NARAYANA MURTHY AND INFOSYS
 INTRODUCTION
THE STRATEGIST
From the beginning, Narayana Murthy focused on the world's most challenging
market - the US. He had two reasons for this. First, there was no market for
software in India at the time. He believed that Indian software companies
should export products in which they had a competitive advantage. In 1987,
Infosys entered into a joint venture with Kurt Salmon Associates (KSA), a
leading global management consultancy firm. KSA-Infosys was the first
Indo-American joint venture in the US.
In 1988-89, Infosys set up its first office in the US. Reebok of France was
looking for a software system to handle its distribution management at the same
time. Infosys bagged the contract and developed the Distribution Management
Application Package (DMAP)[1] for Reebok's French operations. Infosys decided
to use this package to create a standard application package for similar
operations of any company. In 1989, Infosys bagged another major contract from
Digital Equipment.
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In the early 1990s, with the opening up of the Indian
economy, many export-oriented software companies were set up in India that
created the momentum: Infosys leveraged this very successfully. By
mid-1990s, Infosys was competing not only with Indian software majors like
Tata Consultancy Services[2], and Wipro[3] , but also with overseas
players like Cambridge Technology Partners and Sapinet, which offered
software solutions. Narayana Murthy believed that Indian software
professionals had the ability to deal with complex projects. Analysts felt
that unlike elsewhere, India's sharpest minds were heading for a career in
software, and the best of these aspired to be at Infosys. Infosys also
competed with consultancies as Anderson Consulting and Ernst & Young,
which positioned themselves as information management specialists.
In 1994, the joint venture with KSA was dissolved. In 1995, Narayana
Murthy created Yantra Corp.[4] in Acton, Mass. US. Around the same time,
Infosys entered into a joint venture with Satyam Computers[5] and DCM[6]. |
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During 1998-99, Narayana Murthy planned to position Infosys
as a true global company - global clients, global operations, global staff and
a global brand image. In 1998, to support his global ambition, Narayana Murthy
listed the shares of Infosys on Nasdaq through American Depository Receipts (ADR)
issue worth US$75 million. With this, he took the Indian software industry
global.
Narayana Murthy's global strategy comprised three features. The first one was
the "global delivery model." The model emphasized on "producing where it is
most cost effective to produce and selling where it is most profitable to
sell." Cost effective production meant doing as much of the software
development work in India and profitable selling meant focusing almost
exclusively on foreign markets, particularly the US.
The second feature of the strategy was "moving up the value chain" - which
meant getting involved in a software development project at the earliest stage
of its life cycle[7]. However, analysts felt that for this, Infosys would have
to compete with big companies like Cambridge Technology Partners or even
Andersen Consulting, and that could be tough. Agreed Narayana Murthy, "Yes, it
is not going to be easy. But we don't have to be unduly concerned about
unmitigated success. We may succeed in some and not in others - which is not to
say that we will not succeed as consultants."
The third feature of the was the PSPD. According to Narayana Murthy, there are
four fundamental tenets of any well-run business. One: predictability of
revenues; two: sustainability of the predictions; three: profitability of
revenues; and four: a good de-risking model. 'De-risking' meant that Infosys
had put limits on its exposure to businesses of various kinds. For instance, it
limited its exposure to Y2K projects to less than 25% of its total revenues
because this was a business that could disappear overnight and Infosys didn't
want to take the risk.
PEOPLE MANAGEMENT
CORPORATE GOVERNANCE AND INFOSYS
LEADERS IN THE MAKING
[1]DMAP integrated databases and data-crunching tools in forecasting,
purchasing, warehousing, sales management, credit control, customer services, sales ledger, claims and disputes, operations and security, apart from finance and decision support systems.
[2]Tata Consultancy Services offers strategy consulting and system integration
services to help organizations plan and build their businesses in the eEconomy.
[3] Wipro Technologies, based in Bangalore, India, is the global technology services
division of Wipro Limited. Established about two decades back, the company
offers services for business transformation and product realization and also
solutions for the service provider market.
[4] Yantra helps companies to unlock value from multi-enterprise trading networks.
Yantra solutions enable companies to sell complementary products and services,
reduce inventory, coordinate outsourcing partners etc.
[5] Satyam Computer Services Ltd., based in Hyderabad (Andhra Pradesh), is an
end-to-end IT solutions provider and offers a range of expertise aimed at
helping customers re-engineer and re-invent their businesses.
[6] DCM provides design services in the areas of ASIC & FPGA, Communication Software and
Web Applications.
[7]A typical software development project's life cycle comprised designing,
coding, conversion and maintenance.
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