"13% is too ambitious"

B&E: Your guidance is much lower than NASSCOM’s industry guidance. What is your view?
V. Balakrishnan (VB): The NASSCOM growth rate is ambitious. It’s not going to happen. If you look at the IT-BPO model in India, around $70 billion is exports. Around 30-35% of it is captives and captives are not growing. Secondly, two large companies – both Infosys and Wipro – have said that growth will be muted at around 5%. So, I don’t see how the industry will grow at 13%. It’s too ambitious.

B&E: Why is it getting difficult to predict client budgets?
VB: Before the financial crisis in 2008, whenever there was any change in the environment, it took at least 2-3 quarters for it to get reflected in client spending. But after the crisis, which was a wake up call for most corporates across the world, the change is very quick. When they see the environment moving in this manner, they immediately go and cut down all expenses. So the reaction time has come down. Also there is a lot of time taken for signing a contract.

B&E: You predicted the Bear Stearns debacle. Do you see any other major corporate crises coming up?
VB: Now creditworthiness is not a problem, because most of the problem has moved to the government. Now the creditworthiness of governments is being questioned, not the companies. I don’t think you will see any blow ups in the corporates. You will see blow ups in the government! Breaking up of Europe is a reality, the question is when.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

 

For More IIPM Info, Visit below mentioned IIPM articles

 

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
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IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year

BBA Management Education

“Reverse innovation cannot happen by accident”

Hargopal M., Head, Finacle, proclaims that Finacle achieved success in global markets because it was developed with that vision in mind at the outset

B&E: When Finacle was developed by Infosys, was it meant to be a reverse innovation opportunity?
Hargopal M. (HM): Well when we developed Finacle, it was not going to be targeted at any particular market. First of all, Infosys’ ambitions in the product space itself came about in the banking space, because the banking space is a lot more standardised. So, an enterprise class of a product makes sense where there is a general commonality of the business rules. We always had global aspirations for Finacle, and within the banking, the core and other things, you cannot really position for a small niche. For example, a small bank started with our offering at that time. Today it’s around Rs.150 billion in assets. So it means that technology can be a game changer. It doesn’t have to be a certain size – small or medium or large. We also felt that apart from global aspirations, Finacle should be able to service customers across segments.

B&E: So why did India become so important initially?
HM: In a way, if you really look at the growth path, although we had aspirations to make it large, the difference it created was for emerging markets to begin with. These markets did not have any legacy and they had huge diversity in customer segments, et al. The adoption was much higher in these emerging markets. We started with India to begin with, and were able to demonstrate significant compelling value. Between 2000 to 2010, the GDP of India grew by 135%. Deposits grew by around 525%. The lending book increased by 375% for banks as a whole. But if you look at new employees, they grew by only around 5%. This means they managed this growth by bringing in efficiencies with the technology. From the consumer point, they have made a significant difference. Also by using the technology, they have been able to multiply client acquisitions significantly without significant increase in the business cost. The business infrastructure hasn’t grown with the clients they have brought in. If you look at the entire core transformation wave, it started with A-Pac, got adopted in Europe. Now it is going to Western Europe and other advanced markets. The demonstration of the value and the impact of the innovation was that by bringing in the common platform, you are not only able to bring the common business practices, but also able to bring in time to market, time to compliance and a differentiated customer experience. That way, it is very significant. Around 43% of Finacle’s customers now come from the Global 1000 banks.

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Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri

and Arindam Chaudhuri (Renowned Management Guru and Economist).

 

For More IIPM Info, Visit below mentioned IIPM articles

 

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year

BBA Management Education

Massive Transformations in its Strategy & Branding

As Infosys goes Through Massive Transformations in its Strategy & Branding, Virat Bahri discusses what it would take to take The Next Leap

Infosys, which launched its cloud services recently, is on the brink of the transformation in comparison; a shift they refer to as Infosys 3.0. The company posted net profits of Rs.68.23 billion for the year ended March 2011, growing by 8.8% yoy, but the results have been quite disappointing on the whole. Fourth quarter revenue of $1.6 billion almost breached the lower end of its guidance and there was a 1.4% decline in volumes as well (Angel Broking). Sequential revenue growth was just around 1% compared to 5.9% and 10.2% in Q2 and Q3 of the previous fiscal year. In Q4, Infosys experienced a fall in its margin by 110 basis points to 29%, which is due to lower utilisation. The company also dropped 3 ranks in the Power 100 list in 2010 to be ranked 11. A greater concern is the expected margin hit in the coming quarters due to increased hiring of around 45000 people in the current fiscal as well as rupee appreciation. Infosys CEO & MD Kris Gopalakrishnan, however, comments on a positive note to B&E, “If growth accelerates resulting in higher utilization, margins can improve.” Large transformational deals are coming back, but Europe is still plagued by sovereign debt fears. Moreover, 2011 would see the ending of the tax holiday for Indian IT companies. But the company’s strengths of strong cash flows, with cash and cash equivalents totaling $3.8 billion by the end of FY 2011, a debt free balance sheet and strong client relationships keep it in good stead for the coming quarters. Morningstar stock analyst Swami Shanmugasundaram says that the company’s package implementation and system integration services will be particularly accretive to revenues and projects “compound annual revenue growth of 16% for a five year forecasting period (compared to 16% in the past five years)”.

Of course, there are a number of changes within the company that have taken place, and top executives are unanimous that the next few years will see a lot of transformation. A new team has been set up with K. V. Kamath being appointed as the co-Chairman (non-Executive) with Kris and S. D. Shibulal has taken up the position of CEO; changes that will be effective from August this year. N. R. Narayana Murthy has bid adieu to all executive positions in the company. The exit of T. V. Mohandas Pai has been a major blow, and his statements to the media have led to Infosys’ celebrated management practices and philosophies coming under heated debate.

Under the Infosys 3.0 drive, the new team will divide its verticals into four industry groups with each having a separate P&L account. Infosys expects to take some significant initiatives in terms of employee utilization rates, onshore hiring, consulting services, investment into more emerging economies and counter-cyclical verticals like healthcare & public sector, better utilization of existing and creation of new intellectual property and also ensuring a smooth succession to the first non-founder CEO in a few years. Critics would also want the company to look at inorganic growth. A lot has to change in its DNA if it has to compete with the likes of IBM and Accenture, particularly with respect to its relatively cautious approach. But the very fact that Infosys is showing an eagerness for tampering with a long standing status quo is a sign of a welcome beginning.

Read more....

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

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