Marketing Issues Faced by Infosys - Essay Example

?Table of Contents Executive Summary 2. Global Marketing issues faced by Infosys 3 3. Cost savings not included in Project contracts 6 4. Knowledge transfer time cost savings 8 5. Self-Analysis for Persuasive Selling 8 6. Recommendations for Persuasive selling 14 7. References 16 1. Executive Summary The report discusses the various global marketing issues faced by Infosys firstly from a case specific perspective and then from a general perspective considering the various elements involved in a Business to Business marketing environment. Thereafter, the various cost savings done by Infosys for PFS over the past five years have been quantified. Also the expected cost savings in case Infosys bags the Arabia e-procurement project have been calculated. After this, the report shifts towards Internal and External analysis of Infosys to enable Rahul and Jaspal in preparing for their presentation before the client. This is done with the help of SWOT analysis and Porter’s 5 forces analysis. Finally, some recommendations are given for Infosys to persuasively sell its case for bagging Arabia e-procurement project. 2. Global Marketing issues faced by Infosys Infosys is facing a lot of global marketing issues especially in the past decade or so. The issues are related to business model as well as strategy. Infosys is globally perceived as an IT Technology company which provides low cost advantage to its clients due to global labour arbitrage. A lot of IT companies in developing countries have been using this model to earn handsome revenues (NASSCOM, 2007). Infosys has been consciously trying to come out of this image and move up the value chain (IBEF). This was evident because of its focus on end to end solutions in the late 1990s. During this phase, Infosys developed some highly successful industry solutions such as Finacle (Finacle, 2011) and SAP retail (SAP Retail, 2011) products and marketed them well. However, a major challenge has been to go one step further and provide high end consulting services. Infosys has developed the capabilities required to do so by hiring fresh and qualified talent over the past years but marketing the same has been a challenge. The major reason for this is the presence of well reputed competitors in the market who were early movers in this domain. Infosys has always believed in maintaining long term relationship with its clients. This has resulted in client loyalty and satisfaction. However, 80% of Infosys’s revenues come from existing clients. No doubt, retaining old customers is very important but it is equally important to acquire new clients for continuous progress and to increase bargaining power while negotiating contracts. Infosys has shifted its focus towards business domain excellence. While it is of no harm, most of the clients over the world believe in best of breed approach where they outsource their operations in parts to most suitable vendors and also avoid hundred percent sharing of data with a single vendor. Therefore, business domain excellence may not prove to be a very fruitful idea. For further analysis of the global marketing issues, it would be justified to consider the various aspects of Business and Business marketing and the issues Infosys is facing in each of them (Boon, Kurtz): I. Product In Business to Business marketing, as in the case of Infosys, the products are highly technical in nature (Boon, Kurtz). Their form is not fixed and may vary from supplier to supplier. Especially in Business to Business Services marketing, this holds true. Infosys has primarily been providing outsourcing services at low rates. But over the years it has developed end to end products which are high performers in the market. Infosys is also known for its services. It has always exceeded client expectations on the 3 evaluation parameters i.e. Quality, Timeliness and Reliability. However, Infosys has struggled in marketing its high end services over the years. It wants to address this issue in its dealing with PFS. II. Promotion In Business to Business marketing, there is a greater emphasis on personal selling rather than advertising (Boon, Kurtz). Infosys enjoys large word of mouth publicity. It has also deployed specific professionals such as Rahul and Jaspal at on-shore locations to enable personal selling. However, certain cultural issues can come in way of clinching deals. It would be better to add local professionals in the sales team to enable effective communication. III. Price In Business to Business marketing, prices for unique or customized offerings are decided on the basis of bidding (Boon, Kurtz). Hence, Requests for Proposal are used to award projects. Infosys has been doing well on this front especially due to the global labour arbitrage model it relies on. However, a lot of competitors are setting up their offices in distant off-shore locations to take advantage of the same. This has reduces its price advantage and it has to be cautious in the future projects. IV. Customer relations Long term customer relations are very significant in a Business to Business Environment (Boon, Kurtz). Infosys has done well in this area. Its customers have been loyal and 80% of its business comes from existing customers. However, Infosys has not been able to take full advantage of this in the way it would have liked to. For example, in case of PFS, Infosys claims to have potential to handle 45% of their IT spend while in actual they have been handling only 30%. The clients still don’t trust the company enough to handle all their operations to it and make it the sole supplier. V. Decision making In Business to Business marketing, the decisions are generally made by a wide group of individuals (Boon, Kurtz). In other words, the decision making process is decentralized. In Infosys, Rahul and Jaspal are taking all calls in future projects with PFS. Therefore, the decision making doesn’t face any obstacles. Thus, Infosys doesn’t seem to have any issues in this area. 3. Cost savings not included in Project contracts Infosys has saved a lot of costs for PFS in its five year association which were not a part of the project contracts. Infosys redesigned five major maintenance projects of PFS. In the last two years of its engagement with PFS, Infosys was able to reduce the number of its employees in India working on these projects from 250 to 100 due to the redesign. This led to a saving of $3,200 per month per employee. This implies that the net cost savings done by Infosys for PFS in the last two years amounts to $(3200 * 150 * 24) i.e. $11,520,000 or $5,760,000 per year. These savings were completely transferred to PFS. Infosys also worked on writing a subroutine to avoid over-run of batch processing and corruption of data. This resulted in a large opportunity cost savings. The total cost savings per incident due to no need of programmers and technical support were $ (45 * 3* 4 + 40 *1) i.e. $580. The cost saving per incident due to workers not sitting idle was $ (125 *4 *42) i.e. $ 21000. Also the cost saved per incident in reconstituting corrupted data was $ (.39 * 15) i.e. $5.85. This led to a total opportunity cost saving of $ (21585.85 * 24) i.e. $518060 per year. Similarly, an Infosys professional wrote a record comparison algorithm for PFS. The opportunity cost saving in penalty paid was $(360,000 * .01 *12) i.e. $43200 per year. The other cost savings in this improvement cannot be exactly quantified. Infosys enabled PFS to reduce its cash reserves for disability claims as per regulations by transition from manual to online system. The total cost savings due to the same for 2 years can be calculated as $ (14,000,000 * .1 * 2) i.e. $2,800,000 for 2 years or $1,400,000 per year. Also, Infosys enabled a healthcare organization to save $100,000 per year by shifting form a manual to online system. In addition to the above mentioned quantifiable savings, there were many savings which can’t be assigned a particular monetary value. 4. Knowledge transfer time cost savings If PFS chooses Infosys as the only vendor for sourcing, it will lead to huge cost savings. Since Infosys would be involved in the project from the very first day, it would almost require no knowledge transfer time required to understand technical details of the systems implemented by other vendors. The total costs saved in this process can be calculated as $ (8000 * 5 * 12/4) i.e. $120,000. Also a lot of costs savings would be done in maintenance which can’t be quantified properly beforehand. 5. Self-Analysis for Persuasive Selling For Infosys to persuasively sell its ability to provide an end to end solution for the Ariba e-procurement system project, it is very essential for it to do certain analyses. These analyses include self-analysis (which can be done by SWOT analysis (AUT University)) and Competitor analysis (which can be done by using Porter’s 5 forces Model (Porter, 2004)). Both of these have to be performed exclusively from the point of view of the current project. 5.1. SWOT Analysis 5.1.1. Strengths I. Low cost arbitrage model Though it is not the only driver, Infosys still follows a low cost offshore outsourcing model which enables it to gain advantage over its foreign competitors. This results in a considerable cost saving for the client. This is a prime reason PFS has outsourced a large part of its IT maintenance work to Infosys. II. Past performance Infosys has invariably exceeded the expectations of PFS both in terms of costs and quality (as mentioned in the case). This is illustrated by the various areas in which Infosys has saved costs for PFS. Hence, this acts as a big boost for its future business with the client. III. Shift up the value chain Infosys has been making a gradual but steady progress towards moving up the value chain. Therefore, it is concentrating on high end consulting activities rather than just maintenance related work. This is also supported by the fact that Infosys has hired several MBAs from reputed institutes and lateral employees from consulting firms in the past few years. Thus, PFS’s concerns on its Operations consulting expertise can be allayed. IV. Employee satisfaction One of the biggest reasons for Infosys’s success is that it has always been driven by people, the company offers ESOPs as a part of compensation package. In addition it has world class facilities in the form of gyms, sports facilities, state of the art buildings etc. All these factors contribute to employee productivity. V. Ethical Leaders Infosys’s top management is driven by ethics and high values. They have been able to create meritocracy in an environment ruled by corruption. These supreme values give Infosys a respectable position among its peers and business partners and could act as one of the reasons for marching ahead of its competitors. 5.1.2. Weaknesses I. Late mover into consulting Infosys has been a late mover into consulting. It is a long way before it can successfully compete with the Accentures and IBMs of the world. Its expertise in Operations consulting is even more limited hence making PFS to think twice. II. Fickle Low cost advantage The low cost advantage which Infosys has been thriving on for years has been dwindling for some years now. Even foreign competitors have started their operations in India to nullify the advantage. Moreover, India is no longer the only country providing this advantage because of the emergence of several South Asian countries. 5.1.3. Opportunities I. Stepping stone to move from Low cost model to consulting based model PFS e-procurement system project could actually act as a stepping stone for Infosys to accelerate its strategic shift. Good results produced here are bound to generate more business both from PFS as well as other clients. II. Move into Operations Consulting The domain of Operations Consulting has largely been untested in Infosys. It is an opportunity for the company to make its reputation in an area which is booming. III. Attract new talent Infosys has largely been viewed as an IT or Technology company hence inhibiting top brass of students. However, consulting is viewed as a high end business and success in the same will attract fresh talent into the company. 5.1.4. Threats I. Competing firms expert in Operations consulting The two competing firms- Excalibur and Merrimac Consulting have expertise as well as experience in Operations consulting. They are regarded as the topmost firms in this domain. To put a winning proposal against these firms is a huge challenge for Infosys. II. Firms may reduce fees The two competing firms have already started their operations in India and may reduce their cost to PFS in order to win the project. III. Perception of PFS PFS doesn’t perceive Infosys as a traditional player in e-procurement projects. Yet PFS has given Infosys an outside chance. But PFS would be willing to award the project to other companies in case of a slight glitch on the part of Infosys. 5.2. Porter’s 5 Forces Analysis I. Threat of substitutes Infosys does face threats from its Indian competitors though not in the e-procurement project as well as from other off-shore locations such as Philippines, Malaysia, China, Vietnam and other South Asian countries (Chaudhary, 2009). The service quality provided in these countries is almost the same. Therefore, price has a big role in play in awarding of projects. Overall the threat of substitutes is average. II. Bargaining Power of customers The customers have a very high bargaining power due to availability of a number of options. There are a number of companies both in IT and consulting waiting to acquire new clients and projects. Moreover, a lot of customers are going for a large scale decline in their IT expenditure. Therefore, PFS has a high bargaining power. It is also due to the nature of services industry. III. Bargaining Power of suppliers The bargaining power of suppliers in this industry is quite low again due to the nature of services industries. There are a number of similar firms available to supply services at similar rates. Therefore, large efforts have o be made by Infosys for continuous client satisfaction. IV. Barriers to entry The barriers to entry are very low. Therefore, a large number of firms have grown up who eat into the shares of big firms such as Infosys by offering low cost services. This enables them to gain more clients in the beginning. Entry into consulting is even easier. Practically, anyone with a decent knowledge in a domain can venture into consulting services. V. Competitive Rivalry The competitive rivalry is very high. Infosys has competition from various types of firms. On one side, there are technology companies and on the other outsourcing firms. With its initiative to venture into consulting, Infosys faces big time competition from consulting firms. In the e-procurement project Infosys faces tough competition from Excalibur and Merrimac who have expertise in Operations consulting. Handling such competition as well keeping costs down is a big issue. 6. Recommendations for Persuasive selling Rahul and Jaspal need to present a business case before PFS to award the project to them. This must include the benefits derived by PFS due to Infosys in the past, present and future. The first part of their presentation should be totally related to Ariba e-procurement project. They should make PFS aware of the heights they have climbed in Operations consulting and about the new lateral employees they have hired in this field who bring a lot of domain experience with them. They must present previous case studies of projects done with other organizations even if they have been carried out in other industries such as health care. These case studies should be presented with financial and non-financial savings done for the client. Thereafter they must talk about their current organizational strategy of business domain excellence in certain industries such as life sciences, healthcare and insurance and also about how PFS falls in that scheme of things. The second part of their presentation must focus on the savings enabled by Infosys for PFS in the past, present and future. This must contain a list of various quantifiable and non-quantifiable savings enabled over the past five year association between the two companies. In their analysis, Rahul and Jaspal have already identified the possible future savings as a result of this project. This is the point on which maximum stress must be laid. Infosys must also apprise upon PFS the importance of long term relationship and sole-sourcing. This has to be supported by monetary figures. Lastly, Rahul and Jaspal need to convince PFS of their superiority over their competitors. For this, a detailed analysis of both the competitors has to be carried beforehand. A SWOT analysis similar to the one done above could be used for this purpose. The focus should be to nullify their strengths and capitalize on their weaknesses. 7. References Boon,Kurtz. Contemporary Marketing, Business to Business (B2B) Marketing S.W.O.T Analysis. Creative Industries Research Institute. Product Brief Development Tools, AUT University Porter Michael E. (2004). Competitive Strategy: Techniques for Analyzing Industries and Competitors, HBS Indian IT/ITes Industry: Impacting Economy and Society: 2007-08 – A NASSCOM and DELIOTTE Study IT/ITeS – Market and Opportunities – IBEF (India brand equity Foundation) Finnacle Retrieved August 03, 2011 from SAP Retail Retrieved August 03, 2011 from Chaudhary, Goyal, Hussain,Rai. (2009). Strategic Analysis of Infosys Read More