The Marketing Situation of X Infotech - Research Paper Example

Introduction Value creation is the singlemost strategy which can ensure a business to grow in uncertain times. For smaller businesses, which do not have a brand equity advantage, top quality service is the only USP which can give them an edge over competition. It's far more difficult to retain customers, then to find a new one. For X Infotech management, this experience strikes them at their core. Based in ______, X Infotech provides mission-critical application services in IBM Mainframes to a diverse customer base, mainly providing platform-integrating services like IBM Mainframes server installation, web-enabled networking, OS installation and storage solutions. Industry Background Catering to clients across Europe, X Infotech is a relatively smaller organization, which often relies on third-party technicians for client-side maintenance service. Unlike televisions and washing machines and automobiles, Mainframe installations are extremely vulnerable to sudden failure. The complexity of these platforms poses practical difficulties in steady maintenance. Also worth mentioning is the fact that security installations are a top priority in this business. In June 2005, some 22 million Visa customers, and 14 million MasterCard customers woke up to a shocking news event, to find out that hackers had made good with $2.75 billion of money after CardSystems, a US credit card processor lost sensitive billing information to a computer worm that had failed Windows Servers across the country, after which both card companies said good bye to the bankrupt organization (InformationWeek, 2005). The point to be driven home, is that X Infotech is thriving on a risky avenue, where the stakes are immensely high. This report contains a snapshot review of the company's business plan in the latest market scenario. About X Infotech (Internal Environment analysis) The Product: X Infotech provides installation and maintenance services in the entire range of Mainframes, from the older IBM S/390 to the latest IBM z9 systems. The machines are designed to support a large number of OS architecture, Linux, z/OS, z/VM, z/VSE, z/TPF, and MUSIC/SP. They are equipped with central processors, AES cryptography implemented in hardware, and perform a host of functions ranging from I/O processing, cryptography, memory control and service functions like accounting and logging to target processors. These z servers find application in business critical areas, which thrive on high availability, as "downtime" can lead to business loss. The company supports both back-office installations, and web-enabled user-interactive installations. The company takes the help of highly-trained technical personnel to perform a valuable task called backward compatibility, which basically means installation of newer mainframes, in an older environment. The overall texture of the systems are designed to perform bulk data processing such as ERP, financial data, customer databases, online statistics, etc. The Market: X Infotech has a client base all across the UK and Europe, and it operates in a heterogeneous environment. The company is an Advanced LevelTM member of IBM vendors. It is a prestigious level, as this means that IBM recognizes the firm as capable of installing IBM mainframes at customer site, with IBM middleware. There is an annual verification for the same. X Infotech has been complying with these industry standards right from ___(year). So basically, whenever a company wants to fix up an IBM mainframe, it calls up the customer care of X Infotech. The areas where these sophisticated computers go are myriad: Automobiles, Banking, Education and Learning, Electronics, Energy and Utilities, Fabrication and assembly, Financial markets, Government, Healthcare and Life Sciences, Insurance, Media and Entertainment, Retail, Telecommunications, Travel and Transportation, etc. The Brand: In its selected clientele, X Infotech has a good reputation for providing timely services. It models itself after Microsoft's "Passion for Technology" slogan. It prides itself to be continuously keeping abreast of latest technological products to be offered by IBM, and uses a "voice-interactive" service desk, to stay connected with third-party vendors, as well as customers. From a dialogue with customers, the company has been able to generate feedback on its service offerings. Its "product" to be examined in this case, is its unique customer-centric service offering, and the measurement can be the status it enjoys in the customer's perceptual image. As brand symbol value doesn't have enough usage in this case, the target areas are around "core functionality" of the Mainframes, in solving problems, and in experiential positioning as in providing "sensory stimulation". These are the characteristics that the customer expects from this company. Marketing capabilities: The biggest strength of X Infotech lies in its unique PartnerworldTM strategic tie-up with IBM. This takes care of 99% marketing functions for the company. It must be kept in mind that the customers of Mainframe platforms are not laymen, and "conventional" marketing channels have no bearing on the company's outreach. The IBM venture allows X Infotech, the flexibility to improve what in IT jargon is known as the "scalability" of business. It is a one-stop destination for the firm's overall marketing campaigns. It entails a host of useful features, e.g. IBM Global Services Web Hosting computing environment to give clients one-stop access to X Infotech's website. Actually, this feature forms nearly 60% of the company's actual business. The IBM interface also helps the company connect to other business partners, for its requirement in terms of spares, software updates and most importantly, "technicians". Technicians are recruited on a per-project basis, and may hail from any part of the world, thanks to globalization. The IBM partnership takes care of all marketing functions, including marketing intelligence, marketing support and also, selling resources like sales incentives. Product Life Cycle: In the PLC graph, it can be safely said that X Infotech's enjoys the status of "maturity", which basically means stabilizing of service price offered, peaking in sales volume, and mainly brand differentiation, or "diversification". It is at this phase, that the company likes to be recognized as a "value-creating" entity, as an established brand. Using the Boston Matrix method (fig. 1), we can make a scenario analysis of the diverse range of products offered by X Infotech. Figure 1: Boston Matrix Source-Marketing teacher Stars Question Marks Cash Cows Figure 2: Boston Matrix prepared for X Infotech Figure 2; Product Life Cycle Maturity phase for X Infotech Stars: These are product offerings which command a high market share and also have good growth scope. If restricted to individualized domains, X Infotech's "backward compatibility" offering, which is its differentiated service, may qualify for this segment. Apart from that, it has recently diversified its portfolio in cyber caf platforms, and supermarket chains. Cash Cows: These product offerings enable the company to command high market share in a slow-growing arena. Mainframe services in health insurance domains qualify for this segment. Cash cows contribute as much as 45% to this company's overall revenues. Question Marks: These refer to niche category products that have sound potential in coming days ahead. For X infotech, semiconductors and airlines are the next big step forward, as these areas offer plenty of room for future growth of the industry, and hasn't yet really started. Dogs: These are business areas with no growth potential, and no market share. X infotech portfolio is clean in his regard. Financial Analysis: (Put company balance sheet) Human Resources Analysis: At the heart of X Infotech is its customer-care desk, which consists of experienced call centre executives who have received special speech training programmes, to entertain customer queries from any client location. Due to limited size, the company doesn't run a 24x7 helpdesk, reverting instead to a voice-interactive helpline, that recognizes voice commands from customer side. The customer-care desk is given resource training on PartnershipTM modules. Next in importance comes the Sales team, which is accorded a good financial incentives package, in return for converting more customer leads, to actual sales. Most technical staff is outsourced, but the company is working on in-house programmes to train experienced employees, to enable the company to move up the value chain in the future. Many technicians are sent to IBM annual workshops, to familiarize with latest practices from the source. A detailed SWOT analysis towards the end of this paper will give a holistic overview of the company's inherent strengths and weaknesses, and analysis of strategy ensured by the company to stay ahead of competition. About X Infotech (External Environment analysis) It is useful to complete a PESTEL analysis (Business Link, 2005) of the business environment of X Infotech, in order to get an in-depth understanding of major issues that it has to contend with, in the run-up to further marketing programmes in the future. P: Political: A large number of end-users are switching to open-source platforms in Mainframe installations. This has severe repercussions in the wake of security, and ethics. Since data access is randomized, it requires political goodwill to sustain business. A large number of computer companies, including X Infotech, provide periodic feedback to Government agencies. The significant government policy is in sync with X Infotech's gameplan. It envisages the following (Refer Govt. policy bulletin): A balance needs to be struck between security administration skills, and many diverse systems. There is a need that interoperability of systems be maintained. There is a need to remove the reliance on individual suppliers. Perhaps, the last point is a word of caution for IT companies, which need to continuously scale up their business, to stay ahead of government regulations. E: Economic factors: Before Gordon Brown's 2004 budget, the European Commission had declared that the British economy is one of the "strongest and healthiest" in the EU, with an average growth of 2-2.5%, higher than the EU average of 1%. The growth comes primarily from the services sector, e.g. banking, insurance, and IT-enabled Services. Clearly, the marketing campaign of X Infotech must focus on market segments that thrive in these domains. S: Socio-cultural factors: No significant finding. T: Technological factors: The most significant technological factor, for X Infotech, is the continuous upgradation and evolving of newer Mainframes model, from IBM catalogues. Customers are increasingly connecting to sophistication of their interactive access pages, and want customized inputs from vendors like X Infotech. One sureshot tactics to stay in the lead, is by keeping abreast of technological innovations. The PartnerworldTM programme of IBM takes care of this aspect. E: Environmental factors Need for new office premises, in the light of expansion of scales Facing challenges from low-cost vendors (competition). More of this is covered in SWOT analysis. Improving Service Call Rate (SCR): For IT companies, SCR demonstrates an improvement in quality. The lesser the SCR on a quarterly basis, the better the company finds itself in terms of after-sales service. L: Legal Copyright law Patents Privacy Contract laws and High Technology, especially related to electronic signatures, and development agreements with customers. Customer analysis X Infotech services are sought after by a host of customers, in different sectors, as Mainframes have applications everywhere. Installing a new server costs around $100,000, with storage solutions costing extra. Naturally, most customers of the firm are company representatives, or startup businesses. The company needn't bother about Age and psychographic information about its customers, as most of them are young geeks looking for a foothold entry into new business models. Most orders are placed online, or through customer calls Monday to Friday. Maintenance of systems is a major priority, as Mainframes systems are subject to command failure, or allied shortage. For this purpose only, the company hires trained, experienced technical staff on a per request basis, and is gradually expanding its scales. The core philosophy of X Infotech, is "commitment to customer needs", for which it is continually striving ahead. One new emerging area is the dot com boom. Many start ups rely on highly-secure 128 K encryption devices, to facilitate payment options on their websites, thanks to the arrival of e-commerce. This calls for enormous space on server area. As mentioned in Boston Matrix, this falls under Question Marks, and it has become the most significant business for IBM vendors. Competitor analysis: Two significant categories in which X Infotech's competition can be put in, are: Low cost vendors from countries like India, which are a future threat. UK-based vendors of other servers like SQL, Oracle and Microsoft, which continuously grind their way to eat into IBM's marketshare. After initial installation, a large number of controlling applications in Mainframes can be configured online. All the customer has to do is, log on to numerous vendors which understand the particular script in which the programs have been initialized. Naturally, low cost vendors from India are an attractive option to several cost-conscious customers, and it's not good news for X Infotech, who need to do their homework well, if not willing to be eaten by trouble brewing abroad. Figure 3: IBM Call Centre Bangalore, India One way to do so, is by building brand loyalty. Luckily, Mainframes is a segment where a customer is willing to spend the extra service money, if he finds quality service from reliable vendors; also, there are several specific tasks which can be handled only by X Infotech, because it has UK-specific skills, that the Indians don't. Finally, according to a Forrester survey, close to 75% CIO's worldwide feel, that it is far more difficult to communicate a problem to an Indian worker, and get them resolved, compared to an American or British worker. Thus, by continuously providing premium quality, X Infotech can carry on its business successfully, without worrying about competition. Last thing, only a limited number of IT companies in India have Mainframes capability, and most of them work for large US-based corporations (mostly Fortune-500). X Infotech's 59% segment is constituted of medium-buyers, where there is no direct threat of competition, as of now, as they prefer British company. Regarding second source of competition, X Infotech can relax in that a majority of UK clients prefer IBM to other majors, and that IBM still commands 90% of Mainframes market. Most other majors like Sun Solaris, Microsoft and Dell have still not emerged beyond US and Canada much, as they also reckon that Mainframes is an IBM domain of expertise, not that they are very happy with the fact but, it can be safely said that if X Infotech takes its PartnerworldTM programme with IBM seriously, it can always remain in Peace of Mind. In a nutshell, there is no present competition for the company, which is raking in the moolah by advancing its interests around its core competence, "value-added service". So, if a question is posed to the CEO on competition in the industry, he is most likely to retort with, "Competition What competition" SWOT Analysis Before concluding the situation analysis of X Infotech, it is essential to prepare a SWOT analysis of its current situation, which can be done in this way; S: Strengths Resourceful call centre with adequately trained manpower PartnerworldTM programme with IBM that takes care of all marketing and sales functions, as well as product upgrades Technical superiority delivered from well-trained staff. According to Boston Matrix, not even a single product offering in Dog phase. Booming demand in Mainframes sector thanks to dot com age. W: Weaknesses Lack of own technical staff for supervising installation of remote servers. The company has to recruit specialists. It's easier for such people to switch loyalties. However, this is a standard norm in computing industry today. Complacence in its own worth- Convinced that there is no present source of competition, and that there never will be one, is a sure recipe for disaster. O: Opportunities The company is exploring the possibility of entering the semiconductors, and airlines business requirements. It is an unprecedented chapter in its relatively short period of time. Diversification- A large number of web server companies, are increasingly taking to back-end services like telecommunications. Considering the unpredictability of this business, X Infotech has to unleash its own mantra. T: Threats Competiton from low cost vendors in India Competition from other service providers using different platforms. Conclusion In a summary note, it must be reiterated that X Infotech is doing well in its business of IBM Mainframes installation, services and storage solutions. In this research report, we studied the anatomy of this company, looking at all aspects from industry background to internal strengths and weaknesses, and present or perceived threat from competition. We analysed that the company offers a whole range of service offerings from the point-of-view of growth/share matrix, and its business viability model, is thus a recipe for success. The biggest trump card in the company's favour is the PartnerworldTM teamship with IBM, which will always rake in profits for it. Executive summary This paper examines the marketing situation of X Infotech, and to analyse factors that are steadily contributing to its profitability. The company provides IBM mainframes solutions to several clients in __(country/region)______, and has seen its net profits soar from __%__ in 2003 to __%___ in 2006. Being a small vendor of IBM solutions, X Infotech hasn't bothered to calculate its market share because there are a lot of niche players in this domain. However, it should be noted that this is a growth-intensive sector; as a result, there is enough breathing space for even new-entrants, as IBM has 90% market share in mainframes market, which has applications in different industries and businesses. Most IBM vendors provide maintenance solutions to customers based on web-enabled orders, and are affiliated to the parent company through something called PartnerworldTM programme. X Infotech is an Advanced partner (1 step lower than Premium level) of IBM, and continuously receives upgrades and latest configurations expertise, from the parent company. To talk of competition, the company is currently doing brisk business with clients, but strategists are discussing the fallout of future problems created by low-cost vendors in India, a factuality which has been deeply analysed in this report. The only way left to stem the competition is by maintaining its hold on specific deliverables, which are unique to its capability and performance. Also, the company caters to the needs of a consolidated client base, and by continuously moving up the value chain, its market will remain intact. The company has most of its service provisions in "cash cow" phase, and some "stars", and no "dogs", in the BCG position matrix. It is further recommended that: The company enter into high-growth potential areas, i.e. semiconductors and airlines need to be included in the company's diversification portfolio. In addition, the company maintain its market in banking, insurance and ITeS sectors, by increasing partnerships with such clients. This calls for new office premises, and more manpower recruitment. At present, the company relies on actual service technicians on a hire basis. It would be useful if it has a few technicians of its own, if it wants to expand. X Infotech needs to scale itself up, from Advanced Partner to Premium Partner of IBM, if it wants to retain its growth year after year. Stars Question Marks Cash Cows References Marlin, S. 22 June 2005. "Banks scramble to contain damage from CardSystems. Information Week, New York, NY. IBM PartnerworldTM manual, 2006. Retrieved 10 Aug 2006 from http://www-1.ibm.com/partnerworld/pwhome.nsf/weblook/ben_mkt.html Marketingtecher, 2006. "Boston Matrix". Retrieved 10 Aug 2006 from http://www.marketingteacher.com/Lessons/lesson_boston_matrix.htm Government of UK. 28 Oct 2004 "Policy on open source software". Retrieved 10 Aug 2006 from http://www.govtalk.gov.uk/documents/oss_policy_version2.pdf Roberts, M. 2005. "How healthy is the British Economy". Retrieved 10 Aug 2006 from http://www.marxist.com/Economy/brit_economy0304.html BusinessLink . 2006. "PESTEL". Retrieved 10 Aug 2006 from http://www.businesslink.gov.uk/bdotg/action/detailtype=RESOURCES&itemId=1074451452 Read More