Strategic assessment of IT services and Products Industry

Industry Strategy and Analysis
IT services and products

IT services and products Industry Strategy and Analysis | 2
Group 3
Group 3
Atul Katiyar, B Siva Sankaran, K Aravind Reddy, Mathan Anto Marshine P &
S Harimanjunathan
Mobile: +91 7506201026,+91 9619907287 Email: pm13atulk@iimidr.ac.in,pm13bsiva@iimidr.ac.in,
pm13karavind@iimidr.ac.in,pm13pmathan@iimidr.ac.in,pm13shari@iimidr.ac.in

CONTENTS
Executive Summary 5
Key Success Factor of IT service Industry 6
PESTEL Analysis of IT service Industry 7
Political Factors 7
Economic Factors 7
Social Factors 8
Technological Factors 8
Legal Factors 8
Environment Factors 9
IT service Industry Analysis 9
EFE Matrix 10
CPM Matrix 11
Develop the value chain of IT industry ( general company specific) 11
Value Chain 11
Overview 11
Diagrammatic representation 12
"Upstream" Infrastructure 13
"Midstream" Application 13
"Downstream" Delivery 14
Conclusion 14
Porter five forces analysis 15
1) Factors Affecting Rivalry Among Existing Competitors 15
2) Factors Affecting the Threat of Entry 16
3) Factors Affecting or Reflecting Pressure from Substitute Products and Support from Complements 18
4) Factors Affecting or Reflecting Power of Input Suppliers 19
5) Factors Affecting or Reflecting Power of Buyers 20
Identify the Market leader and second rank company of the industry. Analysis of the business level strategies of
each of the TCS and Infosys companies and VRIO framework for each of these companies. 21
TATA Consultancy Services (TCS) - Strategies 21
SWOT Analysis 22
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VRIO Framework Analysis 23
Infosys 3.0 - Strategies 23
SWOT Analysis 24
VRIO Framework Analysis 25
Comments on the changes in Business level strategies required by these companies looking at the future trends
in the industry 26
TATA Consultancy Services 26
Strategies 26
Billing model 26
Sales & Marketing 26
Key Verticals 27
Product line 27
Organization Structure 27
Infosys 28
Strategies 28
Billing model 28
Sales & Marketing 28
Key Verticals 29
Product line 30
Organization Structure 30
Business strategy diamond model (Arenas, Vehicle , Differentiation, stages and economic logic for 2012-13 and
advice for the future) 30
Infosys’ Business Strategy Diamond 31
TCS’ Business Strategy Diamond 31
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Executive Summary
The IT industry in India comprises two components: IT Services and business process outsourcing
(BPO). IT service management refers to the implementation and management of quality information
technology services. IT service management is performed by IT service providers through people,
process and information technology. Between April 2000 and June 2013, the computer software and
hardware sector attracted cumulative foreign direct investment (FDI) of Rs 53,757.60 crores (US$ 7.97
billion), according to data released by the Department of Industrial Policy and Promotion
(DIPP).Nasscom expects the IT services sector in India to grow by 13-14 per cent in 2013-14 and to
touch US$ 225 billion by 2020.
This report contains the results of a detailed study of the IT Services industry in India. The primary aim
of this report was to analyze the IT Services Industry in India using strategic management tools and
evaluate the performance of the industry in the past, the current trend in the industry and the
prospects o f the industry. The strategic management tools that were used were:
• Key Success Factor Analysis
• Value Chain Development
• PESTEL Analysis
• Porter’s 5 Forces Analysis
• VRIO Framework Analysis
• Business Strategy Diamond Model
This report also focuses on the analysis of the two major players in the IT Services industry in India –
TCS and Infosys. Each of the two companies was evaluated using the strategic management tools
listed above. The prospects for each of the companies have also been compiled and put forth.
The future of the IT Services Industry in India is very promising. India's IT and BPO sector exports are
expected to grow by 12-14 per cent in FY14 to touch US$ 84 billion - US$ 87 billion, according to
Nasscom. Indian IT's core competencies and strengths have placed it on the international canvas,
attracting investments from major countries. IT Services is not a story with a start and an end, rather it
is an ever continuing process aimed towards excellence and as long as India and the major players
continue to nurture a perfect environment for carrying out business, the Indian IT industry will
continue its journey on its path to excellence.
Group 3

Key Success Factor of IT service Industry
1) Global IT offshore spending is
expected to rise at a CAGR of 8.0 per
2) Global BPM spending is estimated
to expand at a CAGR of around 7.0
3) Developing countries are expected
to see high demand of IT related
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Talent Pool
1) Industry has a strong mix of young
and experienced professionals.
2) Approx 4.7 million graduates are
estimated to have been added to
India’s talent pool in IT service
industry in FY13 .
3) The growing pool of talented
people has the ability to drive the
innovation and R&D activity in the
industry. Infrastructure
IT
1) Robust IT Infrastructure provided
in various cities in India such as
Bengaluru, Chennai, Hyderabad,
Gurgaon etc.
2) Tier 2 cities being developed as
new IT hubs to support major
centres.
3) Distribution centres located
across the world.
Domestic Growth
1) Penetration of computer in the
country.
2) More and more domestic
companies expected to outsource
their activities.
3) Government expected to become
major contributor to the domestic
demand in years to come.
Global Demand
cent during FY11-13.
per cent during FY11-13
services in time to come
Policy Support
1) Tax holiday declared for STPI and
SEZs.
2) Initiation of IT-SEZs for developing
for developing new IT hubs across the
country especially in tier 2 cities. These
cities provide required manpower and
infrastructure at a lower cost.

PESTEL Analysis of IT service Industry
Political Factors
• Politics and government plays supportive role when it comes to helping the IT industry.
• Government is planning to set-up 15 new laboratories which will facilitate registration and testing
Economic Factors
Group 3
of IT products before they are launched in the market.
• In the 12th Five Year Plan (2012-17), the Department of Information Technology proposes to
strengthen and extend the existing core infrastructure projects to provide more horizontal
connectivity, build redundancy connectivity, undertake energy audits of State Data Centres
(SDCs) etc.
• The Government of India has fast tracked the process of setting up of centres of National Institute
of Electronics and Information Technology (NIELIT) in Northeast India
• The Government of Brazil has liberalized the issue of short term work visas, a move which will
make it easier for Indian IT professionals to take up assignments in Brazil
• FDI up to 100 per cent under the automatic route is allowed in Data processing, software
development and computer consultancy services; software supply services; business and
management consultancy services, market research services, technical testing & analysis services.
• Between April 2000 and June 2013, the computer software and hardware sector attracted
cumulative foreign direct investment (FDI) of Rs 53,757.60 crore (US$ 7.97 billion), according to data
released by the Department of Industrial Policy and Promotion (DIPP).
• As most of the businesses have clients in different countries, their economic behaviour becomes
important factors.

Social Factors
Every industry is affected by the social factors operating in the particular country.
Few of those are given as:
• Education system in India is producing labour force for the industry which is cheap and talented.
Also they are able to communicate easily with people of other countries as the mode of education is
English.
• Availability of large no. of people in the working age group does not pose minimizes the risk of
labour shortage
Technological Factors
• India has got low price mobile tariffs which add to the advantage of industry.
• Advent of Smartphone, tablets, iPads, has added to the advantage and has increased the
opportunity.
• Disruptive technologies present an entire new gamut of opportunities for IT firms in India.
• Cloud represents the largest opportunity under Social, Mobility, Analytics and Cloud (SMAC),
increasing at a CAGR of approximately 30 per cent to around US$ 650–700 billion by 2020. Social
media is the second most lucrative segment for IT firms, offering a US$ 250 billion market
opportunity by 2020.
Legal Factors
• Govt. of India implemented amended form of Information Technology Act 2000 on 27th Oct. 2009. It
provides additional focus to informational security. It has added several new sections on offences
including Cyber Terrorism and Data Protection. Copyright protection and cyber laws were included
in it.
• Indian labor laws are flexible and mostly non-union workers are found in the IT sector due to the
better working conditions, salaries and other job-related opportunities compared to employees in
other sectors.
• The Indian IT service benefits as participating firms enjoy minimal regulatory and policy restrictions
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Environment Factors
• Companies are focusing on reducing carbon footprints, energy utilization, water consumption etc.
• Environmental conservation and protection is an issue which has gained prominence because of
deteriorating environmental balance which is threatening the sustainability of life and nature
IT service Industry Analysis
• The IT service industry in India has become a growth engine for the economy, contributing
substantially to increases in the GDP, urban employment and exports, to achieve the vision of
a powerful and resilient India. Indian firms, across all other sectors, largely depend on the IT
service providers to make their business processes efficient and streamlined. Indian
manufacturing sector has the highest IT spending followed by automotive, chemicals and
consumer products industries.
• India’s total IT industry’s (including hardware) share in the global market stands at 7 per cent;
in the IT segment the share is 4 per cent while in the ITeS space the share is 2 per cent. The
industry is dominated by large integrated players consisting of both Indian and international
service providers.
• Demand from emerging countries is expected to show strong growth going forward. Tax
holidays are also extended to IT sector for software technology parks of India (STPI) and
special economic zones (SEZs). Further, the country is providing procedural ease and single
window clearance for setting up facilities. The country’s cost competitiveness in providing IT
services, which is approximately 3-4 times cheaper than the US continues to be its USP in the
global sourcing market.
• Disruptive technologies present an entire new gamut of opportunities for IT firms in India.
Cloud represents the largest opportunity under Social, Mobility, Analytics and Cloud (SMAC),
increasing at a CAGR of approximately 30 per cent to around US$ 650–700 billion by 2020.
Social media is the second most lucrative segment for IT firms, offering a US$ 250 billion
market opportunity by 2020. Online shopping has increased with the emergence of internet
retailing and e-commerce.
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EFE Matrix
Group 3
EXTERNAL FACTOR EVALUATION (EFE) MATRIX
S.No. EXTERNAL FACTORS WEIGHT RATING
WEIGHTED
SCORE
Opportunities
1 Greater scope for innovation 0.14 4 0.57
2
Increased focus on high end work like consulting and
KPO 0.11 1 0.11
3 Increase in demand for IT services 0.07 3 0.21
4
Greater scope to service domains like transportation,
infrastructure 0.07 2 0.14
5 Helps client shape strategies to fight global recession 0.04 3
6 Expansion into new geographies 0.07 1 0.07
Threats
1 Global economic slowdown 0.11 2 0.21
2 US govt. against outsourcing 0.07 2 0.14
3 Shrinking margins due to rising wage inflation 0.04 1 0.04
4
Rupee - dollar movement affects revenue and hence
margins 0.11 3 0.32
5
Increased competition from low wage countries like
China, Indonesia etc. 0.07 2 0.14
6 Increased competition from foreign firms. 0.11 2 0.21
TOTAL 1.00 2.18

CPM Matrix
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COMPETITIVE PROFILE MATRIX
TCS INFOSYS
Critical Success Factors Weight Rating Score Weight Rating Score
Employee competitiveness 0.11 2 0.22 0.11 4 0.44
Scalability 0.14 4 0.56 0.14 3 0.42
Technology/ Innovation 0.14 3 0.42 0.14 3 0.42
Financial position 0.08 5 0.42 0.08 3 0.25
Price Competitiveness 0.08 4 0.33 0.08 3 0.25
Process Quality 0.14 3 0.42 0.14 5 0.69
Client involvement 0.11 3 0.33 0.11 3 0.33
End - to - end solutions 0.08 4 0.33 0.08 3 0.25
Management 0.11 4 0.44 0.11 3 0.33
TOTAL 1.00 3.47 3.39
Develop the value chain of IT industry ( general company specific)
Value Chain
The value chain (or the more conventional supply chain) is one of the most fundamental and crucial
structural concepts of any industry. In resources sector, the discrete steps are exploration, extraction,
processing and distribution. In finished goods manufacturing sector, materials flow through
procurement, production, distribution to retail stages. Curiously though, there is no single IT industry
model that is widely accepted by technology professionals. This model is meant to conform to
McKinsey's MECE principle (Mutually Exclusive Collectively Exhaustive). Given the intricacies of the
model, it is almost futile to explain without the visual representation of the model. Please refer to the
Value Chain model below
Overview
The Value Chain is made up of three discrete tiers: Infrastructure, Application and Delivery. There are
a total of eleven Industry Roles, including the two recent additions to the delivery channels (i.e. App

Store, Cloud Computing Provider). A single IT vendor may play one or more roles. For instance,
Ingram Micro, the world's largest IT distributor, plays only the Retailer / Enterprise Reseller role. In
contrast, Hewlett-Packard, which is the most comprehensive IT vendor, participates in at least seven
roles. There are two Customer Segments: Business (B2B) and Government (B2G), and Consumer
(B2C), which are served by overlapping channels.
Diagrammatic representation
Group 3

"Upstream" Infrastructure
• The Hardware Vendors design, manufacture, and market computing systems and equipment.
Dell, Lenovo, Apple, Cisco and EMC are among the well-known names in this space.
Supporting these vendors are global outsourced design and manufacturing providers (e.g.
Foxconn, Compal, Flextronics) and component suppliers (e.g. Intel, TSMC, Qualcomm and
Samsung).
• There are only a handful of Operating System Vendors. As computing hardware is closely
knitted with the operating system, they are usually bundled and sold together. Microsoft
dominates the desktop arena while, in the server space, several hardware vendors offer their
own proprietary hardware and operating system combination as an integrated package (e.g.
Sun Microsystems servers running Solaris OS).
• The Infrastructure Software Vendors primarily serves the B2B and B2G market. They provide
heavy-duty and sophisticated software engines (e.g. databases, messaging, networking, and
security) that are the backbone of enterprise computing. Major players include Oracle, CA,
BMC, and VMWare.
"Midstream" Application
• Application Vendors develop software applications into standardized products which are then
sold to customers. These vendors own the software code and brand names of these products.
Classic examples are Microsoft (Office), Adobe (Photoshop), SAP (Business One) and Oracle
(E-Business Suite).
• Application Developers, on the other hand, provide application development services to
enterprises for building highly customized systems. Accenture, Capgemini, TCS, and Infosys
are notable application developers.
Group 3

"Downstream" Delivery
• The delivery tier is the most fragmented as they are many paths to reach the customers. The
retail channels through Retailers and App Store suits the B2C segment. B2B and B2G
customers handle bulk licensing and large scale procurement through Enterprise Resellers and
receive project-level support from Enterprise Class Vendors to deploy major solutions (e.g.
enterprise resource planning). Vertically integrated companies such as Apple, Oracle, and IBM,
operate their own delivery channels. Prominent cases of Enterprise Class Vendors are
Salesforce.com, Google, Cognizant, IBM Global Services and Fujitsu.
• The cloud-based delivery channel is a revolutionary innovation as it shifts computing power
and complexity from the user to the vendor-managed cloud. As a result, the computing
paradigm can finally migrate from an ownership/self-operate model to a utility-like/pay-per-use
Group 3
system.
Conclusion
The Value Chain is an important foundation in the understanding of the IT industry structure. The
eleven industry roles are useful classifications to group vendors based on similar business models,
value creation processes and market behaviors. All IT companies, with rare exceptions, fall into one of
these roles.

Porter five forces analysis
1) Factors Affecting Rivalry Among Existing Competitors
To what extent does pricing rivalry or non-price competition (e.g., advertising) erode the profitability of a typical firm in
this industry?
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Characterization
(Current)
Future
1. Degree of seller
concentration?
High
Will increase with the increasing
trend of startups
2. Rate of industry growth? Growth rate 7.4% over 2012-13 9-11 %
3. Significant cost differences
among firms?
Yes No
4. Excess capacity? No No
5. Cost structure of firms:
sensitivity of costs to capacity
utilization?
No No
6. Degree of product
differentiation among sellers?
Brand loyalty to existing sellers?
Cross-price elasticities of
1) High
2) Less
3) Less
1) High
2) Less
3) Less
7. Buyers’ costs of switching
from one competitor to
another?
Yes
Switching cost will be relatively
less.
8. Are prices and terms of sales
transactions observable?
Yes Yes
9. Can firms adjust prices
quickly?
No
In future high probability of
dynamic pricing.

10. Large and/or infrequent
sales orders?
Group 3
No, as IT spending is always
huge and planned.
No.
11. Use of “facilitating practices”
(price leadership, advance
announcement of price
changes)?
Yes, Industry has first mover
advantage.
Yes
12. History of “cooperative”
pricing?
No, it is not possible as market
forces are highly competitive.
No.
13. Strength of exit barriers? No, entry and exit is easy. No.
2) Factors Affecting the Threat of Entry
To what extend does the threat or incidence of entry work to erode the profitability of a typical firm in this industry?
Characterization
(Current)
Future
14. Significant economies of
scale?
Yes Yes
15. Importance of reputation or
established brand loyalties in
purchase decision?
Yes Yes
16. Entrants’ access to
distribution channels?
Yes, there are strong players in
each segment Tier-I,II and III
companies.
Yes
17. Entrants’ access to raw
materials?
Yes, resources are easily
available.
Yes

18. Entrants’ access to
technology/know-how?
Group 3
Yes Yes
19. Entrants’ access to favorable
locations?
Yes, IT penetrated into tier II &
III cities.
Yes
20. Experience-based
advantages of incumbents?
Yes, Large corporate don't risk
outsourcing to firms of relative
smaller size.
Yes
21. “Network externalities”:
demand-side advantages to
incumbents from large installed
Yes Yes
22. Government protection of
incumbents?
No No
23. Perceptions of entrants
about expected retaliation of
incumbents/reputations of
incumbents for “toughness”?
Minimum, industry is diversified
in terms of verticals and
geography and people
dependent.
Minimum, industry is diversified
in terms of verticals and
geography and people
dependent.

3) Factors Affecting or Reflecting Pressure from Substitute Products and Support from
Complements
To what extend does competition from substitute products outside the industry erode the profitability of a typical firm in
the industry?
Group 3
Characterization
(Current)
Future
24. Availability of close
substitutes?
Not for all IT solution. Not for all IT solution.
25. Price-value characteristics
of substitutes?
Price of substitutes is generally
high.
Price of substitutes will be high.
26. Price elasticity of industry
demand?
High Will be high
27. Availability of close
complements
Yes, hardware Yes
28. Price-value characteristics
of complements?
Price of hardware is
comparatively higher and most
cases it is bundled with
software.
Price of hardware might be
comparatively lower with the
invention of cloud technologies.

4) Factors Affecting or Reflecting Power of Input Suppliers
To what extend do individual suppliers have the ability to negotiate high input prices with typical firms in this industry? To
what extend do input prices deviate from those that would prevail in a perfectly competitive input market in which input
suppliers act as price takers?
Group 3
Characterization
(Current)
Future
29. Is supplier industry more
concentrated than industry it
sells to?
Human Resources: High
Hardware: Less
Office space: High
Hardware: Less
Office space: High
30. Do firms in industry
purchase relatively small
volumes relative to other
customers of supplier? Is typical
firm’s purchase volume small
relative to sales of typical
supplier?
Human Resources: No, Yes
Hardware: Yes, Yes
Office space: No, No
Human Resources: No, Yes
Hardware: Yes, Yes
Office space: No, No
31. Few substitutes for
suppliers’ input?
Hardware: Less
Office space: High
Hardware: Less
Office space: High
32. Do firms in industry make
relationship-specific
investments to support
transactions with specific
suppliers?
Human Resources: Yes
Hardware: Yes
Office space: Relatively no,
being SEZ mostly with
government.
Human Resources: Yes
Hardware: Yes
Office space: Might be yes,
being SEZ is seen as not viable
option to continue by
33. Do suppliers pose credible
threat of forward integration
into the product market?
Yes, increasing cases of
supplier/sub contractors
establishing relationship directly
with customers.
Relatively less, as increasing
contractual norms and
regulation in contracts.

34. Are suppliers able to price
discriminate among prospective
customers according to
ability/willingness to pay for
input?
Group 3
Yes Yes
5) Factors Affecting or Reflecting Power of Buyers
To what extend do individual buyers have the ability to negotiate low purchase prices with typical firms in this industry? To
what extent to purchase prices differ from those that would prevail in a market with a large number of fragmented buyers
in which buyers act as price takers?
Characterization
(Current)
Future
35. Is buyers’ industry more
concentrated than industry it
purchases from?
No, as large number of verticals
and geographies.
No
36. Do buyers purchase in large
volumes? Does a buyer’s
purchase volume represent
large fraction of typical seller’s
sales revenue?
1) Yes, normally IT deals are
large
2) Yes.
1) Yes, normally IT deals are
large
2) Yes.
37. Can buyers find substitutes
for industry’s product?
Very less, as substitutes are
normally inefficient and difficult
to sustain.
Very less.
38. Do firms in industry make
relationship-specific
investments to support
transactions with specific
buyers?
Yes, Customer relationship
management is very valuable in
this industry.
Yes, Customer relationship
management is very valuable in
this industry.

39. Is price elasticity of demand
of buyer’s product high or low?
Group 3
Price elasticity is high Price elasticity is high
40. Do buyers pose credible
threat of backward integration?
No, as outsourcing is cheaper. No
41. Does product represent
significant fraction of cost in
buyer’s business?
Yes
Yes, hardware and software cost
reduced by cloud technologies
42. Are prices in the market
negotiated between buyers and
sellers on each individual
transaction or do sellers “post” a
“take-it-or-leave it price” that
applies to all transactions?
No, normally services are
negotiated.
No
Identify the Market leader and second rank company of the industry.
Analysis of the business level strategies of each of the TCS and Infosys
companies and VRIO framework for each of these companies.
TATA Consultancy Services (TCS) - Strategies
• Company strategy of strengthening the current business and investing in future revolves
around 1) Customer centricity 2) Global Network delivery model (GNDM) 3) full services
portfolio 4) non-linear business models and 5) experience uncertainty.
• Customer Centricity: It is about 1) staying relevant to the customer and 2) Helping customers
to define their future i.e.co-creation model.

• Full Services Portfolio and GNDM: TCS adopted diversified portfolio of software offerings
across geographies and balanced the dependency across its market and portfolio of
offerings.TCS has adopted a model of strong penetration into new geographies and new
service lines, through acquisition of local companies in that region.
• Non-linear business model: TCS non-linear growth model by offering solutions as product Ex:
TCS Bancs(Banking) and mpos (Retail), platform Ex: fully integrated IT as service model and
services Ex: Large number of industry solutions.
• Experience Uncertainty: It is TCS brand promise to customers.TCS helps customers
experience the certainty by reliably delivering business results, providing leadership to drive
transformation and partnering for success.
SWOT Analysis
Strengths
Ability to win and execute large, billion-dollar
outsourcing contracts, increasingly viewed by
customers in the same league as IBM and HP.
Group 3
Weakness
Made progress in commoditised services, but still
lags some peers and multinational rivals in high-end
consulting offerings.
Opportunity
Best positioned among all Indian vendors to
disrupt the global league of IBM-HP-Accenture.
Threat
People-led linear growth means Cognizant can
beat it, and there are no visible leaders beyond N
Chandrasekaran. That could pose a big challenge.

VRIO Framework Analysis
Summary of VRIO, Competitive Implications, and Economic Implications
Parameter Valuable? Rare?
Group 3
Costly
to
Imitate?
Organized
Properly?
Competitive
Implications
Economic
Implications
Global consulting and
Domain Consulting
practices
Yes Yes Yes No
Temporary
Advantage
Above Normal
(at least for some
amount of time)
Geographical
penetration
Yes Yes Yes Yes
Sustained
Advantage
Above Normal
Human Resources Yes Yes Yes Yes
Sustained
Advantage
Above Normal
Strategic Alliances Yes No Competitive Parity Normal
Advanced Technology Yes Yes No
Temporary
Advantage
Above Normal
Reputation Yes Yes Yes Yes
Sustained
Advantage
Above Normal
Infosys 3.0 - Strategies
• Infosys aims to transform into a business solutions provider. The company will not merely
provide software services and solutions, but also do a lot of transformational projects. Along
with the IT services it will also work with the business side of clients.
• The company is focusing on several new solutions, like cloud computing, Enterprise Mobility
and Sustainability, based on current market needs.

• It has groups providing learning solutions and business platform solutions. These along with
country focused teams are the main engines for future growth
• It has consolidated its verticals into four -- Financial Services & Insurance; Manufacturing;
Energy, Utilities, Communications and Services; and Retail, Logistics and Life Science.
Infosys removed of horizontal structure of focusing on specific areas like ERP,CRM, Data
Analytics within the verticals.
• It also has another vertical, Infosys Public Service subsidiary, which will essentially scout for US
government public service work.
• It has grouped its offerings into three groups -- Business Transformation (consulting work,
systems integration, enterprise solutions etc.); Business Operations (application development,
maintenance, infrastructure management etc.); Business Innovation (products, platforms and
solutions). These will be focus areas
SWOT Analysis
Strengths
Early positioning as high end differentiated player
thanks to Nandan Nilekani and NR Narayana
Murthy, investors and customers prefer the
company for its established processes and
predictability.
Group 3
Weakness
Lagging peers in making strategic, 'game-changing
acquisitions, consulting business has not delivered
the results, losing price premiums, lost its No.2
position in the US market to Cognizant last year.
Opportunity
Best positioned to replicate the Accenture model
from offshore, a game-changing acquisition in a new
geography could help the company raise its profile.
Threat
Ongoing visa abuse case and federal investigations
in the US could affect brand and business,
management transition from founders to
professionals, rival Cognizant could overtake the
No. 2 position.

VRIO Framework Analysis
Summary of VRIO, Competitive Implications, and Economic Implications
Parameter Valuable? Rare?
Group 3
Costly
to
Imitate?
Organized
Properly?
Competitive
Implications
Economic
Implications
Global consulting and
Domain Consulting
practices
Yes Yes Yes Yes
Sustained
Advantage
Above Normal
Geographical
penetration
Yes Yes Yes No
Temporary
Advantage
Above Normal
Human Resources Yes Yes Yes Yes
Sustained
Advantage
Above Normal
Strategic Alliances Yes No Competitive Parity Normal
Advanced Technology Yes Yes No
Temporary
Advantage
Above Normal
Reputation Yes Yes Yes No
Temporary
Advantage
Above Normal

Comments on the changes in Business level strategies required by these
companies looking at the future trends in the industry
TATA Consultancy Services
Strategies TATA Consultancy
Group 3
Services
Comments
Billing
model
Transition from Time and
Material model -> Fixed pricing
model -> Transaction based
pricing model.
Currently 80% of TCS revenue is on fixed price model,
they gave with traditional Time and Material model post
2008 global slowdown and identified huge potential of
increasing margins.
TCS CEO N.Chandrasekaran recently announced that
their next strategy in billing model is to obtain 70% of
revenue through Transaction based pricing. Example:
In transaction based pricing TCS will get billed for each
phone call or loan application processed in TCS
infrastructure and software application. Complexity of
this model to IT service provider is their success is much
more closely linked with the success of their customers
in their own business.
Sales &
Marketing
TCS model of going into new
geographies and new service
lines, which is paying off now.
This is evident from the broad-based growth that the
company has witnessed across geographies like the UK
and Europe, growth markets like India, Asia-Pacific,
Latin America and the Middle East and across verticals
like financial services, retail, manufacturing and
telecom.
It's a one stop shop for
anything in the outsourcing
chain.
Be it call centre work, testing, application management,
infrastructure management or any other service. This
helps it win multi-year, billion dollars contracts of the
kind that global IT providers like IBM and EDS used to
win in late nineties and early part of 2000.
Need to adopt relationship
based approach, high quality
Infosys will not enter into a deal if it feels at the outset
that it will not give them high margins, while TCS will
accept the deal but will work at getting higher

Group 3
deal pursuit team and
aggressive sales investments.
margins, by increasing work offshore or increasing
productivity.
Key
Verticals
Extending arm to customers
during global financial crisis by
adopting flexible pricing.
TCS was flexible with clients when the industry was hit
by recession. It was the first company to come out and
say that two of its banking accounts were in trouble and
hence we are adopting a unique pricing mode to
continue work with them. Today, it has managed to get a
larger wallet share from these players.
Providing service for both high
and low business customers
There are two ways of growth. Either take a bet on the
high- value business and let go of bread-and-butter
business. Or you may focus on both. TCS chose the latter
strategy. And this is working well for them
Product
line
TCS banc's - product suite for
all types of financial
institution.
TCS has to improve its offerings in product portfolio in
banking products especially to win deals of multinational
banks abroad.
Acquiring domestic IT
opportunities.
TCS Banc's should focus on winning core banking
deals with new banks which will be licensed to operate
by RBI. Core banking transformation success in State
Bank of India and India post would help to compete with
Infosys Finacle.
Organization
Structure
Restructure big
accounts/verticals into
individual units with authority
to take decision.
TCS is more global and has deep penetration in its
geography. The company was restructured into smaller
units of USD 250 million each. In all these cases, the
restructuring was done to make the individual parts grow
faster. There was no big change in the direction Only
eight senior executives were to report to the CEO
directly. What this revamp has done is to allow TCS to
remain agile, make quick decisions and move forward
with a clear strategic direction.
Adapting to new visa rules and
regulation.
New visa regime rules in United states will burden the IT
organization. There will be dynamic shift in the work
force deployed across geographies. TCS will be able to
handle the new dynamics due to deep penetration in
any geography.

Infosys
Strategies Infosys 3.0 Comments
Billing
model
Group 3
Recruiting more business and
functional consultants, so that
prospects for billing increases.
Infosys aims to transform into a business solutions
provider. This initiative dint yield expected results in the
period of global downturn. May be future, it would
increase the revenue earned from each infoscion.
Sales &
Marketing
Building tomorrow's enterprise. The Infosys sales team was selling a vision of the future,
laying down emphasis how the emerging technology
trends will change their business, and why they should
partner with Infosys to get ready for that change.
Infosys changed its tagline to ‘building tomorrow’s
enterprise’. But all this happen when companies were
trying to save today's enterprise post economic crisis.
Companies which were flexible on pricing could grab
maintenance contracts when they came up for renewal,
like HCL,TCS did. On the blueprint, Infosys’s new matrix
structure should have ensured that the team pursued
tomorrow’s opportunities as well as today’s business.
But, in reality, that did not happen. The company lost
the opportunity on the core business - Renewal of
existing maintenance contract. Hence Infosys should
focus on retaining existing client to build the
tomorrows enterprise.
Strategy of acquiring more IT
projects from existing
customers to reduce sales and
marketing expense.
Infosys desired too much for profitability that they spend
less in sales and marketing (S&M). While they are
spending couple of millions more and percentage has
gone up from 4.8 percent few quarters back to just about
5, it’s still much less than what their top three peers
spend. Further, not only the improvement in S&M—both
spend and client outreach activity—is improving only a
bit, its pace is also very low. We believe both the increase
in S&M and pace are falling short of what is require.
However Infosys believes that when demand conditions
get better, it will get the growth back, without
compromising its profits. That, in fact, is the promise of
Infosys 3.0. With the new strategy, it is possible to be
both a growth leader and a margin leader. However

Group 3
temporary slow pace as quoted by Infosys, lead to
increase in attrition compared to its peers. With huge
accumulation of cash in hand, they need not
compromise on spending on S&M to drive current
profit vs. future growth.
Retaining large client and
increasing the ability to
execute large project.
Infosys's sales team was asked to pursue Infosys 3.0
opportunities (of creating tomorrow’s enterprise), as
well as make the sales in existing businesses
(maintenance, testing and business process
outsourcing). The numbers show the sales team was
getting carried away with 3.0. As a result, it was losing
its edge in core markets. In North America, the biggest
market for all Indian IT services companies, Infosys fell
behind Cognizant in March 2011 quarter. (Cognizant’s
quarterly revenues grew from USD 1,012.1 million to
USD 1,069.9 million that quarter, while Infosys revenues
shrank from USD 1,025.5 million to USD 1,020.5
million.) A quarter later, it happened in its largest
vertical, banking and finance. The inevitable happened a
year later: Cognizant overtook Infosys in overall
revenues too. Infosys was losing out on another of its
traditional strengths, dealing with large clients. The
number of USD 100-million clients went from 13 to 15 in
the last two years. At the same time, for TCS, it went up
from 8 to 16, and even for underperforming Wipro it
went from 3 to 10. Infosys should focus on its
traditional strength of dealing large client, where
they get repeat businesses and multiple deals.
Key
Verticals
Increasing alliance with local
geographic infrastructure
providers.
Infrastructure contracts usually involve data centre
operation, services such as desktop management, local
and wide area network operations management, and
system integration work. Infosys has forged ties with
cloud service providers to service infrastructure clients.
This makes infrastructure deals asset-light and there is
no need to use the balance sheet. Infosys is also willing to
take over assets in small proportion, The change in
strategy appears to be paying off. Infosys has almost
doubled its large deal wins (greater than $50 million)
from 5 in the Jan-March quarter of 2012-13 to 8 in the
October-December quarter of the year. The total value

Group 3
of large deals increased from $400 million to $731 million
in the same period. Some of the big wins included those
from the BMW Group and Harley Davidson, both of
which were infrastructure services led.
Increasing revenue from high-value
business customers.
There are two ways of growth. Either take a bet on the
high- value business and let go of bread-and-butter
business. Or you may focus on both. Infosys chose the
former strategy. We have to wait to see the results.
Product
line
Increasing finacle reach into
North America and Europe.
As spending on IT by bank seems to increase among US
and European banks, Infosys should focus winning more
deals for its banking product suite finacle in western
nations apart from its traditional sales regions such as
South Asia, Southeast Asia, Africa and Australia. Infosys
strong sales experience for its services business in
western nations will help in capturing the market.
Acquiring domestic IT
opportunities.
Infosys should focus on winning core banking deals
with new banks which will be licensed to operate by
RBI. Though Infosys finacle is best suited for Indian
banks, it should not forget the critical deals it lost to TCS
i.e. Core banking transformation of State Bank of India
Organization
Structure
Revamping the organisation
structure and founder
returning back as Chairman.
Reorganisation is not new at Infosys, but current one at a
cost of many veterans damaged the image and stability
of organisation. However return of Founder
Mr.Narayanan Murthy increased the confidence and
moral among all its stake holders.
Adapting to new visa rules and
regulation.
New visa regime rules in United states will burden the IT
organization. There will be dynamic shift in the work
force deployed across geographies. Apart from that
Infosys law suit on illegal use of visa's will affect its brand
image. Infosys needs a comprehensive branding
strategy to position itself stronger.
Business strategy diamond model (Arenas, Vehicle , Differentiation, stages
and economic logic for 2012-13 and advice for the future)

Group 3
Infosys’ Business Strategy
Diamond
Arenas:
1. Offers End to end enterprise risk
management solutions.
2. Provides Social CRM and IT
Shared Support Services.
3. Leader in various banking and e-commerce
services.
4. Provides platform for
Distribution, Procurement &
Talent Management.
5. Services 798 clients across 30
countries.
Vehicles:
1. Its acquisitions of the Portland
Group (procurement space) and
McCamish Systems LLC (insurance
space) are aligned to its strategy of
developing business platforms
through partnerships and
acquisitions.
2. A partnership between Infosys and
P&G began in 2007 moving the
cost structure from being capex
intensive to opex based and
reducing cycle time of realizing the
return on investments.
Arenas
Economic
Logic
Staging Vehicles
Staging:
1. Strengthen its strategic
partnership with clients.
2. Increase its relevance
with customers by
offering end to end
solutions.
3. Its vision is to become
the most respected
Consulting and Systems
Integration firm in the
world.
4. Focus on building custom
software solutions for
specific industries.
5. Plans to invest heavily in
infrastructure and
employees.
Differentiator
Differentiators:
1. Infosys is the first ‘IT Services
/ BPO organization’ in India,
covering multiple locations
across India, to receive the
ISO 22301 accredited
certification awarded by
British Standards Institution.
2. Capable of providing end to
end solutions.
3. Possesses SAP CPM, BO and
RSC CoEs.
4. Provides in-house technical
and domain certifications for
sustained people
development.
5. Capable of providing global
deployment.
Economic Logic:
1. The company is focused on “long-term
growth opportunities” to “deliver higher
business value.”
2. Infosys has nearly Rs 20,000 crores, or
about $3.8 billion as cash. Too much cash
in the bank makes it ultra-conservative.
3. The company has shown excessive risk-aversion,
as revealed in the high cash
balances of nearly Rs 19,752 crores.
Infosys has been conservative in its
growth strategy.

Group 3
TCS’ Business Strategy
Diamond
Arenas
Staging Vehicles
Economic
Logic
Differentiator
Arenas:
1. TCS currently has offices in
North America, South America,
UK & Ireland, Europe, Asia
Pacific, Middle East & Africa,
and India.
2. TCS includes Application
development and
maintenance, BPO, Enterprise
Solutions, IT IS in its service
line.
Vehicles:
1. By acquiring Computational
Research Laboratories TCS has
acquired expertise in High
Performance Computing (HPC)
applications and Cloud services.
2. By acquiring Alti SA TCS has
gained Access to blue-chip
French and European clients in
banking, luxury, manufacturing
sectors.
Staging:
1. Its strategy for long-term
profitable growth is
based on continuously
scaling its core IT services
business, while investing
in new customers,
services, markets and
industries.
2. The Company’s strategy
of strengthening the
current business and
investing in the future
revolves around
Customer centricity, Full
services portfolio, Global
network delivery model
(GNDMTM), Non-linear
business models.
Differentiators:
1. Innovation Labs and Co-innovation
network (COIN)
helps clients achieve and
maintain a competitive
advantage by offering
research-based solutions.
2. TCS’ full services portfolio
combines traditional IT and
Remote Infrastructure
services with knowledge-based
services such as
Consulting & Business
Process Outsourcing.
3. TCS’ global engagement
model allows clients to
choose the sourcing strategy
best suited to your business
needs by taking the follow-the-
sun approach.
Economic Logic:
1. On an annual basis, TCS has delivered
277 basis points improvement in
operating margins to 26.5 per cent (as
per US GAAP) and 429 basis points in
terms of net margins to 22.88 per cent.
2. TCS continues to invest in its business
by maintaining pricing discipline and
improving internal efficiency. And now,
as growth returns to the industry, the
cost discipline will give it an operating
leverage.

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