By: Shanta Mishra

Presenting

Indian Culture and software Indian culture is a mix of Aryan and Dravidian culture.

1600 East Indian Culture got established in India.

1850 Britain controlled about 50% of India.

Independence battle and India won it in 1947.

1991, the financial crisis-

(a) gave birth to the Liberalization of trade,

(B) currency fluctuations took up and

(C)Foreign Direct Investments came into the picture.

Continued…

• Till the year 1999- Agricultural society which employed around 75% of the people.

• There was a poor condition of infrastructure and imports. Several restrictions on the software firm affected it to grow.

• Overall size of the software industry- $300 billion-$750 billion.

• The trend of the industry was changing from to increase in the value

chain for the software service providers.

on-site offshore

Genesis of Infosys• Mr. N.R. Narayan Murthy, born in the year 1946, was an

Electrical and Computer Science Engineer from IIT Kanpur.

• He focused to find how social can create wealth for people and how to foster the creation.

• He worked two years for a public sector.• Joined his friend’s startup firm named PCS - as the head

of software group.• After working for four years at PCS, he left to start Infosys

with the other six employees of PCS- All had complementary skills in the field of Marketing, Finance, Human Resource, and Technology.

The startup was with just $1000

The problem faced by the company as a startup was, shortening of funds and at that time no banks provided funds without collaterals

Managing funds for Infosys• The employee strength reached to 100 by the year

1981 through 1989.• 1989 crisis -Business got almost shattered

-One of the fonder left the company -The company was forced to send

employees outside the India to complete the work.

90% of the work was

done outside the India

The company used just six capital infusions in the form of four loans which were- for the purpose of purchasing the hardware and the other properties.

$225,000 in 1986

$250,000 in 1989

$100,000 in 1991

$150,000 in 1992

Continued…

In the year 1994, company drew up the policy which consisted for few elements such as –

(a) liquidity of 25% of the revenue in the form of liquid assets and

(b) company will provide dividends only when the cash surplus exceeds that level.

But the problem again arose because Indian investors do demand dividends.

IPO and the motive behind it

In the year 1993, Infosys went for the IPO.The main motivation behind going for an IPO were

(a) to realize the value of investments done by the employees and contribute to the creation of wealth inside India.

(b)to invest in new projects and larger projects that could absorb the growth. As a result 138 million Rs were invested in new facilities.

Business took off after the IPO resulting in the doubled revenue and stock split in the year 1994.

Becoming the Star of India• Infosys, between year 1989 to 1999, transformed its image and

the business strategies- Where in the year 1989 hardly 10 to 20 % of the work was being performed in India, it reached to 75% by the year 1999.

Asset creation philosophy of InfosysThere was a need to create an environment to enhance the

overall experience for the employees. For this purpose Infosys soon started constructing campuses and several other facilities for their employees.

Infosys was the first company to value human resource and Institute a stock option plan, low interests and zero interests loans.

Growing painsLesser productivity

Cultural concerns- to handle cross culture

Global Delivery Model

Hiring and retaining employee

Formulated Strategies

To Generate high revenue per employee- needed narrow wage differences between India and US.

To close the gap in the per capita revenue by increasing the value chain of the software development.

To increase the customer penetration- (by taking more projects and bigger projects).

To enhance the brand equity-this can be achieved going for one to one marketing, rather going for the mass marketing.

To increase the amount of fixed price contracts.

US - OfferingKey decision in the year 1999- whether to commence a

stock offering in US or not.Step needed was to create a buzz around the customers.

Most of the customers were in US, so they thought that the US offering will help to create and leverage buzz in their customer market.

ADR (American Depository Receipt), will help to achieve the goal of recruiting international employees.

Also listing will provide currency for the internationally based employees as 26% of the investors were located in US and other locations outside India.

Listing was to be chosen between NYSE and NASDAQ.

NYSE

Advantages• World’s largest equity

market.• Greatest liquidity.• Highly prestigious.• Larger institutional

investor base.

Disadvantages• Higher listing cost.• Much smaller group of

comparable firm.• Mandatory to provide

voting rights to ADR holders.

NASDAQ Advantages• Low cost.• Large and liquid market.• Easier to fulfill listing

requirement.

Disadvantages• Less prestigious.• Not as highly visible as NYSE.