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Cover Story
 

Enter ‘Tactical’ Strategy
In a Superlative & most Insightful analysis, B&E Documents how Corporate Leaders have Transformed their Organisations & Implemented continental strategic shifts that have Rewritten Global Management case books
Issue Date - 17/02/2011
 
Still a long way to go

In this exclusive interaction, infosys ceo kris gopalakrishnan elaborates on the importance of making incremental shifts in strategy in the short term
By : Virat Bahri

His colleagues at Infosys widely consider CEO Kris Gopalakrishnan to be an intellectual leader who brings exceptional insights into every discussion. Interestingly, when told about our concept of strategy shifts, his first reaction was to give his own perspective on the same and also provide some guidelines into how B&E can cover the concept in a better way! In this exclusive interaction with virat bahri, he talks about Infosys’ approach to strategy change, and on the lessons that can be derived from the same.

B&E: Timely shifts in strategy are becoming increasingly unavoidable for IT companies. What is your perspective on the same?
Kris Gopalakrishnan (KG): We have to continuously change our strategy. That’s not new. What is different is that we are emerging out of a very deep downturn. We also realise that there are significant shifts and fundamental shifts happening across the world. The first is the shift towards Asia. We divide the world into 3 parts – European countries, Japan et al that are expected to grow by 1-2%, US and some others that will grow by 2-5% and then countries in Asia and other economies, which will grow by over 5%. The second is about the impact of consumers in Asia; the impact of technology, mobiles and the digital revolution. These are creating a perfect storm of opportunities, even though we are emerging out of a downturn. You need to look at the strategies that you need to have; where on one side, you are not completely out of the downturn but on the other side, there are opportunities. HSBC has significant exposure to emerging markets and that is why it has done better than other banks. If you take advantage of the growth opportunities, then you can grow by more than 5% or even 10%. Indeed, change is faster, because today there are a lot more disruptive changes happening in the environment and not just in technology, which require strategic change.

B&E: Wasn’t Lehman a major inflexion point that compelled Infosys to make major strategic changes?
KG: That was not a strategy change; it was a survival issue. We had planned for 19-20% growth. In the second quarter of that year, we grew sequentially 5%. So we had to stand up and revise the guidance downward and we grew by 11% that year. Next year, we guided for a decline of 3-5%. So the key is how you rein in your expenses and how you quickly change your approach. We had to see how we could honour the offers we made in the campuses (16000 offers) and still meet margin expectations. From October 2009, we have growth coming back. Now we are looking at how we can accelerate growth and what strategies we need to adopt.

 
B&E: Analysts say that Infosys made a marked positioning from the ‘flat world’ to a global company with centres around the world, since it lost its cost advantage, and had to face protectionism as well. How far is this true?
KG: No. Internally we call it Infosys 3.0. Initially, it was all about establishing the global delivery model as a viable alternative to the way services were delivered initially. We did this through technology services – application development and maintenance (in the 1990s). Then we looked at scaling that up and introducing many more services using the global delivery model. The third phase is actually becoming strategic partners to our clients. In this phase, it is important to set up centres across the world, in locations like India as well as in the market to satisfy the requirements of our clients. The first set of requirements is around front end services – consulting, system integration – we are expected to identify the business problem, recommend solutions, design the solutions, and implement the solution end to end. In order to do that, we need local resources. System integration requires local resources. When we deliver this, they expect 24/7 support, in local languages like Chinese, Japanese, French, German et al, which cannot be provided from India. We have centres in Czechoslovakia, Poland, China, Mexico, Phillipines, et al. So we have created them for two reasons – local language support and 24x7 support – ‘Follow the Sun’ strategy. In the medium term, clients need an alternative to India and that will be China as only China can scale up like India.

B&E: But doesn’t the setting up of these centres dilute your cost competitiveness?
KG: Cost advantage comes from delivering services remotely from lower cost locations. Here, it will be the right cost. From China it will be China price, from Philippines, it will be Philippines price and so on. By allowing us to combine these delivery locations, we are able to provide a cost advantage. For consulting service, it is the local price. End to end cost will be still down as we are combining these locations. Earlier, it was being delivered by a local consulting company. We can deliver this now. We will not be more expensive or cheaper; but we will provide a better service, so they get a single partner doing end to end. We will develop the idea to the implementation. Previously someone gave the idea and we did the implementation. Lots of reports produced by consulting companies used to stay on the shelf since they were not implementable. Now, since we give the idea, we stand behind it and ensure it is implementable.

B&E: In your strategic evolution, is there a specific rationale behind moving in the sequence in which you moved?
KG: It’s client acceptance and the brand. You can start from consulting, but remember that at that time, the disruption is not that; the disruption is ability to distribute work and do it remotely. That’s how we changed the industry. Now we are looking at how we can consolidate that position and add more value to the clients. There is no right way; this is how the industry has evolved by leveraging our strengths.

B&E: Post-Lehman, how are you leveraging on the new opportunities in the global economy?
KG: We have to look at how to broaden our industry footprint. We have to look at sectors that are counter-cyclical. For instance, healthcare and public sector fit that bill. In a downturn, people will not stop investing in their health and the government will not stop spending. We also have to diversify from a geography perspective. We have to add new services, so that we can continue to cross sell. We have existing relationships but you can grow by introducing new products & services to increase revenues we get from the same relationship.

          

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