requirements are flexibility and innovation. Accordingly, it has developed clear selection criteria
consistent with this business need. Selection is based on individual’s ability to learn, academic
achievement, conceptual know ledge, as w ell as temperament for (and fit w ith) Infosys’s culture.
Further, because of Infosys’s reputation as a premier employer, it can select from a large pool of
qualified applicants w ithin India. Competition among applicants is intense.
One selection criteria in particular stands out: the “Learnability”. At Infosys, learnability is
defined as the ability of an individual to derive general conclusions from specific situations and
then apply them to a new unstructured situation.
5
P.S. Srivathsa, the Senior Manager of Human Resource Development, adds:
“Learnability is considered an important criterion because the project life cycle is short
and technology is changing rapidly – so the ability of the person to take the concept
learnt in one setting and to apply it to another is very important. At Infosys learnability is
assessed through written tests that include mathematical and analytical questions geared
towards assessing the aptitude of a person to derive generic patterns from a situation.”
For its entry-level positions, Infosys focuses its recruiting efforts on students w ith excellent
academic background from engineering departments of Indian schools. The first step in the
hiring process is manpow er planning, w here the numbers are determined. This planning usually
takes place 20 months ahead of the hiring process. Recruitment includes campus interviews, as
well as inviting applications over the Internet, new spaper ads, through job fairs, and HR
consultants. The initial screening is based on such criteria as academics and experience. In
1999, 185,000 resumes w ere processed and, after the initial screening, w ere reduced to 40,000
resumes. The shortlisted applicants undergo a selection test.
The test comprises tw o main components: arithmetic reasoning and logical reasoning. Because
of time pressures involved in testing the large volume of candidates across the country, the
reading comprehension section has been eliminated, cutting dow n the testing time to one hour.
Tutorials or coaching classes offered by third parties are popular among individuals w ho w ish to
prepare for these competitive tests. Infosys has a question bank system from w hich questions
are picked randomly for each test center. Those w ho score above the cut-off in the selection
test are called for an interview .
Interview s are conducted jointly by the human resource managers and the technical manager.
At the interview stage screening criteria used are aspirations, expectations, flexibility,
presentation skills, and communication skills. In 1999, 10,000 candidates w ere interview ed, and
offers were extended to approximately 3,330. Of these, approximately 2,050 accepted.
Rejected candidates may reapply after 9 months. People do come back and, if they have picked
up the necessary skills, they are hired.
Training and Development
At Infosys, training and development is the next step in building its human assets where the
objective is to match the available skills and abilities to its business requirements. In the
headquarters at Bangalore, the education and research center is housed in a building that can
train 1,000 softw are engineers simultaneously. It comprises fully equipped classrooms, labs w ith
video-conferencing units, individual faculty rooms, and a 30,000 square foot library w ith a
capacity for 10,000 books. In addition, under construction are a management development
training center and a Wireless Center for Excellence to be built by Nortel Netw orks. The
Wireless Center is expected to be the e-commerce research center w ith a capacity for 650
people w orking on research in w ireless Internet capabilities.
The education and research department of Infosys offered 241 courses in 1998-1999, including
courses in business, database management, e-commerce, quality systems, programming
language (e.g., Java, C++), netw orking concepts, software development, languages (e.g.,
French, Japanese), interpersonal skills (e.g., communication) and managerial skills (leadership,
team management, negotiation). Full time faculty teaches 75% of these courses; professionals
teach 10% of the courses and outside vendors offer rest of the courses. The full time faculty
6
comprises 40 individuals from academics and industry. The human resources department
supplies additional 5 facilitators, w ho provide the soft-skills training; the quality control
department delivers the training for quality.
All fresh technology entrants receive 14.5 w eeks of training: 3 days of orientation (e.g. corporate
culture, customers), 5 weeks of foundation courses (e.g., programming, systems development,
interpersonal skills), 7 w eeks of technology courses (e.g. C++, UNIX, HTML) and 2 w eeks of
group project. In 1998-99, 1750 new entrants received the basic training. In addition, training is
provided as a part of the continuing education. In 1998-99, 2000 employees received training as
a continuing education: about 8 days/person in technical and softw are engineering, 1.5
days/person in managerial skills, and 3 days/person in project management.
Beyond entry-level training, people may nominate themselves for the scheduled courses. Close
to 100 courses are offered each quarter, with duration from 1 day to 6 days. Most courses are
presented in classrooms, some in labs. In addition, course may be offered on request.
Training needs are assessed through various mechanisms; the objective is to fine-tune them to
business needs. First the corporate management determines segment-w ise technology
requirements. These expectations are communicated to the education and research department.
So, for instance, the education and research department may be informed of the requirement for
500 people w ith know ledge in Internet technology in the near future. Specific skill needs such as
interfacing w ith Microsoft or Java may be determined through a deeper analysis. Typically,
about 3-6 months advance notice is provided.
Training needs may also be assessed through the regular planning meetings. In these meetings,
the expected projects for the coming year are forecasted. These projections determine skill
requirements (e.g., 300-400 project managers for 500 projects). Based on current skill
availability and skill demand, training needs are determined. The education and research
department also tracks specific technologies; the number of requests for the technology from
clients may also determine course-offerings.
Infosys also offers training and development support to academic institutions by providing
exposure to industry, in the form of sabbaticals at Infosys, training programs, and sharing
courseware.
Careers
Charged w ith the responsibility of developing human assets in a fast paced environment, career
management at Infosys faces tw o challenges: a shift from a focus on technical expertise in the
career to a focus on management expertise, and the speed w ith which this refocusing must be
accomplished.
Nandita Gurjar, the Corporate Development Manager describes the first challenge as follow s:
“Management skills have become increasingly relevant for Infosys because of its everincreasing
volume of business as well as its shift towards consulting business. As the
number of projects to be handed has increased, the demand for project management
skills in goal setting, communication, coaching, delegation and team management has
also increased. Invariably the technical personnel are chosen to move to a management
track. This choice is ironic in some ways because the better an individual is in technical
skills (such as writing code) the more likely he/she is to be moved away from using the
7
technical expertise into a management track requiring management expertise. Technical
expertise provides an individual legitimacy and respect from co-workers making them a
natural choice as a team leader. Within a short time span the team leaders are required
to manage projects, clients and the people working on these projects. It, therefore,
becomes necessary for the individual to abandon their technical expertise – something
that has been very salient to their identity in the course of education and early career,
when they aspire to be smart “techies”, and start collecting a repertoire of managerial
capabilities.
While developing management skills by attending management development programs
2-3 years ago was one of the “nice things to do”; it has now become a business necessity.
The nature of management skills required is further complicated by the fact that at
Infosys, managers are also required to mange from remote. Team members are spread
geographically and may not meet each other or the team leader for a year or perhaps
never. As hiring overseas gathers momentum, the demands may be further exacerbated
by the fact that team members may belong to different backgrounds and may not
completely understand the organization and the country culture. “
The second challenge facing career management is the “compression” in career, an effect of
the speed at w hich employees must move from one stage in their career to another. The new
hires are very young (22 years old) and they are put under managers who are 24 years old. At
30 these employees are managers of managers. At 35 an individual can potentially become a
vice-president. Management skills become necessary at a very early stage in the life and
career of an individual at Infosys. Rapid change is a constant challenge. Nandita summarizes
this challenge as follow s:
“It is a challenge to teach a 24-year-old to become a manager. The young individual
believes, “I have not yet grown”, but you are saying, “you have to do it”. Just when you
become used to something you are pulled out of it and it is time to move on to something
else. Those who can cope with this change emerge as leaders (perhaps at the age of 32);
others fall back and become comfortable where they are. The whole career development
progress in Infosys is therefore comparatively shorter than in other companies.”
To address the pressing need for management development, Infosys has put in place some
training programs. These include:
• First time manager program: This is a 5-day program for new managers, designed to
change a manager's mindset from an individual to a more managerial one, w here the focus
has to shift from managing individual performance to managing team performance.
• The manager of managers program: The program is geared tow ards teaching managerial
skills (such as delegation, team management) to more senior managers.
• Infosys leadership program: The program emphasizes the dynamic environment outside of
Infosys and the adaptation to its environment. Once again, the objective is to create a “mindshift”
for the senior managers, from looking inw ard at the internal operations to becoming
aw are of external change factors.
Compressed careers bring w ith them another challenges: stress and burnouts. With
technology-assisted communication devices (e.g., Palm pilots, cell phones and home computers)
employees are multi-tasking, even in meetings. The potential for stress is enormous, intensified
by the time zone differences that make the employees accessible around the clock. Thus,
8
working around the clock, coupled w ith extensive travel and minimal time to manage w ork and
nonw ork needs may cause many employees in the future to burnout.
Performance Appraisal
Perfomance appraisal is a rigorous comprehensive process at Infosys, tied to the future
development of the individual’s skills and capabilities. First, an evaluation of personal skills is
carried out for the tasks assigned to an individual during the appraisal period. The criteria used
to evaluate performance on tasks are derived from the business goals and include: timeliness,
quality of w ork, customer satisfaction, developing others, know ledge dissemination, peer
satisfaction in the team, increased business potential, and developing optimal task solutions.
The evaluation of personal skills and abilities is carried out for the follow ing: learning and
analytical ability, decision making, team leadership, change management, communication skills,
teamw ork, planning and organizing skills. Each criterion is described and measured on a 5-point
scale. Further, each of the scale points are anchored to descriptions of expected behavior12.
Performance appraisal is carried out semi-annually, in July and January. 360-degree appraisal
is carried out for all employees. Appraisals are sought from peers, direct supervisors,
subordinates and customers. A minimum of 6 to 7 appraisal reports are collected for each
employee. All appraisal forms are completed on-line and the data is maintained in a central
database. The appraisal information is used to identify training courses and other
developmental interventions. Future objectives for both task accomplishment and individual
skills development are based on the results of the semi-annual evaluation.
Compensation
“We compensate our human assets in three ways. We add learning value through
training and development and appraisal practices. We add emotional value through
initiatives directed towards supporting employees with their work and personal needs,
and we add financial value through monetary compensation.” (Hema Ravichandar,
Senior Vice President Human Resource Development).
Although Infosys faces strong domestic and international competition for its human assets,
through enticing offers from competitors, the compensation level at Infosys equals the average
industry level for each country. It is neither above market nor below the market level. The belief
is that financial value, w hen combined w ith learning and emotional values, yields a total
compensation greater than that offered elsew here in the industry.
Infosys is one of the first Indian companies to offer stock option plans to their employees.13
Currently Infosys offers three option plans that cover all Infosys employees:
1994 Employees Stock Offer Plan: Established in September 1994, the plan provides for the
issuance of 6,000,000 w arrants to eligible employees.
1998 Stock Option Plan: Infosys’s 1998 Stock Option Plan provides for the grant of nonstatutory
stock options and incentive stock options to employees. A total of 1,600,000 equity
shares are currently reserved for issuance pursuant to the 1998 Plan. Unless terminated sooner,
the 1998 Plan w ill terminate automatically in January 2008. All options under the 1998 Plan w ill
12 Please see Appendix C for description of one such scale.
13 “The Lightening Spark,” Silicon Technology and Business Magazine, August 1998, 50-51.
9
be exercisable for ADSs represented by ADRs.
1999 Stock Option Plan: The 1999 Plan provides for the issue of 6,600,000 equity shares to
employees. A compensation committee comprising a maximum of seven members administers
the 1999 Plan. Options w ill be issued to employees at an exercise price not less than the Fair
Market Value. Fair Market Value means the closing price of Infosys’s shares on the stock
exchange w here there is the highest trading volume on a given date and if the shares are not
traded on that day, the closing price on the next trading day. Under the 1999 Plan, options may
also be issued to employees at exercise prices that are less than Fair Market Value, only if
specifically approved by the members of Infosys in a general meeting.14
In addition such statutory benefits as pension, medical and leave, Infosys also offers a loan
program that employees find very attractive. Loans may be taken for pursuing a degree program
such as an MBA, or to meet such personal needs as purchasing a car or a house. The interest
rate varies (4% for a car purchase and 0-4% for house purchase). To date, almost all loans
have been repaid.
Infosys Overseas HRM
Overseas, the main thrust of human resource management at Infosys has come from its Global
Delivery Model. The objective of this model is to support customers using virtual teams that
span geographic locations. Recently, how ever, the focus has shifted from producing at low est
cost and selling at maximum price to producing at locations that provide other benefits. For
example, production demands arising from customer needs in Canada, London or the USA may
require that production be carried out in that specific country. Or, in another instance, the “dot
com” customers require latest technical expertise that may not be available in India, so that
developers must be hired from Silicon Valley in California.
Currently, the greatest need at Infosys is to hire people at all overseas locations, w ith about
1000 hires in the next year in the US and 100 in Canada. Before the NASDAQ listing, Infosys
could not pay overseas hires, because Indian stock options are not fungible. How ever, since
1999, Infosys has been recruiting actively in North America (including Canada). A draw back that
Infosys faces in attracting candidates is that it has very low brand equity in the US. The
NASDAQ listing helped build the brand equity for Infosys in its own immediate market, but to
most people it is still relatively unknow n
The recruitment strategies being used at the campuses in the U.S. are similar to those used by
all other companies. These include lobbying w ith campus career centers, giving talks to student
groups, sending email campaigns, participating in career fairs, etc. How ever, certain aspects of
the recruitment unique to Infosys offer it a recruiting advantage.
Prasad Tadimeti, the HR manager of Infosys, USA describes these recruiting practices:
“ We offer to provide extensive training, that few other companies will offer. The training
includes classroom training and mock projects. After a year our employees are as good
as the best Bachelor of Science computer scientist in the world. Subsequently,
employees have the opportunity to sign up for any course as a part of their continuous
learning process. With an increasing hiring rate, Infosys plans to set up training facilities
in US itself. The other aspect of recruitment that provides an advantage to Infosys is our
14 Infosys, Annual Report 2000, p.155
10
willingness to hire anyone with any reasonable math or science background (for example,
economics, math, statistics, physics or chemistry. This is a departure from the hiring
practices of other firms that focus on the traditional computer science, computer
engineering, and electrical engineering backgrounds. This approach to hiring is attracting
a lot of attention. Given our proven track record of training non-computer background
people in India, we can do it again here, as long as there is some degree of analytical
background in the curriculum and the person has a good GPA.”
Although learnability is an important criterion for hiring even in North America, the written test
used in India to screen out applicants cannot be used in the USA. Instead, the screening
criterion is a GPA of 3.0. This compares to a 70% cutoff used by Infosys for students from
Indian universities. The other characteristics considered important are interpersonal skills and
communication ability, ability to w ork under pressure and to travel extensively. While hiring in
North America, Infosys particularly emphasizes communication and interpersonal skills,
because of their experience that candidates in North America possess these more than
candidates in India. In contrast employees hired in India are stronger in technical skills. A team
comprising both skills is therefore very advantageous, and can potentially create learning from
each other’s skills.
Subject know ledge is a distant third or fourth level criterion, based on an assumption that, if the
person has applied his/her mind to understand a concept in his/her ow n discipline, then it is not
very probably difficult to teach the person software programming.
Overseas, Infosys maintains the same compensation strategy as in India, namely, that they are
not industry leaders in pay. To attract candidates they emphasize the entire employment
package. Features of the package include career advancement opportunities, long term careers,
job challenge, training opportunities, autonomy and more early career responsibility compared
to competitors.
Culture has so far not been a major barrier in Infosys’ ability to do business in India. Prasad
provides insight into one significant difference in the managerial approach.
“The employment relationship in Indian businesses is implicit in that there is a mutual
understanding that the manager will act in the best interest of the employee. Several
employment related issues are left implicit - short-term needs may not be fulfilled with the
expectation that benefits may be forthcoming in the long run. The employment is
expected to last a long time period. Even if performance is sub-par, efforts are made to
help the person by either transferring to another line of business or by providing remedial
training. In the Western context, on the other hand, employment contracts are more
explicit. Employees may want to know the performance criteria and the performance
goals against which they will be evaluated. They are less tolerant of ambiguity in the
relationships and expectations have to be met instantly for trust to be generated. This
difference in expectations from the employment relationship is a challenge that Infosys is
facing and expects to continue facing as it diversifies into a global company with heavier
influx of different cultures.”
Future Plans
Infosys plans to maintain its growth rate in India and to expand overseas. It has already set up a
software development center in Toronto and plans to set up more centers soon. It plans to hire
substantial number of employees over the next few years in its overseas offices (e.g., 100
employees in Toronto by mid 2001).
11
As a part of its growth strategy, Infosys is exploring possible candidates for acquisitions in
United States. Infosys believes that pursuing selective acquisitions of IT services and software
applications firms could expand its technical expertise, facilitate expansion into new vertical
markets, and increase its client base.
As part of its business strategy Infosys is gearing to move up the “value chain” and provide endto-
end solutions to clients15.
Infosys w ill have to achieve these objectives in the face of many challenges 16. These include
increased global competition and labor cost, rapid growth, and increased employee diversity.
As Infosys expands overseas, it w ill experience increased competition from firms w ith potentially
low er labor costs and w ith a greater ability to respond to changing client IT preferences.
Historically Infosys’ labor costs have been low er than those of service providers in the United
States and Europe. How ever, because w ages in India are currently increasing at a faster rate
than in the United States, Infosys will experience shrinking profit margins in future. The rapid
grow th of Inofsys challenges its ability to transmit its corporate culture worldw ide as well as its
ability to attract and retain skilled personnel. Overseas hires and acquisitions w ill result in
Infosys experiencing increased employee diversity of cultures. Increased diversity will also
come from a different set of skills required for expansion into consulting business.
Infosys’ human resource management practices w ill have to be assessed in light of these
challenges. What adjustment w ill Infosys have to make to harness its human assets as they
move in to the future?
15 For details about Infosys’s strategy please see Appendices D.
16 For details of competition and risk factors please see Appendix E & F.
12
Appendix A
Lev and Schwartz Human Capital Accounting Model
Infosys places an asset value on its human capital based on an accounting model put forth by
Baruch Lev and Aba Schw artz. Lev and Schw artz’s model is based on human capital theory,
which recognizes human capital as one of several forms of holding w ealth for a business
enterprise, such as money, securities and physical capital. In this model of accounting, human
capital is treated like other forms of earning assets and thus is an important factor explaining
and predicting the future economic grow th of the company.
Lev and Schw artz’s accounting model is based on the measurement of human capital using the
formula, Vr = ÓT
t=r I(t)/(1+r)t-r, w here Vr = the human capital value of a person “r” years old; I(t) =
the person’s annual earnings up to retirement; r = a discount rate specific to the person; T =
retirement age. The formula uses an earnings profile, w hich is a graphic mathematical
representation of the income stream generated by a person. Typically, earnings increase w ith
age. As the person reaches retirement age, productivity declines as a result of technological
obsolescence and health deterioration. This model postulated in 1971 remains largely unused
as a result of criticism from Accounting professionals w ho argue that human capital cannot be
purchased or ow ned by the firm and therefore would not be recognized as an asset. Additionally,
critics of human capital theory state that labor force does not have a “service potential”;
meaning employees are paid for rendering current services and no asset is formed by these
payments. Regardless, this model is one of few that exist to value human capital, a source of
know ledge for companies. While very basic, the Lev and Schwartz model provides a means by
which to disclose human capital values to stakeholders.17
The Lev & Schwartz model has been used by Infosys to compute the value of the human
resources as of March 31, 1999. The evaluation is based on the present value of the future
earnings of the employees and on the follow ing assumptions:
1. Employee compensation includes all direct and indirect benefits earned both in India and
abroad.
2. The incremental earnings are based on group/age have been considered.
3. The future earnings have been discounted at 25.32% (previous year – 26.95%), this rate
being the cost of capital for Infosys. Beta has been assumed at 1.48 based on average beta
for software stocks in the US.
17 Lev, Baruch and Aba Schwartz. “On the Use of the Economic Concept of Human Capital in Financial
Statements.” The Accounting Review 44(1971): 103-110.
13
As of March 31 2000 1999
No. of
Employees
Value of human
resources (Rs. in
lakhs)
No. of
Employees
Value of human
resources (Rs. in
lakhs – 1
lakh=1,000,00)
Production 4,292 196,513.84 2,854 76,984.25
Support–
Technical*
450 8,165.20 389 7,168.97
Support – Others 647 19,062.73 523 10,416.52
5,389 223,741.77 3,766 94,569.74
* Note: Support - technical includes trainees, employees in R&D activities and support
personnel allocated to production.
2000 1999
Number of employees 5,389 3,766
Value of human resources 223,741.77 94,569.74
Total revenue 92,146.48 51,273.84
Softw are revenue 88,232.37 50,889.12
Employee cost 33,455.91 16,605.64
Value-added 72,330.70 37,411.49
Net profits excluding extraordinary income 28,594.86 13,291.54
Total revenue/Human resources value (ratio) 0.41 0.54
Total software revenue/Human resources
value (ratio)
0.39 0.54
Value-added/Human resources value (ratio) 0.32 0.40
Value of human resources per employee 41.52 25.11
Employee cost/Human resources value (%) 14.95% 17.56%
return on human resources value (%) 12.78% 14.05%
14
Value-added statement
Year ending March 31 2000 1999
Total revenue 92,146.48 51,273.84
Less:
Softw are and development expenses (other than
employee costs and provision for post-sales client support)
12,916.31 9,326.92
Administration expenses (other than provisions) 6,854.47 4,535.43
Subtotal 19,815.78 13,862.35
Total value-added 72,330.70 37,411.49
Applied to meet
Employee costs 33,455.91 16,605.64
Provision for post-sales client support 209.63 219.19
Provision for bad and doubtful debts and doubtful loans
and advances
94.03 39.87
Provision for contingencies 333.00 666.00
Provision for e-investing the company 350.00 -
Provision for investment in subsidiary - 705.96
Income tax 3,970.00 2,294.00
Dividends (including Dividend tax) 3,303.65 1,331.83
Retained in business 30,614.48 15,549.00
72,330.70 37,411.49
The figures above are based on Indian GAAP financial statements.
_________________________
Source: 1999-2000 Annual Report
15
Appendix B
Products
Infosys’s services include software development, maintenance and re-engineering services, ecommerce
and internet/intranet consulting as w ell as dedicated OSDCs for certain clients. In
each of its service offerings Infosys assumes full project management responsibility for each
project it undertakes.
Dedicated Offshore Software Development Centers
Infosys has pioneered the concept of dedicated Offshore Softw are Development Centers
(OSDCs) in w hich a software development team that is dedicated to a single client uses
technology, tools, processes and methodologies unique to that client. Each dedicated OSDC is
located at a company facility in India and is staffed and managed by Infosys. Once the project
priorities are established by the client, Infosys, in conjunction w ith the client’s IT department,
manages the execution of the project. By focusing on a single client over and extended time
frame, the dedicated OSDC team gains a deeper understanding of the client’s business and
technology and can being to function as a virtual extension of the client’s softw are team.
The Indian offshore development model became popular in the mid-1990’s as a method of
dividing softw are project activities betw een a service provider’s offshore software development
facility and a client’s on-site location. This model contains many features that are attractive to IT
consumers w ho are primarily located in the United States, Europe and Japan. These features
include: (i) access to a large pool of highly skilled, English-speaking IT professionals, (ii)
relatively low labor costs of IT professionals offshore, (iii) the ability to provide high-quality IT
services at internationally recognized standards, (iv) the capability to w ork on specific projects
on a 24-hour basis by exploiting time zone differences betw een India and client sites, and (v)
the ability to accelerate the delivery time of larger projects by parallel processing different
phases of a project’s development. While some U.S. and European companies have
commenced their ow n operations in India, most large corporations have opted to form strategic
alliances w ith local Indian IT companies to reduce the risks and start-up costs of operations in
India.
Infosys has a long history of executing projects betw een its clients’ sites in North America,
Europe and Asia and the company’s offshore software development facilities in India. In a
typical software development or re-engineering assignment, Infosys assigns a small team of tw o
to five IT professionals to visit a client’s site and determine the scope and requirements of the
project. Once the initial specifications of the engagement have been established, the project
managers return to India to supervise a much larger team of 10 to 50 IT professionals dedicated
to the development of the required softw are or system. A small team remains at the client’s site
to track changes in scope and address new requirements as the project progresses. The client’s
systems are then linked via satellite to Infosys’s facilities enabling simultaneous processing in
as many as four offshore software development facilities. Once the development stage of the
assignment is completed and tested in India, a team returns to the client’s site to install the
new ly developed softw are or system and ensure its functionality. At this phase of the
engagement, Infosys will often enter into an ongoing agreement to provide the client w ith
comprehensive maintenance services from one of its offshore software development facilities. In
contrast to development projects, a typical maintenance assignment requires a larger team of
10 to 20 IT professionals to travel to the client’s site to gain a thorough understanding of all
aspects of the client’s system. The majority of the maintenance team subsequently returns to
16
the offshore software development facility, w here it assumes full responsibility for day-to-day
maintenance of the client’s system, while coordinating w ith a few maintenance professionals
who remain stationed at the client’s site.
By pursuing this model, Infosys completes approximately 68% of its project work at its offshore
software development facilities in India. Its project management techniques, risk management
processes and quality control measures enable it to complete projects seamlessly across
multiple locations w ith a high level of client satisfaction. Certified under ISO 9001, TickIT and at
Level 5 of the Capability Maturity Model, Infosys rigorously adheres to highly evolved processes.
These processes govern all aspects of the software product life cycle, from requirements to
testing and maintenance.
Infosys has invested in redundant infrastructure w ith “warm” backup sites and redundant
telecommunication capabilities w ith alternate routings to provide its clients w ith high service
levels. Additionally, Infosys utilizes tw o telecommunications carriers in India and has installed in
its principal facilities multiple international satellite links connecting w ith netw ork hubs in
Fremont, California and in Quincy, Massachusetts. A different ocean cable connecting Europe
and the United States serves each of these hubs. Moreover, Infosys has installed w ireless links
among its facilities in Bangalore and intends to install w ireless links among its other Indian
facilities by the end of 2000.
Software Development
Infosys provides turnkey software development w ith projects varying in size. These include
development of new applications or development of new functions for existing applications.
Each development project typically involves all aspects of the software development process,
including definition, prototyping, design, pilots, programming, testing, installation and
maintenance. In the early stage of a development project, Infosys personnel often work at a
client’s site to help determine project definition and to estimate the scope and cost of the project.
Infosys then performs design review , softw are programming, program testing, module testing,
integration and volume testing primarily at its ow n facilities in India.
Software Maintenance
Infosys also provides maintenance services for large legacy software systems. Maintenance
services include minor and major modifications and enhancements (including Year 2000 and
Eurocurrency conversion) and production support. Such systems are either mainframe-based or
client/server and are typically essential to a client’s business. Infosys’s IT professionals take an
engineering approach to software maintenance, focusing on the long-term functionality and
stability of the client’s overall system. Infosys performs most of the maintenance work at its own
facilities using satellite-based links to the client’s system. In addition, Infosys maintains a small
team at the client’s facility to coordinate support functions.
Software Re-Engineering
Infosys’s re-engineering services assist clients in migrating to new technologies w hile extending
the life cycle of existing systems that are rich in functionality. Projects include re-engineering
software to migrate applications from mainframe to client/server architectures, to extend existing
applications to the Internet, to migrate from existing operating systems to UNIX or Window s NT
or to update from a non-relational to a relational database technology. For companies w ith
extensive proprietary software applications, implementing such technologies may require
rewriting and testing millions of lines of software code. Infosys has developed proven
methodologies that govern the planning, execution and testing of the softw are re-engineering
process.
17
New Services
Infosys is also focused in certain new service areas such as (i) Internet consulting, which
includes developing applications for Internet/intranet solutions and e-commerce solutions; (ii)
Euro conversion, which assists clients in making their systems Euro compliant; and (iii)
engineering services, which include software product design. For example, Infosys recently
developed an integrated e-commerce online shopping site for one of its US clients, w hich
include four different systems and gave the company complete cycle responsibility for the
project.
____________________________
Source: Infosys 2000 Annual Report
18
Appendix C
Performance Appraisal
Example of one Behaviorally Anchored Rating Scale
Timeliness (includes the ability to plan, schedule and track the assigned, in such a manner that
the w ork flows as envisaged and the w ork is completed on time).
A Way above
expectations
Displays abilities to plan, schedule and track w ork
independently. Accomplishes w ork w ell in advance
resulting in being able to contribute tow ards other
activities of the project.
B+ Exceeded expectations Displays ability to plan, schedule and track w ork.
Accomplishes w ork w ithin allocated time.
B Met expectations Displays ability to plan, schedule and track w ork. Able
to meet project deadlines.
B- Met expectations w ith
assistance
Needs assistance in planning tracking w ork. Unable to
meet project deadlines independently.
C Below expectations Not able to plan, schedule and track w ork for most of
the assigned responsibilities. Severe impact on the
project deadlines.
19
Appendix D
Infosys Strategy
Business Strategy
Pursue world-class operating model. The management believes that one of the most critical
contributing factors to Infosys’s success has been its commitment to pursue high-quality
standards in all aspects of its business, including deliverables to the customers, human
resource management, investor relations, planning, finance, physical and technological
infrastructure, sales and marketing.
I
nvest heavily in human resources. Infosys believes that its continued success will depend upon
its ability to recruit, train, deploy and retain highly talented IT professionals. Even as the field of
software engineering has been attracting the best and brightest Indian students, management
believes Infosys has become, for Indian engineering graduates, one of the most sought after
employers.
Focus on managed software solutions. Since its inception, Infosys has dedicated itself to
providing managed software solutions, many of which are offered on a fixed-price, fixed-time
frame basis. By taking full project management responsibility in every project, Infosys provides
its clients high-quality, cost-effective solutions with low risk.
Capitalize on a well-established offshore development model. As one of the pioneers of the
offshore software development model, Infosys has made significant investments in its
infrastructure and has developed the advanced processes and expertise necessary to manage
and successfully execute projects in multiple locations w ith seamless integration.
Maintain disciplined focus on business and client mix. Infosys provides a wide range of software
services and maintains a disciplined focus on its business mix in an effort to avoid service or
client concentration. Beginning in fiscal 1996, Infosys aggressively sought to minimize its client
concentration and to accept as clients only those that met strict guidelines for overall revenue
potential and profitability.
Growth Strategy
From fiscal 1994 to fiscal 2000, Infosys experienced compounded annual revenue and net
income grow th rates of 62% and 73%, respectively, and grew from approximately 480 IT
professionals to approximately 4,625. The follow ing are the key elements of Infosys’s growth
strategy:
Broaden service offerings. To meet all of its clients’ IT needs, Infosys strives to offer a
comprehensive range of services by continuously evaluating new and emerging technologies.
I
ncrease business with existing clients. In fiscal 2000, Infosys provided software services for
more than 190 clients in the United States, Europe, Australia, Asia and Japan.
Develop new clients. Infosys pursues several new client development strategies.
I
ncrease revenue per IT professional. To increase its revenue per IT professional, Infosys
continually focuses on building expertise in vertical markets, refining its software development
20
tools and methodologies, and storing and disseminating experiential know ledge in order to
improve efficiency and productivity.
Expand and diversify base of IT professionals. Management believes that a critical element of
Infosys’s growth strategy is its ability to increase its base of IT professionals.
Pursue selective strategic acquisitions. Infosys believes that pursuing selective acquisitions of
IT services and software applications firms could potentially expand Infosys’s technical
expertise, facilitate expansion into new vertical markets and increase its client base.
____________________________
Source: Infosys Annual Report 2000
21
Appendix E
Competition
The market for IT services is highly competitive. Competitors include IT services companies,
large international accounting firms and their consulting affiliates, systems consulting and
integration firms, temporary employment agencies, other technology companies and client inhouse
MIS departments.
Infosys expects that future competition w ill increasingly include firms w ith operations in other
countries, potentially including countries w ith low er personnel costs than those prevailing in
India. Part of Infosys’s competitive advantage has historically been a cost advantage relative to
service providers in the United States and Europe. Since w age costs in India are presently
increasing at a faster rate than those in the United States, Infosys’s ability to compete effectively
will become increasingly dependent on its reputation, the quality of its services and its expertise
in specific markets.
Infosys believes that its ability to compete also depends in part on a number of factors outside
its control, including the ability of its competitors to attract, train, motivate and retain highly
skilled IT professionals, the price at w hich its competitors offer comparable services and the
extent of its competitors’ responsiveness to client needs.18
18 Infosys, Annual Report 2000, p.143
22
Appendix F
Risk factors
Management of growth. Infosys has experienced significant growth in recent periods. The
company’s revenues in fiscal 2000 grew 68.2% over fiscal 1999. As of March 31, 2000, Infosys
employed approximately 4,625 software professionals worldw ide with 17 softw are development
facilities in India, and one global development center in Canada, operationalized in fiscal 2000.
In comparison Infosys employed 3,160 employees in 11 facilities as of March 31, 1999 and
2,190 in nine facilities as of March 31, 1998. In fiscal 1999, Infosys approved major expansions
to its existing facilities and the building of new facilities. Infosys’s inability to manage its grow th
effectively could have a material adverse effect on the quality of the company’s services and
projects, its ability to attract clients as well as skilled personnel, its business prospects, and its
results of operations and financial condition.
Political and economic environment. During the past decade and particularly since 1991, the
Government of India has pursued policies of economic liberalization, including significant
relaxation of restrictions on the private sector. The current Government of India, formed in
October 1999, has announced policies and taken initiatives that support the continuation of the
economic liberalization policies pursued by previous governments and has, in addition, set up a
special IT task force to promote the IT industry. How ever, the speed of economic liberalization
could change, and specific laws and policies affecting IT companies, foreign investment,
currency exchange rates and other matters affecting investment in Infosys’s securities could
change as w ell.
Government of India incentives and regulation. Infosys benefits from a variety of incentives
given to softw are firms in India, such as relief from import duties on hardw are, a tax exemption
for income derived from software exports, and tax holidays and infrastructure support for
companies, such as Infosys, operating in specially designated “Softw are Technology Parks”.
There can be no assurance that these incentives w ill continue in future.
Restrictions on US immigration. Infosys’s professionals w ho work on-site at client facilities in the
United States on temporary and extended assignments are typically required to obtain visas. As
of March 31, 2000, substantially all of Infosys’s personnel in the United States w ere working
pursuant to H-1B visas (745 persons) or L-1 visas (218 persons). Although there is no limit to
new L-1 petitions, there is a limit to the number of new H-1B petitions that the United States
Immigration and Naturalization Service may approve in any government fiscal year. In years in
which this limit is reached, Infosys may be unable to obtain the H-1B visas necessary to bring its
critical Indian IT professionals to the United States on an extended basis. The US Government
reached this limit in March 2000 for its fiscal year ended September 30, 2000 and in May 1999
for the fiscal year ended September 30, 1999. While Infosys anticipated that such limit w ould be
reached prior to the end of the US government’s fiscal year and made efforts to plan accordingly,
there can be no assurance that Infosys will continue to be able to obtain a sufficient number of
H-1B visas. Changes in existing US immigration laws that make it more difficult for Infosys to
obtain H-1B and L-1 visas could impair its ability to compete for and provide services to clients
and could have a material adverse effect on the its results of operations and financial condition.
Dependence on skilled personnel; risks of wage inflation. Infosys’s ability to execute project
engagements and to obtain new clients depends, in large part, on its ability to attract, train,
motivate and retain highly skilled IT professionals, particularly project managers, software
23
engineers and other senior technical personnel. An inability to hire and retain additional qualified
personnel w ill impair Infosys’s ability to bid for or obtain new projects and to continue to expand
its business. Infosys believes that there is significant competition for IT professionals w ith the
skills necessary to perform the services offered by the company. There can be no assurance
that Infosys w ill be able to assimilate and manage new IT professionals effectively. Any increase
in the attrition rates experienced by Infosys, particularly that of experienced software engineers
and project managers, w ould adversely affect Infosys’s operational and financial results. There
can be no assurance that Infosys will be successful in recruiting and retaining a sufficient
number of replacement IT professionals with the requisite skills to replace those IT
professionals w ho leave. Further, there can be no assurance that Infosys will be able to redeploy
and retrain its IT professionals to keep pace w ith continuing changes in IT, evolving
standards and changing client preferences. Historically, Infosys’s wage costs in India have been
significantly low er than wage costs in the United States for comparably skilled IT professionals.
How ever, at present w age costs in India are increasing at a rate faster than in the United States.
In the long-term, w age increases may have an adverse effect on Infosys’s profit margins unless
it is able to continue increasing the efficiency and productivity of its professionals.
I
nfrastructure and potential disruption in telecommunications. A significant element of Infosys’s
business strategy is to continue to leverage its eight softw are development centers in India and
to expand the number of such centers in India as w ell as outside India. Infosys believes that the
use of strategically located netw ork of software development centers w ill help in many w ays. It
will provide it w ith cost advantages, the ability to attract highly skilled personnel in various
regions, the ability to service clients on a regional and global basis and the ability to provide 24-
hour service to its clients. Pursuant to its service delivery model, Infosys must maintain active
voice and data communication betw een its main offices in Bangalore, the offices of its clients,
and its other software development facilities. Although Infosys maintains redundant softw are
development facilities and satellite communications links, any significant loss of the company’s
ability to transmit voice and data through satellite and telephone communications w ould have a
mater ial adverse effect on its results of operations and financial condition.
Risks associated with possible acquisitions. Infosys intends to evaluate potential acquisitions on
an ongoing basis. As of the date, however, Infosys has no understanding, commitment or
agreement w ith respect to any mater ial future acquisition. Since Infosys has not made any
acquisitions in the past, there can be no assurance that the company w ill be able to identify
suitable acquisition candidates available for sale at reasonable prices, consummate any
acquisition, or successfully integrate any acquired business into its operations. Further,
acquisitions may involve a number of special risks. These include diversion of management’s
attention, failure to retain key acquired personnel and clients, unanticipated events or
circumstances, legal liabilities and amortization of acquired intangible assets, some or all of
which could have a material adverse effect on the company’s results of operations and financial
condition. Under Indian law , except in certain limited circumstances, Infosys may not make any
acquisition of, or investment in, a non-Indian company w ithout RBI and, in most cases,
Government of India approval. Even if Infosys does encounter an attractive acquisition
candidate, there can be no assurance that RBI and, if required, Government of India approval
can be obtained.
_____________________________
Source: Infosys 2000 Annual Report
