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Assignment Infosys Technologies- CAN Submission

Sub: - Managing Business Markets


8th May 2017
Submitted By Md Jawed Manzoor
EPGCMM -09 -08
About Infosys
They are an End to end solution provider with ERP/SCM, Consulting, Product &
service vendors, Maintenance contracts and Business process outsourcing the
Key strengths are Demonstrating value, consulting capability, Gaining trust, and
adaptability to work in different cultures and finally position them as End to
End solution provider. The revenue of Infosys is Rs35 billion ($750 Mn) and
profits exceeding Rs9billion ($200 Mn)
About PFS
They were the leading providers of Individual life, Group life, medical and dental
and long term and disability insurance company in the US. Started in 1882 with
an objective to provide reasonably priced, reliable, long term shelter and
security for families
The revenues are over $27 billion (Rs1.2 trillion) and it serves 50 Mn Customers.

Objective:
Infosys has revenue of $30Mn and 65 projects from PFS. PFS perceives Infosys as
a Low cost maintenance provider with less domain expertise. PFS wanted to
outsource their e-procurement system to reduce cost. The current cost $78 per
order against $ 45. They are currently 10000 different items from 1200 suppliers
which they want to bring it down to 300 along with bringing in uniform purchase
practices across the company.
Competitors: Excalibur and Merrimac Consulting firms
Case Analysis Questions:
1. What quantifiable cost savings not specified in project contracts
has Infosys delivered to PFS during the past five years?
2. What knowledge transfer time cost savings can PFS expect from Sole
sourcing the Ariba e-Procurement System project?
3. How can Infosys PFS Account Team persuasively sell the firms Ability to
deliver a superior end-to-end solution for the Ariba e-Procurement System
project?
4. Looking beyond the immediate Ariba e-Procurement System
project, what challenging issues related to global marketing does this case
pose for Infosys?
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Challenges
1) Infosys has successfully increased the number of major IT projects it conducts
for PFS to 65, but has managed to capture only US $ 30million (i.e., Rs.
1.38billion Indian rupees) in annual business out of PFS annual IT total spend of
$1billion (Rs. 46 billion) even though it could ideally handle up to 45 per cent of
that total spend.
2) They are trying to secure higher value addition and profit in the business.
3) They have to show that they can handle the strategic and conceptual
consulting Infosys maintenance.
4) Most of the projects that it had undertaken have been low value added and
price sensitive business.
5) Ariba requires an end-to-end solution. If it could win it and deliver a high
quality solution, they can gain a greater share of more profitable, high value-
added business.
Five years ago, they had selected Infosys whose work exceeded expectations
both in the areas of quality and timeliness, and reliability. Infosys
demonstrated that they are focused on Employee productivity in reducing
cost rather than moving the people off shore as was being practiced by their
competitors.

Infosys reduced the no of people operating in five maintenance project from


250 to 100 and redeployed the other 150 people on to other projects of PFS
with no extra charge which gave them a benefit of the costs of a full-time
equivalent (FTE)3 are $8,000 per month (Rs. 368,000) in the US and $3,200
per month (Rs. 147,200) in India, the resource reductions represent a
significant benefit for PFS .

Under the data corruption prevention subroutine by writing a new record


comparison algorithm they could reduce the incidents per year from 24 to
0and in the bargain saved cost of three programmers which was an FTE rate
of $45 (Rs. 2,070) per hour per person, one technical support person at an fte
rate of $40 (Rs. 1,840) per hour and at PFS , 125 employees for four hours at
an FTE rate of $42 (Rs. 1,932) per hour per person. Apart from this running
program to reconstitute the corrupted data would take about 15seconds at a
central processing unit (CPU) at a time rate of $ 0.39 (Rs. 18.0)per second.

They reduced the cash reserve ratio in had to pay disability claims by
$14million (Rs 645 million) by streamlining and reengineering both
the claim submission and payment process, with cost of capital at 10% it
saved them enormous money
Benefits of sole sourcing. PFS will reap Significant benefits from
sole sourcing

The project to Infosys, Getting involved from day one of the project,
Infosys will be able to forgo the knowledge transfer time required to bring
programmers up-to-speed on technical details of the system had they
entered at the maintenance stage.

The project will take 12 weeks time with 5 programmers to master the
Ariba E-procurement system and the work should be done in Dallas. The
FTE cost will be $8000. During the maintenance phase, Infosys should
accrue additional savings and it would be in an advantageous
position to address any software issues quickly, but it will be
difficult to predict those issues now and asses any cost savings for
the solutions.

In the past Infosys has always exceeded the expectation of


the customer in terms of Quality, timeliness and reliability all they
have to do is exhibit, that they can handle the strategic and
conceptual consulting as they are already exposed to all aspects of PFS
IT system That will translate into better work more quickly which will yield
significant cost savings for PFS.

The competitors Excalibur and Merrimac have weakness in the area of it


systems maintenance. Their labour rates have been non-competitive.
Further they had a tendency to avoid low value and low profit projects
such as maintenance and therefore did not have requisite expertise.
Infosys have been hiring well-seasoned people from other top consulting
firms and from top business schools worldwide.
Infosys was bolstering their consulting resources and the in house training.

Value Delivery
Infosys should demonstrate to PFS that they have exceeded their expectations
not only on quality but also by providing Value added services.
Infosys should demonstrate that they could handle end-to-end solution
especially those, which fall outside the traditional IT system
maintenance activities.
They need to present logical arguments to convince PFS that the entire e-
procurement system should go to a single vendor.
Infosys would assist the PFS account management team by assigning a number
of support personnel to the project in the form of a program manager, three
business analysts, technical specialist on Ariba program, product specialist on e-
procurement software along with a development and technical analyst.
In addition, the team skilled in executing the companys award winning Package
Implementation Methodology will be deployed, to ensure that the Ariba e-
procurement software is up and running in a flawless manner in short order.

Infosys should show case the three end-to-end Ariba e-procurement system
projects which it had done (One in health care and two in retail segment)along
with the savings which the health care company has received$100,000
(Rs4,600,000) by way of switching the change order procedure system which
was an manual converted to online software based system.
During the proposed visit of PFS vendor management team to Bangalore,
Infosys should make arrangements to demonstrate the capabilities in the by
making them visit the training center where members who were associated with
PFS had undergone five training on JAVA and also facilitate meeting with
consulting group in the E&R block.
The Estimated cost of the project is $2 million (Rs. 92 Mn) and for the
maintenance portion it will be $400,000 (Rs18.4Mn) and the work has to be
done in Dallas so the costs will be similar to other two competitors.
Average profitability of Infosys is around 30% so in this project they even
cut upto 15% of the profits considering the potential of obtaining projects on
CRM and Financial management system from PFS

Cost SAVINGS
1) Re Engineering Project assignment
$12.9 Mn By transfer people to India in 3rd year
250-75x8000x12-250x3200x12= $7200000
Reassigning of the personal $ 575600
2) Data Corruption
$518060 total=0.5 Mn
Programmer $ 12960=24x3x4x$45
Tech assistant $960=24x1x1x$40
3) Cost saving from idle time
$504000-=24x125x$42
Cpu cost saving-$140=24x15x0.39
Record algorithm
$ 43200 time reporting=.04million
4) Reduction in disability claims
Data and assumption- $1400000$
Cash reserve reduction =0.1x 14 million=1.4 million
Looking beyond the immediate Ariba e-Procurement System
project, what challenging issues related to global marketing does
this case pose for Infosys?
In contrast to competing firms, Infosys has an advantage -- Infosys
personnel diligently and rigorously gather, document, and analyze data
on an ongoing basis. They can compete with two main competitors in
this field Excalibur and Merrimac Consulting by some factors. First, they
should demonstrate to PFS managers that Infosys performance has
exceeded their expectations over five years of their collaboration. They
can do this by documenting not only quality of efforts but also the
added value that Infosys has delivered. Second, they will have to
provide evidence that Infosys can handle all aspects of an end-to-end
solution, and in particular, those that fall outside of their traditional IT
system maintenance activities. Third, they are going to present logical
arguments that convince PFS managers that the entire e-procurement
system project should go to a single vendor. Excalibur and
Merrimac have an outstanding reputation for operations
consulting. They will have to demonstrate that they can deliver the
maintenance portion of an end-to-end solution to PFS . Infosys, on the
other hand, clearly does outstanding maintenance work. They will
have to show that they can handle the strategic and conceptual issues.