Case Preparatory Questions

1. Analyse Infosys business strategy and its evolution? How important is PFS account to Infosys?
 Infosys business strategy:
 wealth could be created ethically and honestly
 organization where advancement was based on merit
 Evolution: four phases of development
o First decade, Infosys relied on an offshore outsourcing model.
o Second: In the early 1990’s, the Infosys business model opportunistically evolved to focus on
maintenance contracts for legacy systems.
o Third: Beginning in the late 1990s, Infosys redirected its priorities away from selling discrete
maintenance projects and toward the marketing of end-to-end solutions and in particular those
involving consultative services such as design, customization, business-process reengineering,
and installation.
o Fourth: In recent years, Infosys business model has evolved again, this time emphasizing greater
focus on specific industries. Rather than pursuing all potential clients with uniform market
offerings, Infosys now seeks business domain excellence. This entails offering highly
customized end-to-end solutions to a limited number of potentially high profit market segments
that have “mission critical” IT applications.
 How important is PFS account to Infosys?

o Although Infosys successfully increased the number of major IT projects it conducts for PFS to
65, they have only managed to capture around United States (U.S.) $ 30 million (i.e., Rs. 1.38
billion Indian rupees) in annual business out of their annual IT total spend of $1 billion (Rs. 46
billion) even though they could ideally handle up to 45% of that total spend.
o Moreover, most of the projects that they have undertaken have been low value-added, price
sensitive business.
o This project requires an end-to-end solution. If they win it and deliver a high quality solution,
they will be in an advantageous position to gain a greater share of their more profitable, high
value-added business.

2. What are the factors forcing Prairie Four Square (PFS) Insurance to consider “sole sourcing”
compared to its current “best of breed” IT services procurement policy?

o PFS will reap significant benefits from sole sourcing the project.
o Given the required integration both within PFS internal groups and across outside suppliers, end-
to-end IT projects, “sole sourcing” would work better
o Most importantly, by being involved from day one in 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.
o Based on the estimate, it would take 5 programmers around 12 weeks to master an Ariba e-
Procurement system that another vendor had installed and customized.
o As those programmers would be based in Dallas, their FTE costs would be $8,000 per month (Rs.
368,000). When entered the maintenance phase, Infosys would accrue additional savings in that
 we would be in a far better position to quickly track down the source of any software problems.
Of course, at this time it would be impossible to predict what those problems might be and to
assess a monetary cost savings to their resolution.”

3. What quantifiable cost savings, not specified in project contracts, has Infosys delivered to PFS
during the past five years?

o Beginning in year two of our engagement at PFS, Infosys took charge of those projects.
o In years past, PFS had employed 250 people to complete them.
o Each of those employees was assigned exclusively to one project.
o Once they learned the nature of project tasks, they began to move some of them to Bangalore.
o In year three of our engagement at PFS, they had 75 people working on the projects in the U.S.
and 250 in India.
o At this point, they began to scrutinize the manner in which these tasks were completed and to
question whether the tasks could in fact be completed at the same quality levels using fewer
people.
o They reengineered the processes for each project and assigned remaining employees across
several projects.
o Thus, in years four and five of our engagement at PFS, they have used 75 Infoscions in the U.S.
and 100 in Bangalore to complete the redesigned tasks. The surplus 150 Infoscions in
Bangalore were transferred to other PFS projects at “no extra charge” to PFS.
o Given that the costs of a fulltime equivalent (FTE) 1 are $8,000 per month (Rs. 368,000) in
the U.S. and $3,200 per month (Rs. 147,200) in India, the resource reductions represent a
significant benefit for PFS.

4. How can Infosys’ PFS Account Team persuasively sell the firm’s ability to deliver a superior end-
to-end solution for the Ariba e-Procurement System project?

a) Team Support

 Infosys senior management would assist the PFS account management team by assigning a
number of support personnel to the project.
 Among these individuals would include a program manager, three business analysts, a technical
specialist on Ariba programming, a product specialist familiar with e-Procurement software, a
development analyst, and a technical analyst.
 In addition, the Enterprise Solutions Group would contribute a team skilled in executing the
company’s award winning “Package Implementation Methodology.”
 This would insure that the Ariba e-Procurement software is up and running in a flawless manner
in short order.

b) Overall Quality of Infosys Work

1
 Average Performance Metrics on Maintenance Projects over Past Five Years

Performance Dimension PFS Target Infosys Results

requests delivered with
zero defects 90.0% 97.1%
Quality
delivered defects per
4.9 3.2
1000 person hours
requests delivered on
91.0% 99.6%
time
Timelines
effort estimation
83.0% 98.1%
accuracy
uptime on Infosys
maintained systems 94.0% 99.9%
Reliability
abend* ratio across
Infosys 1.8% 0.2%
maintained systems

c) Reengineering Project Assignments

o In years past, PFS had employed 250 people to complete them.

o Each of those employees was assigned exclusively to one project.
o Once they learned the nature of project tasks, they began to move some of them to Bangalore.
o In year three of our engagement at PFS, they had 75 people working on the projects in the U.S.
and 250 in India.
o At this point, they began to scrutinize the manner in which these tasks were completed and to
question whether the tasks could in fact be completed at the same quality levels using fewer
people.
o They reengineered the processes for each project and assigned remaining employees across
several projects.
o Thus, in years four and five of our engagement at PFS, they have used 75 Infoscions in the U.S.
and 100 in Bangalore to complete the redesigned tasks. The surplus 150 Infoscions in Bangalore
were transferred to other PFS projects at “no extra charge” to PFS.
o Given that the costs of a fulltime equivalent (FTE) 2 are $8,000 per month (Rs. 368,000) in the
U.S. and $3,200 per month (Rs. 147,200) in India, the resource reductions represent a significant
benefit for PFS.

d) Data Corruption Prevention Subroutine

o Infosys reduced the average number of corruption incidents per year from 24 to 0.
o Each time a corruption event occurred in the past, three programmers would spend an average of 4 hours
apiece at an FTE rate of $45 (Rs. 2,070) per hour reconstituting the data.
o These programmers would be assisted by a technical support person for one hour at an FTE rate of $40
(Rs. 1,840) per hour.

2
o At PFS, 125 employees would be idled for 4 hours at an FTE rate of $42 (Rs. 1,932) per hour. Running
programs to reconstitute the corrupted data would take some 15 seconds at a central processing unit
(CPU) time rate of $.39 (Rs. 1.80) per second.
o More importantly, Infosys demonstrated to PFS early on in the engagement that Infoscions had the ability
to diagnose problems and write subroutines to correct them.

e) Record Comparison Algorithm

o Along similar lines, Infosys had an opportunity to write a critical algorithm for PFS last year that
improved record comparison processing efficiency by 56% and processing time by 8 hours.

f) Reduction in Disability Claims Reserves

o Two years ago, Infosys helped to reduce the cash reserves that PFS must have on-hand at all times to pay
disability claims by $14 million (Rs. 645 million).
o In accordance with insurance regulations, PFS was allowed to reduce its cash reserves. At a cost of
capital at around 10%, PFS achieved significant savings.
o This is a simple but persuasive anecdote in that it demonstrates that Infosys can effectively reengineer
payment processes.

g) Benefits of Sole Sourcing

o PFS will reap significant benefits from sole sourcing the project to Infosys. Most importantly, by being
involved from day one in the project Infosys they 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.
o By best estimates, it would take 5 programmers around 12 weeks to master an Ariba e-Procurement
system that another vendor had installed and customized. As those programmers would be based in
Dallas, their FTE costs would be $8,000 per month (Rs. 368,000).

h) Ongoing Ariba e-Procurement Projects

o Infosys has initiated 3 end-to-end Ariba e-Procurement system projects within the year.
o Two of them are for retailers and one for a healthcare organization. One retailer and the healthcare
organization are located in the U.S. while the other retailer is in Europe.
o In the case of the healthcare organization, we have already been able to save them $100,000 (Rs.
4,600,000) per year by switching the company’s ‘change order’ procedures (i.e., the alteration of a
previously processed order) from a manual to an online software-based system.

i) Vendor Management Team Visit

o PFS President Laura Ewing and a vendor management team, will be visiting Infosys in Bangalore next
week. The vendor management team is comprised of middle level IT and purchasing managers who deal
with us on a regular basis.
o They can use their visit to demonstrate that Infosys has the capabilities to deliver an end-to-end solution
on the Ariba e-Procurement System project.
o They plan to provide all team members associated with the PFS project five weeks of JAVA training here
in Bangalore. Therefore, they could take our PFS visitors over to the Infosys Education and Research
(EnR) Group and have them sit in on several JAVA training sessions as well as demonstrations of JAVA
projects that we have successfully completed in the past.
o While they are visiting the E&R block, they might also go over the consulting portion of our employee
training programs and introduce them to some of our new hires who come to Infosys with considerable
consulting experience.”

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