INFOSYS – TCS – TARGET

B2B MARKETING – PROJECT

Presented by:
Aditya
Manish
 INTRODUCTION – THE CLIENT

 Target Corporation is one of the largest retail chains

in the world with revenues of close to $ 75 billion
 Target has close to 1800 stores in the US
 Target has online footprint as well but maximum
sales is generated offline
 Their retail formats include Discount stores,
Hypermarket and "small-format" stores
 Target is headquartered at Minneapolis
 Major competitors of Target are Walmart, Kroger,
Costco, etc
 INTRODUCTION – THE VENDORS

 Infosys Technologies Limited is the 2nd largest IT

company of India
 Infosys has revenues of around $12 billion

• Tata Consultancy Services (TCS) is the largest

IT company of India

• TCS has revenues of around $21 billion

 THE CLIENT-VENDOR RELATIONSHIP IN
2008

 Target Corporation used software services from Infosys and TCS

 Infosys and TCS had almost 50-50 share of projects within Target in
2008

 Infosys dealt mainly with projects concerning Store Operations

 Slightly high-end projects concentrating on Software Development

 TCS dealt mainly with projects concerning Warehouse Operations

 Typically low-end projects dealing with Production Support
 THE ISSUE – CHANGE IN RELATIONSHIP

 Timing: 2008 – 2009 US Recession is ongoing

 Client Priority: Retail sales are low across USA and Target is in Cost-Reduction Mode

 Proponent of Change:
 TCS proposes to change contract structure from Time & Material to Fixed Price Contract
 It is indicating to Target that TCS is confident of its service quality and is willing to share project risk.

 How Client (Target Corp) perceived this Change:

 A Fixed Price Contract helps Target plan its yearly IT Budget with better accuracy – move is in-line
with Client’s cost reduction goals
 This reduces % of project risk from Target IT Portfolio – adding value to Client and showing
confidence in wanting to become a long-term partner (by sharing risk)
 Since risk is now shared, Vendor puts in more due-diligence towards defining scope of project -
realizing more value from Client’s IT investments
 Lower monitoring expense, in Fixed Price the onus of reaching target milestones is on Vendor –
further cost reduction for Client
 THE ISSUE – CHANGE IN RELATIONSHIP

 Key Benefits for Targets:

 Cost Reduction (Outsourcing Budget + Monitoring Resources)
 Better Value for IT Investments
 Potential Long-Term Technology partner with aligned goals.

 Current situation with other Vendor (Infosys)

 Slightly higher-tech projects
 All on T&M basis (high monitoring + high risk)

 What happened next:

 TCS offered to take up Infosys share of projects as well
 Target evaluated options all offered the contracts to TCS on Fixed Price Basis
 Project ratio became Infosys: TCS = 10:90
 Infosys lost most of the projects from its biggest Retail Client
 OUR ANALYSIS
• Infosys was caught napping in this instance. It could not see the threat of its
competitor here

• Infosys perceived that it was providing value added service to its client and can
command the price which it was demanding

• Infosys thought the goodwill it had with the client will see them through even
when they got to know of this threat

• Infosys did not read the market conditions properly in 2008. It did not
anticipate reduction in consumption even at Retail outlets. Target was under
pressure to reduce its costs and Infosys did not see this coming

• TCS had a plan to capture the client’s market. It used the cost leadership
method to get the volumes

• Infosys thought it had product differentiation but from the lens of the client, it
did not
 OUR SOLUTION

 Looking at market conditions, Infosys could have proposed

better model of price and services.
 A combination of T&M and FP for its different offering
 A milestone based T&M offering
 An FP offering
 Should have offered a solution to help its client sail through
tough times
 Chosen to take a temporary cut in margin
 Offered services with longer warranty periods
 Taken steps to become a strategic partner of choice
 Provide strategic consulting services for long-term planning