Infosys Technologies Ltd

INTRODUCTION

In February 2001, Infosys Technologies Ltd. (Infosys)[1] was voted as the Best Managed Company in Asia in the Information Technology sector, in leading financial magazine Euromoney's Fifth Annual Survey of Best Managed Companies in Asia. Infosys was started in 1981, by seven [2] professional entrepreneurs led by Narayana Murthy, Chairman and CEO of Infosys with an equity capital of Rs.10,000. By 2000, Infosys' market capitalization reached Rs.11 billion and by 2001, Infosys was one of the biggest exporters of software from India. Narayana Murthy had built an organization that was respected across the country, with very strong systems, high ethical values and a nurturing working atmosphere.

With his sound management skills, Narayana Murthy seemed to have taken Infosys to the pinnacle of success in two decades. From a turnover of Rs.1.16 million in 1981, Infosys had grown to a Rs.19 billion company in 2001. (Refer Tables I and II).There were many firsts to Narayana Murthy's credit. Infosys was the first company to push for off-shore software development [3]as against body shopping that was coming during the 1980s. He championed corporate governance in India. Infosys was the first Indian company to follow the US Generally Accepted Accounting Principles (GAAP) disclosure norms before going for a Nasdaq listing in 1999. Narayana Murthy was also the recipient of many awards (Refer Exhibit I).

TABLE I

INFOSYS: KEY STATISTICS (1981-98)

(in Rs million)

Year Turnover Net Profit

1981 1.16 0.38

1987 19.00 3.84

1988 27.50 4.90

1989(9 months) 25.40 4.50

1991 50.00 n.a.

1992 145.20 35.00

Source: Business World, November 7, 1998.

A In late 2000, Infosys became a total software services company. It had set up a software development centre at Toronto as part its globalization strategy. Analysts felt that Narayana Murthy had not only managed his company well, he talked about the company at every opportunity that came his way. In the process, he had built a brand equity for his company.

TABLE II

INFOSYS NET SALES: 1998-2001

(in Rs billion)

Year Net Sales

1998 2.58

1999 5.09

2000 8.82

2001 19.00

Source: Business World, November 7, 1998.

BACKGROUND NOTE

Narayana Murthy obtained his Bachelor's degree in Electrical Engineering from University of Mysore in 1967 and his Master's degree in Technology from Indian Institute of Technology, Kanpur in 1969. He started his career as head of the computer centre at IIM, Ahmedabad. In 1972, he went to Paris where he was part of the team that designed a 400-terminal, real-time operating system for handling air cargo for Charles De Gaulle airport. Narayana Murthy was a left-wing activist and mingled with French communists during his stay in Paris but his outlook changed while traveling around Europe. He believed that the only way to pull India out of poverty was to create more jobs, by setting up new companies. In 1975, he returned to India and joined Systems Research Institute, Pune, (Maharashtra). He then headed Patni Computer Systems Pvt. Ltd., Mumbai, (Maharashtra) before founding Infosys in 1981, along with six other professionals.

THE STRATEGIST

From the beginning, Narayana Murthy focused on the world's most challenging market - the US. He had two reasons for this. First, there was no market for software in India at the time. He believed that Indian software companies should export products in which they had a competitive advantage. In 1987, Infosys entered into a joint venture with Kurt Salmon Associates (KSA), a leading global management consultancy firm. KSA-Infosys was the first Indo-American joint venture in the US.

In 1988-89, Infosys set up its first office in the US. Reebok of France was looking for a software system to handle its distribution management at the same time. Infosys bagged the contract and developed the Distribution Management Application Package (DMAP)[1] for Reebok's French operations. Infosys decided to use this package to create a standard application package