Infosys in China
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Case Details:
Case Code : BSTR221
Case Length : 18 Pages
Pages Period : 2001-2006
Organization : Infosys China
Pub Date : 2006
Teaching Note :Not Available
Countries : China
Industry : Information Technology and Related Services
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"Both from the market point of view because there are so many MNCs operating in China, and due to its huge domestic IT market, corporations like Infosys must have China on their radar screen. Furthermore, I think China is also a market for talent because as a talent source China is pretty good except the English part, but they are improving very rapidly."
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- Narayana Murthy, Chief Mentor, Infosys Technologies, in 2004.
"We're looking at China as a resource for our global operations."
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- Nandan M. Nilekani, CEO, Infosys Technologies, in 2002.
Introduction
On April 14, 2006, Infosys Technologies Limited3 (Infosys),
India's second largest software exporter,4 announced that it had crossed the
milestone of US$ 2 billion5 in total revenues in the 25th year since its
inception.
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Infosys'revenues increased by 33.5% from Rs6 71.3 billion in the
financial year 2004-05 to Rs 95.2 billion in the financial year 2005-06.
At the same time, Infosys announced that its Chinese subsidiary had incurred
loss of Rs 166 million on revenue of Rs 260 million.
The reason for this loss, Infosys said, was that though it was able to secure some local clients, it was
unable to attract foreign companies operating in China to procure its services. In 2004-05, the Chinese venture incurred a loss of Rs 83.9 million. Infosys had 500 employees in China as of March 2006,
against a projected 800 to 1,000 persons. Though Infosys had planned to
enter China in 2002, its plans materialized only in 2004.
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Infosys entered
China as a part of its global expansion strategy. The most important reason
for entering China was the soaring salaries of software professionals in
India - a result of growing global demand for them.
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The gap between the demand and availability of skilled manpower in India was
likely to increase further, and India was estimated to witness a shortage of
250,000 workers in the IT industry by 2009, according to a study conducted
by KPMG7 and NASSCOM.8
China was the only place where the salaries and quality of infotech manpower were comparable and competitive with those in India. With a
presence in China, Infosys planned to move to other neighboring countries like
Japan.
According to Nandan Nilekani (Nilekani), "We need a deep reservoir of
talent as well as an alternative low-cost center like India as we continue to
grow. And only China can match up."9 |
Infosys in China
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