Building a Disruptive Business Model in the Market

Building a Disruptive Business Model in the Market Basab Pradhan Senior Vice President & Head – Worldwide Sales © Infosys Technologies Limited 2004 -2005

Safe Harbor Certain statements made in this Analyst Meet concerning our future growth prospects are forwardlooking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20 -F for the fiscal year ended March 31, 2004 and quarterly report on Form 6 -K for the quarter ended June 30, 2004. These filings are available at www. sec. gov. Infosys may, from time to time, make additional written and oral forwardlooking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company. © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 2

Outsourcing & Consulting – the two primary streams of our business Consulting & Application Integration Application Outsourcing Discretionary spend Either way Baseline spend Application Outsourcing – Targets the ‘Run the business’ spend with the promise of improving cost-performance parameters of the operations Consulting led Application Integration or Application Development – Targets ‘Change the Business’ spend on major programs where business expertise is required or organizational change is high Gray area in-between the two is the spend on small projects. These could go either under the Outsourcing arrangement or under Consulting Most of the discussion in the presentation is around IT and therein the application layer. However, all the points in the discussion also apply to our forays into Infrastructure Mgmt as well as BPO through Progeon © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 3

Structure of the outsourcing market Size of deal 66% of the market* Application Outsourcing Market Incumbent Onsite Outsourcing Offshore Outsourcing 4% of the market* Managed Projects * Source: Gartner © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 4

The structure of the market is driving onsite outsourcers to vacate the middle… » Onsite outsourcing has little cost leverage. The need to show cost savings drives margins down substantially » High involvement purchase requires high sales investments. Pays off only for ‘all-at-once’ mega deals » Sales teams are high cost, specialized and commission based – unable to focus on small deals or ‘grow-with-success’ deals » Transition to offshore outsourcing will be hard for onsite outsourcers, both organizationally and client credibility wise » Offshore players on the other hand have good margins. Able to make smaller deals profitable © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 5

…as the structure of the market is changing Size of market » All-at-once deals are going out of favor – few success stories » Expectation that modularity will come into sourcing of IT similar to manufacturing © Infosys Technologies Limited 2004 -2005 Incumbent Onsite Outsourcing Size of deal » IT is better understood – need for top management to give it all away is going down Application Outsourcing Market Offshore Outsourcing Analyst Meet 2004 | New Game. New Rules. Slide 6

Infosys market strategy » Created Unit called Strategic Global Sourcing (SGS) as an overlay to IBU sales force » Hired large deal experience into SGS » Created large offshore outsourcing as a distinct offering that addresses key client concern around risk » Modular Global Sourcing – attacks the soft underbelly of the large outsourcing © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 7

Structure of the market - consulting & application integration » Fat at the top – in the past driven largely by huge ERP implementations Size of market » However, there is still a major market at the top end » Infosys’ penetration till recently has been largely in smaller engagements Size of deal » This is now leveling out as clients seek Ro. Is on smaller projects before moving onto larger ones Consulting & Application Integration $107. 9 B* Current Infosys *Forrester Research for 2004 © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 8

Onsite consultants’ high cost model makes them uncompetitive » Moving delivery offshore has organizational barriers » Offshore is typically a different cost center, a different organizational unit » Partners feel compelled to find billable work for their onsite teams to avoid layoffs » Clients are offered offshore only ‘if they insist’ » Low credibility on offshore amongst most clients » The Partner Sales model is a high cost model » Smart Partner, Networked Partner » Large number of highly paid Partners form a major component of costs » High cost Delivery and Sales needs to be supported by higher rates © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 9

Infosys market strategy: Infosys Consulting, integrated 1: 1: 3 » Use Application Outsourcing strength to attack lower end Some part of discretionary spend is low risk for client – push to move that under sourcing arrangements » Build World-Class Consulting Attack the high-end of the market with Infosys Consulting combined with low cost, high predictability delivery engine. Avoid integration issues by building Infosys Consulting as an organic, opt-in Infosys Consulting © Infosys Technologies Limited 2004 -2005 on ati ing lic pp ourc A ts Ou Analyst Meet 2004 | New Game. New Rules. Co Ap nsul Int plic ting eg ati & ra on tio n Slide 10

Combining consulting with outsourcing Process Build Operate Application Build Operate Infrastructure Build Operate © Infosys Technologies Limited 2004 -2005 ØBPO Analyst Meet 2004 | New Game. New Rules. Slide 11

Combining consulting with outsourcing Process Build Operate Application Build Operate Infrastructure Build Operate © Infosys Technologies Limited 2004 -2005 ØAO Analyst Meet 2004 | New Game. New Rules. Slide 11

Combining consulting with outsourcing ØConsulting and App Integration Process Build Operate Application Build Operate Infrastructure Build Operate © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 11

Combining consulting with outsourcing ØBuild-Operate Solutions Process Build Operate Application Build Operate Infrastructure Build Operate » New opportunities to combine ‘Build’ and ‘Operate’ – build industry leading process and outsource the process and IT for maximum leverage » Will combine consulting strengths of Infosys Consulting along with Delivery strengths and cost leverage of Infosys and Progeon © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 11

Imperatives for Infosys sales force » Form peering relationships with CXOs. Extend beyond IT into other functions and Lo. B » Intimately understand client’s and industry’s business issues » Change selling behavior from selling services to selling solutions » Follow a standard organization wide process in Sales » While not changing the essence of what makes us successful today © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 12

How are we addressing these imperatives » Reorganized mainly on industry lines » Talent Management to build the sales organization of the future » Role definitions – senior roles for CXO relationships » Defined competencies for all roles » Promotions, hiring, training, development aligned to competencies » Strengthen Performance Management » Unified Sales Process for the company © Infosys Technologies Limited 2004 -2005 Analyst Meet 2004 | New Game. New Rules. Slide 13