Blue Ocean Strategy (BOS) – Infosys Technologies India- Initiative to Overcome Slowdown

K V Kamath took over as the chairman of Infosys this year, and talked about a ‘Blue Ocean’ strategy with focus on healthcare and government verticals, and expansion into emerging markets India and China. Infosys revenues from healthcare (1.1%) and government (1.3%) verticals are negligible compared to BFSI (30%), Telecom (15%) and Manufacturing (10%). Healthcare and Government verticals are very critical for Infosys to maintain growth as US government announced a major healthcare spend (US$ 40bn by 2011- Total US$100 bn) and Indian Government is spending around rupees 30,000 crore on various IT projects across departments in 2011.

Even before Kamath took over, Infosys Leadership has set up a separate business unit in 2009 for focusing on domestic India Market dominated by Government spending and plan was to get 2-3% of revenues from this unit. India Post, Indian Railways and LIC are planning to spend $3 billion on IT this year. Government-sponsored projects like NREGA, e governance projects of states and 26 core projects in agriculture, income tax, pensions, land records and passports are other projects being planned. Another critical project is the Aadhaar cards by UIDAI with total cost of the project of at least INR1.5bn lakh crore.

According to Blue Ocean Strategy, for Infosys, Government Vertical is an un-entered market and focus on this segment will lead to revenue growth. Recently Infosys has bagged the Rs 700-750 crore financial services systems integrator contract from the Department of Posts (DoP) and 'rural information and communications technology system integrator contract, worth about Rs. 100 crore (Rs. 1 billion). Infosys is looking at public sector contracts in UK and other European countries, which Infosys avoided earlier due to complex contract liabilities and present pricing models don’t work.

Healthcare is the second focus vertical according to Infosys Blue Ocean Strategy. Infosys has established a separate subsidiary in the US for serving government and healthcare customers in 2009. Sources are reporting that Infosys is about to acquire Thomson Reuters’ healthcare division in a US$700-750 million transaction in US which will be the best option for Infosys to gain revenues in this vertical segment instantly. Health care segments require domain expertise, involves regulatory compliances and work is complex. Apart from US, Infosys is searching for acquisitions in Europe and Japan and in both industries healthcare and public services.

Expansion in China and India is another Blue Ocean Strategy of Infosys. Accordingly Infosys is planning to increase the headcount at its India business process outsourcing (BPO) unit by five-fold to 2,000 in one year. In China, Infosys is planning to triple its staff headcount to 10,000 in 2-3 years. Infosys has to focus on this strategy, as US and Europe are facing economic slowdown and debt crisis and businesses and governments in this regions are slowing down their IT spend. To overcome this scenario this seems to be the best strategy not only for Infosys but all other Indian IT vendors.

Discussion Points:

With management shake up as an added trouble along with other problems like Debt crisis and Economic slowdown, attrition, lack of skilled professionals, Will Infosys be able to keep up the revenue growth and stay ahead of the competition?