PDF: 2962 pages, 5.2 MB - Bay Area Council Economic Institute

Software/IT Services/Business Process Outsourcing
ware, and consulting firms, some with existing relationships in the Valley—gravitating to the
emerging power center of the tech world.
Some were largely job shops at first, providing Indian engineers and programmers on an outsourced
contract basis by project. They coordinated on-site personnel with India staff to attack
problems with large numbers of technicians working 24/7. They primarily assisted with integration
and networking of legacy Oracle, SAP, Siebel, or other hardware/software systems, and later
helped companies web-enable back office functions and customer interfaces. As they developed
expertise across various platforms in key verticals such as finance, health care, automotive, telecommunications,
and retail, they offered U.S. clients customized solutions.
Basic IT services still account for 50–60% of the top Indian players’ businesses. Still, Indian IT
firms have been steadily moving up the value chain- from IT/BPO services and systems integration
to product development, systems management, and consulting; from isolated projects to
ongoing relationships; and from basic time and materials or fixed cost/fixed timeframe contracts
to more creative revenue-sharing, build-operate-transfer or other outcome-based models.
Licensing of patents for new products developed through ongoing alliances has provided
additional revenue streams.
Infosys Technologies Ltd. was founded in 1981 by N.R. Narayana Murthy and six
partners. Its first employees were recruited from IIT-Chennai. In 1983, Infosys moved
from Pune to Bangalore. Its first and most important overseas office, in Fremont,
California, opened in 1987 and is now the firm’s U.S. headquarters. The first Infosys overseas
client, also signed in 1987, was Cleveland-based Data Basics Corp., a developer of field service,
work order, accounting, and facilities management software. Infosys was listed on NASDAQ in
1999 and at that time established proximity development centers (PDCs) at Fremont and in
Boston. In 2004, Infosys invested $20 million in a high-end consulting unit launched at Fremont.
With about 200 employees, the office focuses principally on client engagement.
Infosys was first to deploy the global development model (GDM) that broke up project work by
location according to available capacity, cost advantage and skill level requirements—specifically,
work to be done in India or another overseas location (offshore), versus at an Infosys facility near
the client (nearshore), versus at the client’s facility on site. GDM was, in essence, the “follow-thesun”
approach that enabled Infosys to throw the optimal number of employees at a project, across
multiple time zones on a 24/7 basis, at the least possible cost without compromising quality.
Company revenues grew from $414 million in fiscal 2001 to more than $3 billion in 2007. The
Infosys global workforce has grown from 10,000 in 2002 to 88,000 today, and with 5,000 rooms
(soon going to 12,000) the company’s Global Training center in Mysore is the largest such facility
in the world. Its California client list has included Apple, 3Com, Hewlett-Packard, and PeopleSoft.
Deal size has increased over time, with a growing number of projects in the $100–200 million
range, as well as clients spending more than $1 million annually. U.S. clients accounted for 63% of
Infosys’ business in 2007, down from nearly 75% in recent years as Europe and Asia business has
grown. Infosys’ top 5 clients account for about 20% of revenues.
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