Large India-based outsourcer Infosys is now trying to move from a ‘profit’ focused business model to a ‘growth’ focused business model, perhaps in response to competition and market downturn (see Profit-focused Infosys now looks to growth in LiveMint.com, 29 July 2008). In our view, this means
- Showing flexibility in pricing to win bigger contracts but at the same time
- Maintaining operational cost focus
Infosys has grown to such a big size now that it can no longer afford to ignore large (but low profitability) contracts which sometime requires transfer of assets, employees etc. TCS has been aggressive in going after these types of contracts and have won some big deals in the past. Infosys’ strategy now is a tacit admission that it can no longer afford to maintain high (abnormal) profitability without sacrificing growth.
The ‘growth’ model has been a forte of Cognizant in IT industry, which has publicly maintained that they will re-invest profits for higher growth. This model has had very good success and Cognizant has been one of the star performers both in terms of share price and operational performance.
At Integreon, we do not see any immediate impact of this shift on our KPO and LPO business, but we keep a close watch on the bigger outsourcing industry.
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