Saturday, April 15, 2006

25 years of Infosys

Its a company, that has perhaps changed what India means to the world. Sure, footsoldiers of the IT outsourcing industry did it, but Infosys laptop warriors are the face of India today. Together with other Indian IT firms, all other things being equal, it was they who moved the perception of India from a land of Cobra to Corba.

And Infosys turns 25 this year. Here are a few reports (and I will add more if they come by!):

Business Standard: Guiding light

The positive outlook on a high base is encouraging especially since Infosys is known for its conservative guidance and has built in wage inflation and flat billing rates.

The confidence appears to stem from the company being able to ramp up its accounts: it now has 221 accounts of over $1 million and 9 clients with billings of over $50 million.

The Hindu Businessline reports: We are 25, dreaming, daring.

After an "intense, hectic and rewarding" journey of 25 years, Infosys is now poised to "conquer the world," according to the Chairman and Chief Mentor, Mr N.R. Narayana Murthy. At 25, one is strong, young and full of energy, he said. "This is the time you dream of bigger things and are daring, ready to conquer the world."

Revenue tops 2 billion USD:

"It took us 23 years to reach the first billion dollars in revenues, while we reached the next billion in 23 months," said Mr Nandan Nilekani, CEO, President, and Managing Director.

Heres a link from Rediff: Infosys loves to match numbers. A sample:

Data available since the quarter ended June 1997 show that its sales matched its net profit after every eighth quarter till the quarter ended in March 2000. Thereafter, its net profit was either close to its sales or even higher than than that every 16 quarters.

The company may be criticised for not building a product or an operating system, but argue as you may, IT service is a business model. You can argue that it is all about labour arbitrage, but then again, it is a business model. Let us not be apologetic about it at all. If hot shot traders can take advantage of arbitrage in financial markets, Indias IT industry can advantage of arbitrage in labour markets. It is a model that has spanned 25 years, with its share of ups and downs. And then again, unlike stingy miserly bodyshoppers (who were hit thanks to Infy), this company shares its wealth with its employees and stakeholders. There are many others in the labour arbitrage business, right from the Gulf boom days in India, so why did not any of them make it big? Because they focussed on the short term, while Infosys (and some others in the industry) focuses, sharply on the long term. The company is a model of fairness and corporate governance. Sure you can find faults, but then show me one company where you cant.

May the code be with Infosys for another 25 years and more!


realitycheck said...

Like children we believe what the media has to say without batting an eyelid.

Like wide eyed girls in love we lap up everything NRN says about greatness, growth, ethics.

If anyone asks, why after 25 years a non-strategic IT services company like Infosys (also Wipro, TCS) are still out of the tax net - we are branded traitors and anti growth.

If we ask why Infy alone requires land larger than manhattans central park (845 acres) in Bangalore - we are dubbed anti merit.

If we point out that paying tax does not amount to government interference - we are branded as if we are out to get the IT industry.

If we even mention the fact that the big IT services guys choose to run their own bus transport companies (with numbers like 26A, 31B and so forth) - without paying tax to the government which can then run a company for all citizens - we will be banned from the media.

I can go on and on - the IT services industry is based on wage arbitration nothing else. The main metrics to be considered are how many outstanding visa applications, how many on hand, how many resources on the bench and how many are being billed at what rate.

There is absolutely nothing wrong with this business model. It is however not strategic to national interest - the 10 year tax holiday has long since passed. It is time these companies pay tax like Ford / Hyndai / Tata / BHEL and all other corporates. The tax is not chump change, if these concerns had been taxed like others we would be looking at 350Cr per quarter from Infy alone. The government can then embark on bold infrastructure projects !

Neelakantan said...

Well, as long as one is following a legitimate business model and paying whatever tax the government demands, why does someone care? The government has not taxed them, so they are not paying.

Regarding land, well, see the campus and then decide. No industry can operate out of cubbyholes.

Second, for every BHEL, there are a thousand bhelpuri public sector undertakings which are a black hole.

Strategic to national interest? Infosys (and the IT sector) has done more for Indias image than any other company.

And as I always say, where we are today, take the IT sector off, assume it never existed, would we be better off or worse. You will get your answer.

Anonymous said...

As a company Infosys in doing great, building up India's reputation and serving the shareholders. But we have to give kudos to Infy media management, everytime they earn brownie points by projecting that they are sharing the wealth with employees. In reality poor guys are one os the most overworked, underpaid tribe in country, but outside Infosys grand campuses everyone thinks they are the 'kings'.

And this business is about labor arbitrage, now the battle is in our home turf, lets see how the war goes.

realitycheck said...

Well, as long as one is following a legitimate business model and paying whatever tax the government demands, why does someone care? The government has not taxed them, so they are not paying.

All this would be fine if it were the truth. The IT department has sent several tax notices to all three companies for hundreds of crores. They lobby intensely to keep these benefits - they create new special purpose SEZ units with the purpose of getting tax exemptions even after the 10 year tax holiday has long elapsed.

Really, Infosys abroad is synonymous with "offshoing and job loss".

Cubbyholes ?, Infy wants land for hounsing not for offices. Mr Pai regularly talks about building "Land banks" for the future. So the tax benefits given to Infy are not going for investments in R&D or training - they are just used to buy land at a dizzying rate.

There is a real artificial divide created in the media between Infy/Wipro/Satyam/TCS. In reality these companies are for the most part indistinguishable from each other. Yes, Infy had the stock option thing going - but that was long ago.

FYI, Infys training center in Mysore is 350 acres - TCS trains the same number of people in a couple of buildings in Trivandrums Technopark (which is shared by 100+ companies)

I hope I am not wasting my time talking to a Infy Fanboy.

Paddy said...

Well I am surprised to see mr. realitycheck to be totally out of sync with reality.

Bashing infy as a "land grab" machine is easy, strangely overlooking what other MNCs companies are doing or have done.

Coca-Cola was supposed to be listed within some years of entering in india and is still not listed for whatever reasons

Each state was giving tax breaks to set-up a shopfloor for companies like GM, Ford.

Bharat forge is setting up forging factories in India, when forging industries world-wide are being shut (and obviously moved to india) because of huge amount of noise pollution they cause and health of workers are affected.

POSCO agreed on investment only when iron ore mines were given at sub-market prices, as per press reports.

I believe the list goes on and one can single out every corporate. Atleast infy is doing something and investing it back. Tax breaks (assuming entire amount is invested in land banks) will create alternate employments and investments. Surprsingly all those are ignored.

NC said...

Well, Infosys definitely is a great company and surely "built to last".

A set of challenges that Infosys and others in its league face are to do with the cost advantage being lost by these firms to global competition. Higher wages, lower productivity levels, higher ramp up times, etc.. add to these problems and only those who step up and provide value to their clients in the form of business transformation and other associated services would last the lap, others would come in the category of also ran.

Its going to be a tough race from now on, the tax holidays are over, the industry and clients are maturing fast. Let's wait and see how the infy's and wipro's and TCS's take on the competition.

NC said...

Do not agree to the anti infosys(and others as well) comments from mr. realitycheck.

Land grabbing is something that infosys cannot be accussed of, others too have large campuses and as long as the company pays due prices for the land its fair. Also infy never purchases land from anyone other than the government.

As i said the tax holidays are over for most of the infy units and they are already pating taxes to the govt. Also the current annual report talks about some $70mill for IT, so they are paying taxes as they are due.

The Comic Project said...

Couldn't help looking at some of the comments and feel that maybe Infy is being bashed up for being successful? aka Reliance in the 80s/90s? Anyway, there is not much of a difference between the top 3-4 IT companies. Where infy scores is that it has good management and even better media management. While Wipro raves about their CEO travelling economy, and TCS has the "tata" name behind it - Infy has managed to strike an amazing balance between performance and image, with the image outweighing performance, but as long as you declare bonus issues and 1000$ incentives for touching $1 billion - who cares!

Let's not bash up a company for being successful, at the same time, let's not forget that there is a lot of hype about Infy out there. Nothing wrong with that.

realitycheck said...

First of all, I apologize for the tone of my earlier post. I have been on several forums and have been bashed by blind believers in the media.

Let us see shall we :
NC said that "As i said the tax holidays are over for most of the infy units and they are already pating taxes to the govt. Also the current annual report talks about some $70mill for IT, so they are paying taxes as they are due.

Mr NC, sorry to disappoint you, but the corporate tax for the rest of India is 30%. I dont know what your source is. I am looking at the Unaudited Consolidated Earnings report for 1Q06 (US GAAP) and here they are:

Earnings : $172 mil
Tax provision : $18 mil

The unbelievable fact is that the provision for tax this year is LESS than last year (which was $20 mil).

This is what frustrates me, people just take the media hype for granted and do not look at the facts.

Someone says other companies land grab too. First off, that is not true. Second, that would not make Infy less of a land grab machine - just because others land grab.

Comparing Infy with GM/Fords shop floor tax breaks is just not right. All economists agree that some industries are strategic to the country. For example, the ability to produce VLSI semiconductors, high efficiency IC engines, sophisticated automotive control systems and so forth. I am afraid Infy is just not in that league.

We should be extending these precious tax breaks to comapnies like Hynix, TI, Samsung, Nokia and the like. We still do not produce even rudimentary electronics like DSL modems, LCD screens, flash memory, packaged software , and all other building blocks of a successful hitech society.

I never said Infy was not a success story. On the contrary I think Infy is a spectacular success. God bless them. I am just saying that an industry cannot be tax free just because it is profitable. That would only leave the unprofitable companies in the tax net.

The land requirements for a software company such as Infy is a separate post by itself. Can you buy even 10 acres land in Bangalore without the government procuring it for you ?

I heard no response to the startling fact that TCS trains more employees from a unit within Technopark trivandrum. Why then does Infy need 380 acres in Mysore for training. Last time I checked it was not agricultural training.

Dont shoot the messenger - learn to look beyond the media hype.

Sorry if I hurt anyone. This is one of the biggest issues today. Governments strapped of cash for public infrastrcuture projects and the most profitable IT services industry is still out of the tax net.

realitycheck said...

Regarding land, well, see the campus and then decide. No industry can operate out of cubbyholes.

Had to respond to this one.

I have seen many Infy campuses thank you. There is no shortage of land. The Infy campus in EC has a golf course within it.This is outrageous use of land within an industrial estate.

Why cant they scratch that golf course and build a 10 story office building ?

Do other companies have golf courses within their campuses ?

Vasu the terrible said...

Its all about nexus. Nexus between beurecrats, Industrialists and politicians.

The nexus has only one moto. Land and cash. IT industry rates has stabilised world wide and the space for upward growth is limited. This being the case, Infosys's only source of growth is to build realestate assets.

845 acres of land for housing 25,000 ?? in bangalore. It translates into 1500 sq.feet per employee...

Isnt it atrocious for government to act as a broker so that infosys can accumulate more and more land for its IT dream ??

Govt acquired the land in e-city on behalf of infosys much below the market price that existed.

Why would govt do that ? the nexus between SMK, Jayakar Jerome, the infosys top brass and a whole set of wheeler dealers in bangalore.

Somehow It just shames me no end to see a hyperbolic media deiefying a crass capitalist who wears a mask of sauve sophestication just to increase wealth for himself and few select individuals.

There is nothing wrong in being a crass capitalist. But to make a moral argument about it is the core reason why we have capitalist thieves and violent communists all under the same sky.

There more to the infosys phenomena than just entreprenuership.

Imagine 845 acres in bangalore...


Maybe I am wrong and its the duty and moral responsibility as an Indian to support narayanmurthy in his nefarious endeavours. Maybe I am being thanklesss to the man who changed the image of india single handedly and has brought in investments.

But I cant help but ask, whose investments.. who are the benificiaries.

Tax holidays, 5000 acres, proposals to build hotels.. Its a stink!!.


Vasu the terrible said...
This comment has been removed by a blog administrator.
Anonymous said...

I think that reality check is right. Infosys's has a public face - Narayan Murthy who is pitch forked (or does it himself) whenever they want to "present" a humble face(nothing wrong with it, per se). But what's the true story of infosys? They have done a great job - businesswise, right place, right time, right actions, right strategy and right people. I do not grudge them for that. What hurts us is the fact that they have made bangalore a place unlivable for us - non ITians/ non INFOSCIONS. Infosys is like any other successful company in India - Greedy, Cunning, Cut-throat, aggressive, money minded, dont give a damn for the place/the society, et al. ... hence there is no need for NRM to preach to us - do this, do that, dont do that; Just because he is successful, he thinks he has a mantra for all of us - which we should follow - Spreading wealth by creating it ( other than for infoscions, NRM's driver/gardener(?), their vendors and agenies) -- sounds like a brave statement to lift/motivate the rest.

I think the government is taking us all for a great ride - by giving these guys a tax break -- and offering them land ...

gbhupesh@gmail said...

Software industry does not require an integrated environment like a large manufacturing plant or like steel plant or a dam/power project. Even when these industries are given land those are in mostly in very remote area. So why so much land for Infosys that is also very near to city.

What is market price? Why Govt should assist Infosys in occupying land?

Always this reason is given that if they are doing on Market price what' the problem.

What is market price? See off market large deals of Pantaloon (Big bazaar) shares, they are at 25% premium to market price. If more demand come price will further move up. Getting bulk land through govt acquisition will not happen on true market price. If tomorrow Govt come to Infy founders and says Warren Buffet want to invest in India please sell your 10-12% (whatever) shares to him on market price. It will bring some $$ for infrastructure projects to India. Will they be willing to sell their shares on market price.

Land is also a natural resource all have equatable right on that.

There is not only one company Infy who has done India proud. There are other like TCS (see big deals which TCS is able to do), Satyam, Wipro. Only difference is they are not media savy.

Any way politician are hope less and greedy people on this earth.

If still Infy feels they require land and that because of infrastructure problem. I propose following solution.

*Govt float a 30 year bond in market. (Insurance companies will be interested buying big share of these bonds).
*Buy land from this money with a premium to market price and allocate a part of bonds to land owners.
*Give land to companies to build township and office complex on BOT concept (Build Operate Transfer concept). Let them use it for 25 - 30 years and then transfer it to Govt in phases. That time this property can be auctioned/rented to pay for bonds.

This scheme ensure:
development not land grabbing as 25 year time start when land is allocated.
opportunity to all.