What makes Infosys tick?

AT INFOSYS, one of the key focus areas is creating a whole generation of leaders, mentoring them, giving them the inputs, the opportunities and creating a management bent, with which the challenge of growth and scalability can be faced.

Today, any of Infosys' units or practices is as big as Infosys was a couple of years back, and in few years, each of these people will be leading a unit as big as Infosys is today. So, it is vital that there is a whole band of leaders who are able to deliver, execute and meet those challenges.

To do this, an open culture has to be created -- a culture that encourages ideas from all and recognises merit, that does not get subdued by hierarchy and is free of politics, and emphasises excellence, speed and execution. This has been the attempt at Infosys -- to build a management team for the same purpose.

Moving up value-chain: The second issue is that people in the software industry are talking about, ``going up the value chain.'' While some people believe that going up the value chain is getting into products, others believe it is developing only technology solutions. There are many aspects to value creation and value generation.

Put simply, going up the value chain is delivering a service or a product for which the customer is willing to pay a higher price because he perceives a higher value.

Infosys has demonstrated that it has gone up the value-chain. Revenue productivity has gone up from $ 42,000 in 1996-97 to $81,000 in the first quarter of this financial year.

On the marketing and branding side, it is about building a brand for the company and being recognised as a leader in one's segment.

On the sales side, it is about how you position yourself when you meet your customers.

On the proposal side, it is about how you package and position a proposal so that the customer sees value in the solutions given.

On the delivery side, it is using highest quality methods to reduce defects and also cycle-time.

Going up the value chain has also to be seen in the context of what Infosys calls the PSPD model.

Sustainable, predictable, profitable: By PSPD, Infosys means that revenue and business models must be generated where there is predictability of the revenues.

One must be able to predict that in the next 4, 8 or 12 quarters, a certain revenue is assured, in order to ensure that the expected growth is managed.

The second aspect of the Infosys revenue models is that it has to contain sustainable revenue streams.

The third aspect is that it has to be profitable. Everything the company does has to generate margins, profits and deliver earnings to the bottomline.

The final, and fourth, aspect of the strategy is what it calls de-risking. Which means that one should not become overly dependent on one technology, a particular business or one kind of service offering.

Tempered for de-risking: How do you reconcile the value-chain with PSPD, considering that in a sense one has to make certain judgments? For example, Infosys today derives 10.9 per cent of its revenue from dotcom start-ups that demand very high prices.

If the company's sole goal was to go up the value-chain, it would do much more business with dotcoms and get much higher revenue per employee. But the moment it does that, the company will be subjected to a high level of risk because these companies, in turn, are funded by venture capitalists who are not funded by revenue, but by capital which is ruled by market conditions. So, clearly, the process of going up the value-chain has to be balanced with the demands of predictability, sustainability, profitability and de-risking. That is the constant theme practiced at Infosys.

The company makes sure that while going up the value-chain every year, in terms of productivity and contribution to the employee, a revenue model is also built that is predictable, sustainable, profitable and has been de-risked.

The key focus: Ultimately, the focus is on building a company which works on a high growth, high margin and low risk principle. It has to find the balance and the right mix and still be able to deliver growth, minimise risk, and choose revenue streams that are sustainable in nature. The company has to be flexible and responsive to change and take advantage of new market trends.

Edited-excerpts of the theme address, `Leading to the future', by Mr. Nandan M. Nilekani, Managing Director, President and Chief Presiding Officer, Infosys Technologies. The second part of this address will be published next week.