The case describes how Infosys differs from other software companies in India. To what degree is Infosys’ performance show this fact. Please cite numbers and examples. The first difference of Infosys from other software companies is its financial policy. Infosys’s CEO and other founders are frugal because of their backgrounds and therefore have avoided to use debt. This results in a conservative financial policy as the followings. The first one is to have liquidity of up to 25% of revenue in the form of cash and liquid assets to ensure that the firm can cover the next eight months of expenses.
Second, The firm pays dividend only if it has a cash surplus and the dividend payout should be no more than 20% of a year’s profits. The last one is the company funds all of its capital expenditures and working capital needs out of its cash flow. Infosys’s conservative, financial policy, together with its tight cost control and low capital expenditures, help increase the firm’s profit and generate more cash for the company to finance its operation in the future. Second, Infosys take advantage of the capital markets with one of the first market-priced IPO in 1993.
The IPO allows Infosys to realize the value of the investment by the employees and to contribute to the creation of wealth in India. Also, the company is able to take advantage of tremendous growth opportunity in India through investment in the business. After the IPO, Infosys’s revenue increased from Rs. 95 million in 1992 to Rs. 145 million in 1993, and it then had a stock split in 1994. All in all, the investment enables Infosys to generate sufficient cash flow for all of its capital needs and the IPO crates funds allowing the company to do so without constraining its liquidity.
Third, Infosys is considered one of the most desirable places of employment among Indian students. Infosys wants to create a sustainable business and finds “employees” as a key to success. It tries to get people to work for the company and enhances the overall experience for employees. The company therefore sees the need to create an environment where people use speed and imagination in everything they do, where people benchmark themselves on a global scale, and to become a globally respected firm and a leader in the Indian market.
Infosys addresses people would stay and work for a company if there is learning value-added, financial value-added, and emotional value-added–probably the most important element–, which is all reflected in the company. First, Infosys allows employees to have chances in having the responsibility early, and allowing them to progress quickly in the organization. Second, it is the first company in India to institute stock option plan, loan program for employees, or even a home loan with a second lease on property. Third, Infosys really helps out and is always be there to get people through tough times.
The friendliness, openness, and transparency of the organization are really the key factors in its ability to attract and retain people. The friendliness, openness, and transparency of the organization are really the key factors in its ability to attract and retain people, which contribute to the firm’s performances. Lastly, Infosys has taken a leadership position in several areas in the Indian market, apart from the operating environment Infosys has created. Murthy, Infosys’s CEO and other employees hold numerous leadership positions in Indian business associations, reflecting the their skills and abilities to mange the company.
Also, it is the first Indian company to file a 10K and the first to perform a full audit according to U. S. GAAP, and has won many awards in India and throughout Asia for the standards it has set in our reporting and disclosure policies. This transparency is also a significant competitive advantage, which highly attracts the foreign investors into Infosys and enables the firm to realize the value it has in the public market and enhance its performance. Also, Infosys creates maximum value in India in a legal and ethical manner because it shares all of its best practices with all the Indian companies and will even help them implement it.