Companies & Sectors
Quality of solution is the clincher for Infosys in its sales strategy, not necessarily pricing, says Nomura

Infosys is likely to lag behind its peers in the cost-efficiency segments and higher exposure to discretionary segments will continue to drag growth, says Nomura Equity Research

Infosys has a value design initiative, and its focus is on winning competitive deals with an emphasis on improving the quality of solution presented to clients. Solution is the clincher according to the company, not necessarily pricing. This is part of the quick note of Nomura Equity Research following a call with the company’s head of sales, Basab Pradhan. Further in going to market, the IT company has a focus on selling differentiated offerings like products and platforms and steering the conversation with clients away from plain outsourcing, observes Nomura in its quick note.
According to Nomura, the tasks involved in value design are qualification of which deals to chase; assembling the right team from across the organization for deal pursuit; accountability of the team (attribution of credit for contributing to non-sales people participating in this initiative); and knowledge management—i.e. drawing from past proposals, so as not to rediscover the wheel.
Infosys also has a star account program, where the focus is on managing star accounts or what management identifies as the 47 accounts which are $100 million plus or have the potential to reach $100 million. The 47 star accounts of Infosys contribute 60% of its revenue, narrates Nomura.
According to the research note, the Infosys’ sales team has 11 people looking at global markets (covering alliances, marketing and large deal outsourcing), and 16 regional heads overseeing the field force—who report to the sales head and the unit heads. In all, there are 800-900 people in sales, and pre-sales activities with responsibilities across  new account opening; account management or client servicing which has the largest allocation of resources (large accounts have five to six people manning an account); and practice sales (experts in certain domain area/pre sales)
Infosys says the recent sluggish growth is not necessarily due to hunting issues but more related to mining, as account-led growth has not contributed as much in the high growth areas. Infosys has been adding close to 40-50 accounts on a quarterly basis over the last four quarters, but many of those have been the non-Global 2000 clients. The company has found that clients falling below the Global 2000 have a mortality rate of about 90% by the fourth year. Hence, Infosys has refocused its hunting efforts towards the Global 2000 segment and sales bonus structures are being aligned to getting these clients.
The company believes there is greater flexibility currently in terms of structuring deals or taking over people. Deal pricing is largely decentralized with the unit heads taking a decision on deal go no go. The company does not believe its higher margin thresholds compared to competition is leading them to forego deals.
The focus on growing outsourcing, irrespective of the growth in higher value-added segments (consulting, system integration segment), continues and the company is not foregoing growth in outsourcing despite the aspiration to increase contribution of higher value-added segments in the longer term. The company continues to participate in deal churn and has been successful in the same and gave instances of two deals recently won – one in a major UK bank where they were a smaller player and have expanded footprint and another in a hi-tech company where they were the incumbent vendor and are expanding their footprint.
The company does not see blanket pricing reductions as seen during the global financial crisis, but believes some clients are taking advantage of the environment through rebids, wherein competitive pressures are pushing pricing down. The management says Infosys is not leaving deals on the table purely because of pricing.
The company’s view remains that Europe continues to be shaky and US has dependence on European demand and does not have enough momentum on its own to counter the European sluggishness. Transformational deals continue to be elusive and outsourcing deals is where the opportunity remains. From a verticals perspective, only hi-tech within manufacturing and retail is seeing good demand, while clients within the rest of manufacturing have more global businesses and are seeing slowdown/ uncertainty. The company continues to see softness in BFSI.
Nomura’s view on the performance of Infosys is as follows: “We continue to expect Infosys to lag peers like HCL Technologies, Tata Consultancy Services and Cognizant in the cost-efficiency segments and believe Infosys’ higher exposure to discretionary segments (about 36% of revenues) will continue to drag growth. We believe the increase in flexibility is likely to be more aimed at saving volume share, but will not necessarily drive significant incremental volumes.” 


The Bailout in the US: By actual numbers

While Democrats paint a glowing picture of the bailout, ProPublica’s Bailout Tracker database tells the whole story. A look at the biggest losses and gains stemming from the TARP and Fannie, Freddie bailouts in the US

Quick, how many billions in the red are taxpayers on the bailout of GM? AIG? Fannie and Freddie? Is it true that the government has reaped a profit from bailing out the banks?
It should be easy to find answers to such questions. But while it's a snap to find rosy administration claims about the bailout, finding hard numbers is much more difficult. That's why, since the bailouts began in 2008, we've maintained a frequently updated site to provide them. Now we've retooled our database to make it even easier to find these sorts of answers.
So you can effortlessly discover that it's $27 billion for GM, $23 billion for AIG, $91 billion for Fannie, $51 billion for Freddie, and yes, the bank investments have so far returned a profit of $19 billion.
We also make it easy for you to see which investments have resulted in losses (39 so far in total) and to sort bailout recipients by how far in the red or black they are. As always, our scorecard page adds it all up and shows where both bailouts — the Troubled Asset Relief Program, better known as TARP ($55 billion in the red) and Fannie and Freddie (negative $142 billion) — stand right now.
Ultimately, the bailout of GM seems likely to result in the TARP's single biggest loss. But since the government still holds about a third of the company's stock (currently worth about $10 billion), we don't include it on our list of losers yet. It's possible the government will sell the stock for more than it's currently worth, recouping more of its investment.
For now, the reigning bust is the $2.3 billion investment in the bank CIT, which landed in bankruptcy less than a year after its bailout. Second on the list is Chrysler, which resulted in a $1.3 billion loss.
"The government's financial stability programs are expected to cost far less than many had once feared during the crisis, and we're continuing to make significant progress recovering taxpayer investments," said a Treasury spokesman.
Over time, that list of losing investments is likely to grow far beyond 39, because many of the smaller banks that have yet to repay the government are struggling. Although more than 300 banks have exited TARP (often repaying with money from another government bank program), nearly 400 remain. Of those, 162 are behind on their dividend payments to the Treasury Department. According to the GAO, the banks that are languishing in TARP tend to be weaker than those that have left, and at least 130 appear on a secret "problem bank" list kept by regulators.
The TARP's main bank program was supposed to be reserved for healthy banks, but among the losing investments are banks that were troubled even when they first received the money. Central Pacific Financial, a Hawaii bank, got its $135 million in early 2009 despite regulators having just ordered it to raise additional capital. As we reported then, the approval came two weeks after staff for Sen. Daniel Inouye, D-Hawaii, who had helped establish the bank and owned a large amount of the bank's stock, inquired about the bank's application for funds. Both regulators and Treasury denied that the inquiry affected their decision. Taxpayers ultimately lost $61 million from the investment.
Also notable among the failed investments is South Financial Group. The bank received a $347 million government investment in 2008 about a month after its former CEO, Mack Whittle, retired with a $18 million golden parachute. Taxpayers ultimately lost $200 million while the CEO kept his package. Contacted by ProPublica, Whittle said, "I founded [South Financial Group] in 1986 and take offense that anyone would imply that retirement benefits were not warranted." He added that the benefits had been negotiated long before he announced his retirement in the summer of 2008 and that he'd retired by the time the bank applied for TARP funds.
Of course, the government has already turned a profit on its bank investments overall, because the biggest bailouts — particularly Citigroup and Bank of America (each received $45 billion) — resulted in large profits. None of the banks remaining in TARP have net outstanding amounts over one billion dollars.
The Treasury wants to get rid of those remaining bank investments as soon as it can — even when that means selling stakes in apparently healthy banks for a discount, as ProPublica's Jesse Eisinger reported last month.
What defines a profit? So far, the Treasury has allowed many banks to exit TARP after receiving most, but not all, of the amount owed. But in cases where the Treasury received enough other revenue (e.g. through dividend payments) from the bank to result in a net gain, we label that investment as a profit. So far, that's been the case for 26 banks.
The final cost of the TARP, the Fannie, or the Freddie bailout isn't possible to know.
For the TARP, it depends on the biggest remaining investments: AIG and the remains of the auto bailout, GM and GMAC (now called Ally Financial). The net outstanding amount of those three companies together is about $61 billion. At this point, it seems likely that Treasury will ultimately recoup its bailout of AIG. The auto companies, on the other hand, seem likely to result in a loss approaching $20 billion, according to both Treasury Department and Congressional Budget Office estimates.
Another big factor is the TARP's housing programs, its mortgage modification program chief among them. Although Treasury set aside more than $40 billion for its various initiatives, less than $5 billion has been spent so far, a testament to the limited reach of the programs. Since those are subsidies, none of that money will be repaid, and any spending ups TARP's tab. Earlier this year, the CBO estimated that ultimately $16 billion would be spent.
Of course, all of these numbers benefit from being put in a broader context. The Obama administration argues that the TARP should be credited with blunting the force of the financial crisis and saving "more than one million American jobs." Critics like former TARP inspector general Neil Barofsky say the program may have stemmed the damage from the crisis, but it did so by largely preserving the broken too-big-to-fail system that caused the crisis. It's also worth mentioning that the Federal Reserve played an enormous role in supporting the biggest banks and allowing them to exit TARP.
The fate of the Fannie and Freddie bailouts is even harder to figure, although the Treasury recently announced that all of the companies' profits from now on will be handed over to Uncle Sam each quarter. Their tabs should decrease, but how quickly and for how long they'll be allowed to exist is unclear.
For now, our site provides a snapshot of the two bailouts as they actually stand. We've been at it since 2008, and we'll continue to update it frequently.



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