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-------- 20th Annual General Meeting --------
Implications of the US economic situation
for IT services and Infosys
All brand names, product names or logos referenced in this presentation are trademarks or
registered trademarks of their respective companies or organizations
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
This presentation may contain certain forward looking statements.
The company may not achieve results as expressed or implied by
such forward looking statements. Actual results could differ
materially from those expressed or implied in such forward looking
statements due to a number of factors including those discussed
under the head "Risk factors" in the company's filings with the
United States Securities and Exchange Commission. Do not place
undue reliance on these forward looking statements. This
presentation contains references to findings of various reports
available in the public domain. The company makes no
representation as to their accuracy or that the company subscribes
to those findings. They are provided only by way of information.
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
The Seeds of the Economic Slowdown in the
US were Sown During the Dot Com Boom…
Click & Mortar Race
Competitive pressure from
Dotcoms
Lure of market cap
Dot-com Boom
Spate of new internet
business models
High valuations
Easy venture capital
Spending to keep up
with the Dotcoms
Free spending to reach
scale
Infrastructure Boom
Infrastructure providers thrive
on free spending economy
High valuations
Easy venture capital
Free spending to reach scale
E-services boom
Massive demand surge
in industries like
securities, consulting
Boom economy
Free corporate spending
Booming capital markets
Greater equity ownership
High consumer
confidence
Free consumer spending
Free spending to
reach scale
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
Easy Dot Com … Easy Dot Go
Click & Mortar Survival
No more keeping up
with the Dot Joneses
Prioritized initiatives
Dot-com Bust
Profits matter!
Stock Markets crash
VC dries up
Net creation of Dotcoms
goes negative
Free spending to No
spending
Layoffs
Stock valuations
evaporate
Refocusing on ROI
Lay-offs
Infrastructure Bust
Infrastructure demand slump
VC dries up
Few New players
Control of spend
Lay-offs
Stock valuations evaporate
E-services challenge
Dot-com bust
Infrastructure bust
Click & Mortar Survival
Top-line challenges
Write-offs
Lay offs
Stock valuations evaporate
Down economy
Corporate spending slows
Capital markets crash
Equity linked wealth evaporates
Lower consumer confidence
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
How Bad and How Long Will It Be?

Opinions vary

Merrill Lynch predicts that the US economy will rebound in
H2-01


Morgan Stanley predicts a mild recession this year


US to grow by 0.8% with further weakness in H2 of this year
Consensus Economics ( a statistical average of leading economists)
predicts a Q4 reversal


US will grow by 2.1% in 2001 led by a strong H2
US grows by 2.0% in 2001
Gartner predicts that the US GDP growth will slowdown to 2.8% in
2001
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
Is the US Slowdown Contagious?

% Of US trade (export + import) as
part of total GDP for major global
economies
Country
Ex+Im
*($ Bn)
GDP
($ Bn)
% of
GDP
Canada
405
698
58%
UK
85
1434
6%
Germany
88
1922
4.6%
France
50
1320
4%
Japan
211
4619
4.5%
China
116
1070
10.8%
Singapore
37
91
41%

Today’s global economy is more
interconnected than ever through
trade and capital flows

Slowdown in the US will have
varying but significant effects across
multiple interconnected economies

Impact to the economies of all major
developed markets should be
expected - including countries in
Western Europe

Based upon Q1 growth rates
Europe is estimated to grow by
2% against 3.4%
(WSJ, May 23, 2001)
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
A Slowing Economy means Slower Growth in IT Spend

Capital expenditure to be
impacted by slowdown

Over 50% of capital expenditure in
the US related to IT spend

A portion of IT spend is discretionary

Implications
Slowing IT spend
Pressure on margins
Longer sales cycles

Key Results of the C-level study
conducted by CIO (Mar-01)

Reduced IT spends (2001 growth in
spend = 9% as compared to 14% for
2000)

53.5% of respondents felt that their 2001
IT spend will be negatively impacted by
the slowdown

Internet systems will continue to be a
priority (% of budget in 2001 = 18% vs
2000 = 14%)

47% of respondents had no revenues
attributable to internet commerce in
2000
Greater centralization and
control in IT purchase (Robert
Baird, Mar 01)
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
The Current Economic Slowdown Has in It Both
Adversity and Opportunity for Infosys
Opportunity
Adversity

Slowing IT services market

Pressure on margins

Longer sales cycles

Increasing competition from
other players


Opportunity to significantly increase
market share

Outsourcing trend is expected to
continue

Economic situation may favor
offshore
Opportunity to create Brand Salience


Marketing spend in IT services
industry reduced significantly
Opportunity to consolidate

Get ready for next stage of growth
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
Our Strategy Is to Contain the Downside While Taking
Advantage of Opportunities…
Continue to manage costs
conservatively
Prudently manage costs
We intend to:
Build Brand Salience

manage costs conservatively.
Increases in costs should trail
revenue growth.

sustain margins with greater
offshore work
Continue Investing in long-term
capabilities
Consolidate operations to
prepare for the next growth spurt
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
Our Strategy Is to Contain the Downside While Taking
Advantage of Opportunities…
Increase focus on brand building
Continue to manage costs
conservatively
We intend to:

enter into new verticals and
high-end services

increase spend on marketing
Build Brand Salience
Continue Investing in long-term
capabilities
Consolidate operations to
prepare for the next growth spurt
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
Our Strategy Is to Contain the Downside While Taking
Advantage of Opportunities…
We intend to:


Continue to manage costs
conservatively
Build Brand Salience


Continue Investing in long-term
capabilities
Physical infrastructure across
development centers in India
Upgrade technology and information
infrastructure
increase headcount by 1500-2000 this year


Consolidate operations to
prepare for the next growth spurt
continue investment in capital
infrastructure
Will enable us to take advantage of large
revenue opportunities
continue investment in Sales



New offices in emerging markets
Greater penetration in Europe and AsiaPacific
Continue hiring in Sales
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
Our Strategy Is to Contain the Downside While Taking
Advantage of Opportunities…
Continue to manage costs
conservatively
We intend to prepare for the next
stage of growth:
Build Brand Salience

Readying internal company
operations for next stage
Continue Investing in long-term
capabilities

Strengthening middle and senior
management

Continuing capital expenditure for
infrastructure building
Consolidate operations to
prepare for the next growth spurt
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
In Summary…

The external environment presents challenges, largely in the form of a weak
economy of uncertain duration

We believe Infosys has a resilient business model


A wide range of services woven around a tried and proven Global Delivery Model

De-risked revenue profile
 Across
economies
 Across
service offerings

Well managed operations and costs

Proven business development capability
Our strategy to meet the challenges that the external environment faces is to

Continue to manage costs conservatively

Continue to invest in building capabilities

Invest in building brand salience

Consolidate operations
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
"Infosys is better positioned to
meet the challenges ahead"
© 2001 Infosys All rights reserved
-------- 20th Annual General Meeting --------
Thank You
© 2001 Infosys All rights reserved