Most Infosys employees fondly recall the year 2005 as the halcyon days of the Bangalore-based software giant. Nandan Nilekani was at the helm; offshoring was booming and New York-based author and columnist Thomas Friedman had just published The World is Flat. 'After the book, every US firm wanted to do business with Infosys,' recollects a software industry executive. ( Infosys succession: Industry experts give their take ) What's more, the company's premium positioning in the minds of customers ensured that it could charge higher billing rates for its services and also corner higher profit margins compared to larger peers. A lot has changed since then. Nilekani has moved on to head the UIDAI project.
More importantly, in the last year or so, Infosys has lost some of that sheen, partly due to external factors like the recession and partly because of its own conservative approach, say industry watchers.
Firstly, Infosys was no longer able to differentiate itself substantially—customers had become more price-sensitive after the financial meltdown— and they didn't see substantial value in what the company was doing compared to some of its peers. Its margin leadership started eroding and some say its cautious approach meant the company did not take up some contracts that other vendors were willing to.
Secondly, analysts say Infosys' conservative DNA meant that it went slow on opportunistic acquisitions while competitors like Tata Consultancy Services (TCS) took calculated bets and acquired assets during the downturn. In that period, TCS bought Citibank's captive unit, thereby strengthening its BPO play while HCL Technologies beat Infosys to acquire Axon. HCL contends the acquisition was a game-changer.
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