Last Updated 27 Jul 2020

Infosys: Financing an Indian Software Start-Up

Category Entrepreneurship
Essay type Research
Words 830 (3 pages)
Views 415

Infosys is small software development venture which provides information technology (IT) consulting services for international clients. The company is located in Bangalore and was founded back in 1981 by a small group of skllfull entrepreneurs, with very little equity of 1000$ and without backing from a large companies. Mr. R. Narayana Murthy is the CEO and chairman and Nandan Nilekani is the president and chief operating officer (COO), of Infosys Technologies Ltd.

Being a company grounded on a Indian soil at that tome was not an advantage for Infosys because the economic policy supported by the government prior to 1991 caused many problems for business, especially for those businesses that wanted to import goods from a foreign market. Therefore the easiest business solution for Infosys was to develop software services , since production of hardware could have been a troble because all the devices they need for the hardware development were imported from abroad. Because the domestic market held no real opportunity for the new company, Infosys focused on international markets for its software products.

Up till 1999 Narayana Murthy bought out all the shares from the remaining founders, the company has dramatically transformed its business and image and grown with over 100 employees. It faced possible bancropcy but somehow managed to survive it, took the advantage of the capital markets with one of the first market-priced IPOs and brought itself a tremendous growth in its business. It is our vision at Infosys, to create world-class leaders who will be at the forefront of business and technology in today's competitive marketplace.

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Challenges: As the mission for the company was to become a globally respected firm and a leader in the Indian market, they needed to transform Infosys as a desirable place to work not only for domestic people but also for the foreigners who have complementary skills. That is why they have invested the money from the IPO and created an environment that would enhance the overall experience for employees by taking three most important values: learning value-added, if there is financial value-added, and if there is emotional value-added.

This was very well percieved by the internal employees as well as all other gratuated students who were considering Infosys as the best place to work. Employees had very good training programm, chance for carrier development, possibility for company loans for private reasons etc. Infosys even offered stock options to all qualified employees. The factor which helped Infosys to grow at a faster pace than others was the low employee turnover. The turnover rate at Infosys was around 11% as opposed to industry average for software companies' of over 25% during the 1990s.

Infosys' retention capability was a function both of its rigorous selection procedures as well as proactive HRD practices Increasing productivity was their next challenge in order to remain competitive on a global basis. Therefore they considered three objectives: increase our customer penetration, to increase our brand equity, increase the amount of fixed price contracts we work on. Hiring international employees was a possibility to accomplish many of the objectives with regard to productivity.

And finally the most important challenge was regarding future growth and financing. Infosys' shares trade on the Bombay Stock Exchange. The company must decide whether it should seek to also list its shares on a U. S. stock exchange and, if yes, whether to list on NASDAQ or NYSE. Solution: There are several opportunities and constraints for considering the current situation and objective of the company. The main challenge is to move up the value chain by increasing our revenues per employee and by increasing our customer base.

For accomplishing this goal, the brand should be enhanced not with tools like advertising and other “traditional” forms of marketing but with word-of-mouth publicity that will highlight the uniqueness of our company compared to our competitors. Secondly, an ADR offering in the United States would help accomplish other goals, such as the recruitment of international employees. Thirdly, in addition to providing currency for our employees, a listing would also provide currency for acquisitions in the United States or any another international location.

Finally, it would be helpful for our current investors as well. Very few contraints appeared for infosys’s listing on the US exchange, mostly related to the valuation of the company on the US exhange. Conclusions: In my opinion I think the company should be list its shares on the US exhange due to the following reasons: The offering would be fantastic for investors as there are very few, if any, comparable ways to invest in this part of the world and there is a huge desire to invest in international markets.

Possibility to recrute international employees. Finally with the listing Infosys will voluntarily opt to behave like a US domestic issuer, rather than subjecting itself to the less stringent standards of a foreign issuer. When it comes for deciding the right exchange, I would choose NASDAQ since it is a favoired market for technology stocks and offers better conditions for foreign companies unlike NYSE .

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Infosys: Financing an Indian Software Start-Up. (2017, Apr 21). Retrieved from

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