Infosys SWOT Analysis (2024)

Company: Infosys Limited
Founder: Narayana Murthy
Year founded:1981
CEO: Salil Parekh
Headquarter: Bangalore, ‎Karnataka‎, India
Employees (Mar 2022): 314,015
Type: Public
Ticker Symbol: INFY
Annual Revenue (Mar 2022): Rs 1.03 trillion
Profit | Net income (Mar 2022): Rs 21.2 billion

Did you know? Infosys, an IT company, operated without a computer until 1983.

Table of Contents

Infosys Strengths

1. Second-largest Indian IT Company

Infosys is ranked second after Tata Consultancy Services, with a market capitalization of $79 billion. In August 2021, Infosys became the fourth Indian company to cross the $100 billion mark in market capitalization.

The large scale gives Infosys a competitive advantage in cost minimization and business negotiations.

2. Strong financial growth

Infosys has had tremendous growth in the past few years, achieving a 5-year CAGR of 28% in revenue. The company reported revenue of Rs 1.03 Billion in FY22, a 21% increment compared to the previous fiscal year.

3. Light Balance Sheet

Infosys is the largest public company with zero debt on its books. It creates higher free cash flow levels, which give the tech giant more flexibility in returning value to shareholders while also providing the company ample room to adjust the capital structure and easier access to capital.

4. Vast market reach and diversified portfolio

Infosys and its global subsidiaries can be found across 247 locations in more than 50 countries worldwide. It boasts a significant presence in the United States, China, India, Australia, Japan, and the Middle East.

It runs 82 sales and marketing offices and 123 development centers globally. Around 62% of revenue is generated in North America, 25% in Europe, 3% in India, and 10% worldwide.

5. Phenomenal brand growth

Infosys has been recognized as the fastest-growing IT services company in the world, according to Brand Finance’s 2022 annual report.

The tech giant’s brand value has grown by 52% since 2021 and 80% since 2020, reaching US$12.8 billion.

6. Strong brand recognition

Infosys has a strong brand image for the quality of products and services it provides. The company has also won several awards, such as leader in Gartner Magic Quadrant, Green Apple Award, and Global System Integrator of the Year.

The company can use its strong brand reputation to attract customers and influence consumer decisions.

7. Product innovation

The tech giant drives innovation by partnering with select startups to provide novel services to its clients. It has opened a network of 20 high-tech co-creation incubators for digital innovation globally, the latest being in Sydney, Australia.

The firm spends around 0.5% of its annual revenue on research and development to support product innovation.

8. Strategic Partnerships

Infosys has partnered with major players in the business and technology space, enabling it to better position its IT business solutions and consultancy services and cement its place as a market leader in the IT services segment.

Currently, the conglomerate is associated with blue-chip companies like Amazon, Google, IBM, Microsoft, HP, and Oracle, to name a few.

9. Broad products & diversified end markets

Infosys operates across multiple business segments, including energies & utilities, telecom, manufacturing, hi-tech, and life sciences, with around 47% of revenue generated from financial services and retail segments.

It makes the company less vulnerable to shifts in market forces within the IT space.

10. Quality employee training programs

Infosys has one of the IT industry’s best employee training and competency development programs. It uses an exciting blend of classroom, virtual, macro, and microlearning setups to retool its workforce.

The company offers around 1,500 courses in continuous education and has been actively transforming the training process using digital platforms.

Infosys Weaknesses

1. Overreliance on a few clients

Infosys has an over-concentrated client base which leaves it in a vulnerable position.

For example, 20.5% of its consolidated revenue in FY22 was generated by the top 10 clients, and the top 5 clients generated 11.9% of revenue. With the global market entering a highly uncertain business environment, this could affect the tech giant’s revenues.

2. Unsuccessful company acquisitions

On former CEO Vishal Sikka’s watch, Infosys bought Panaya, a US-based automation technology company, in 2015 for $200 million, and Skava, a US-based retail digital solutions company in 2015 for $120 million. Both the acquisitions were unsuccessful, resulting in the tech giant write off $90 million on the deals.

3. Controversies

Infosys has been involved in several controversies. Most notable was its involvement in the Russian energy industry after the country’s invasion of Ukraine.

Another faux pas was its forced settlement of $800k for tax fraud in the US in 2019 due to its failure to adhere to California’s laws on immigrant workers’ payrolls.

4. Management/ownership changes

Infosys has been plagued by wrangles in its top leadership, where the board and founders didn’t see eye to eye over issues of governance. This led to the departure of CEO Vishal Sikka in 2018.

Infosys Opportunities

1. Opportunity in the unexploited IT value chain

India is emerging as one of the fastest-growing digital ecosystems in the world. India’s IT industry had an extraordinary growth rate of 15.5% in early 2022, twice as fast as the country’s economic growth.

Experts estimate that by 2025 there will be a $1 trillion opportunity in the software product sector globally.

2. Increasing demand for cloud-based solutions

Major organizations are increasingly turning to cloud computing to help streamline their operations.

Research shows the segment was valued at around $430 billion in 2021 and is expected to grow to about $1,026 billion by 2028, registering an average compound annual growth rate of 15.8%.

3. Emerging markets

In 2021, India was the top outsourcing destination in the world, making up 55% of the market for IT and Business Processing Management services.

The IT sector in India has attracted cumulative foreign direct investment of around $86 billion in the past 12 years. This is a segment that Infosys can further exploit.

4. Rapid adoption of digitalization

Currently, around 57% of revenue is linked with digitalized products and services, up from 49% in the last fiscal year.

Infosys can leverage its cutting-edge analytics to provide data-rich digital services to customers and gain more traction in the rapidly growing digital age.

5. Expansions and acquisitions

The size of Infosys gives it an advantage in acquiring smaller competitors and expanding its business landscape.

Most of the previous acquisitions have greatly benefited the company, and Infosys can continue doing so to advance its business to the next level.

Infosys Threats

1. Higher interest rate environment

Infosys’ growth prospects could be dimmed by Fed rate hikes in 2022, which are likely to see potential clients decrease their CapEx investments.

2. Rising wages

Wage hikes and increased travel costs have been eating into the profits of India’s three tech giants – TCS, Infosys, and Wipro.

These companies are spending up to 62% of their revenues on salaries, creating an unsustainable situation for the tech giants.

Infosys spent, on average, 55% on remunerations in the last 4 fiscal years, making it the 3^rd IT company in India that paid the most in salaries.

3. Workforce attrition

Indian IT companies are unable to stem the tide of employees leaving, with Infosys experiencing the worst overall attrition rate among the tech giants.

The company experienced an attrition rate of 27.1% in the most recent quarter. Employee attrition has cost implications as recruits taking up the vacancies must undergo training.

4. Intensified competition

Infosys operates in the highly competitive IT industry, with major competitors such as Accenture, IBM, and Oracle. This could possibly lead to pricing pressure and cost concerns in the future.

The race in innovation could also put Infosys at a disadvantageous position if it fails to catch up with competitors.

References & more information