Management Control Systems - Infosys

MANAGEMENT CONTROL SYSTEMS INFOSYS TECHNOLOGIES LIMITED

Submitted By: ABHISHEK ANAND DEEPESH MITTAL SUHAS CHAUDHURY SAURABH JOHARI SHALINI YADAV SANAM LAKHANI RUMELI DEY

CONTENTS INFOSYS......................................................................................................................3 ORGANIZATION STRUCTURE.......................................................................................3 Infosys in the beginning..........................................................................................3 Period from 1989 - 2002..........................................................................................3 2003 Onwards......................................................................................................... 4 MANAGEMENT CULTURE.............................................................................................4 CONTROL PROCESS....................................................................................................5 INFOSYS’ GLOBAL DELIVERY MODEL..........................................................................6 IMPLEMENTATION OF GDM MODEL..........................................................................7 ADVANTAGES FROM GDM........................................................................................8 RESULTS AFTER THE IMPLEMENTATION OF GDM.....................................................8 CHALLENGES...........................................................................................................9 RECOMMENDATIONS ..............................................................................................9 COMMUNICATION........................................................................................................9

INFOSYS Infosys Limited was started in 1981 by seven people with US$ 250. Today, they are a global leader in the "next generation" of IT and consulting with revenues of US$ 6.604 billion (LTM Q2-FY12). Infosys defines designs and delivers technology-enabled business solutions for Global 2000 companies. Infosys also provides a complete range of services by leveraging our domain and business expertise and strategic alliances with leading technology providers. Their offerings span business and technology consulting, services, systems, product engineering, custom software development, maintenance, re-engineering, independent testing and validation services, IT infrastructure services and business process outsourcing. Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force in the industry leading to the rise of offshore outsourcing. The GDM is based on the principle of taking work to the location where the best talent is available, where it makes the best economic sense, with the least amount of acceptable risk. Infosys has a global footprint with 64 offices and 65 development centers in US, India, China, Australia, Japan, Middle East, UK, Germany, France, Switzerland, Netherlands, Poland, Canada and many other countries. Infosys and its subsidiaries have 141,822 employees as on September 30, 2011. Infosys takes pride in building strategic long-term client relationships. 98.5% of our revenues come from existing customers (Q2 FY 12).

ORGANIZATION STRUCTURE Infosys in the beginning Infosys was a start-up founded by 7 individuals. Early days were a constant struggle due to the dynamic environment. Companies focus was on delivering a single product based on single technology in a single marketplace. Low degree of Formalization, low complexity and high centralization were few of the characteristic. Period from 1989 - 2002 In 1989, company lost some key accounts this lead to a drastic change in the overall strategy. The period after liberalization led to massive growth. The company started catering to different market segments and different clients. Company had to adhere to a new set of guidelines and streamline process due to the IPO in 1992. The company structure was split up into functional units and the Project Matrix Structure was employed within the production unit.

These changes lead to increasing complexity, moderate formalization and moderate degree of centralization. 2003 Onwards Company had become too big to carry on without modifying the existing structure so the concept of decentralization was brought in. The company was divided into IBU’s (India Business Units), each IBU concentrated on a particular sector and this made the company more customers focused. Managers of each IBU were empowered to take decisions to further the IBU’s prospects and within each IBU the project matrix structure was carried forward. Decentralized system with an ability to take quick decisions was build. In 2007, the IBU concept was further refined to take into account geographic growth and opportunities. The company has adopted a free form organization devoid of hierarchies. Everyone is known as associates irrespective of his position in the company. This system not only helps in creating the feeling of equality but also helps in developing project leaders

MANAGEMENT CULTURE Culture represents collective norms and behaviors of a group of people be it any region, country or an organization. Organizational or management cultures are the characteristics that are based on morals, values, traditions and personnel behavior. It is generally set by the higher management in an organization and most of the times it acts as a control mechanism. The various dimensions of Management culture are as follows: Process vs. Result- whether the company focuses more on the manner in which work is done or the outcome. Job vs. Employee- whether the company focuses more on the work to be done or on its employee’s wellbeing. Open vs. Closed- whether anyone can fit into the organization or only special few people can join. Loose vs. Tight Control- management casual or serious. Normative or Pragmaticwhether ideologically driven or market driven. According to Mr. Narayan Murthy “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. This has been at the forefront of their management culture. Infosys is often voted as one of the top employers of India for its management culture and employee friendly practices which often act as their control system as well. Infosys’s stresses that its operations are driven by key values that s called as C-LIFE.

Customer Delight: A commitment to surpassing the customer expectations. Leadership by Example: A commitment to set standards in their business and transactions and be an exemplar for the industry and our own teams. Integrity and Transparency: A commitment to be ethical, sincere and open in their dealings. Fairness: A commitment to be objective and transaction-oriented, thereby earning trust and respect. Pursuit of Excellence: A commitment to strive relentlessly, to constantly improve themselves, their teams, their services and products so as to become the best. The company attracts the best talent from across the country through a selection process and the employees are required to go through training process for 14 weeks. In addition all the employees are required to go through some form of training every year and some of the chosen employees are trained at the Infosys Leadership Institute to take on higher responsibilities in the company. The company follows a variable compensation structure which is dependant on the performance of the individual and the team as a whole. Thus the company follows a closed culture where only few people who can go through the selection process and training can only fit in. Infosys does take care of its employees by providing facilities from fully furnished Infosys hostels for the trainees to restaurants, movie theatres, swimming pools, gymnasiums and several other facilities in the Infosys Development centers. Moreover it follows an informal culture in office where the employees (seniors and subordinates) address each other by only their first names which facilitates easy and open communication within the organization and in turn motivates the employees to work for the benefit of the organization. Thus it can be concluded that in Infosys their management culture acts as their control system wherein their result driven attitude and closed culture ensures best output from the employees and refrain them from unethical practices whereas the facilities provided like ESOPs , informal communication practices and sources of entertainment provide motivation for the employees to serve the company.

CONTROL PROCESS Reducing cost of compliance using Continuous Controls Monitoring (CCM) Increased globalization, complexity in business environments and higher emphasis on corporate governance drive the need for compliance. Compliance can be external, i.e., imposed by legislation, or internal, which is driven by organizational policies and procedures.

Progressive and matured

organizations such as Infosys consider compliance as an enabler to meet business objectives. Their focus goes beyond the requirement of law and use compliance as means to increase process efficiency and stakeholder confidence.

Continuous Controls Monitoring (CCM) assumes a periodic review of controls. It is important to note that for risk and compliance, CCM involves near real-time review, which can be performed only if testing is automated. Hence, automation of testing is the key to Continuous Controls Monitoring. Initially, compliance was virtually non-existent since there were only few frameworks available. Internal control did not involve testing and assessment and internal audit was largely concerned as group reporting to Chief Financial Officers (CFO) and not the audit committee. The Sarbanes Oxley Act, 2004 was the landmark legislation for compliance despite which companies faced lack of defined processes for compliance.

However, as compliance evolved, organizations realized that automation, i.e., control

execution and compliance program management, was key to reduced cost of compliance. CCM helps reduce the cost of compliance through: REDUCED EFFORT: Automated testing of controls reduces effort for review REDUCED AUDIT COST: Auditors place greater reliance on automated testing and reduce effort on substantive testing INCREASED FREQUENCY OF AUDIT: CCM enables more frequent audit with reduced cost MULTICOMPLIANCE CAPABILITY: CCM supports compliance with multiple regulations thereby ensuring controls are tested only once REMOTE MONITORING: CCM enables testing of controls from remote location, enabling monitoring controls in a cost-effective manner PROACTIVE MONITORING: Near realtime testing prevents fraud and revenue leakage CORPORATE GOVERNANCE: CCM’s near real-time monitoring prevents control failures and enables corrective action to ensure a secure organizational image. Implementing CCM follows a process similar to software implementation. Effective planning is important to maximize value of investments by ensuring standardization, optimization and automation. Automation is the key for successful CCM implementation. Unless the controls are automated, it is difficult to test using a tool. The design of CCM is primarily dependent on reporting requirements, compliance with regulations and internal policies, key controls to be monitored, etc. Automated testing can be monitored, assessed and reported from remote locations.

INFOSYS’ GLOBAL DELIVERY MODEL The salient features of GDM are outlined below: •

The large scale software development projects were divided into 3 categories: 

The first category included tasks that were to be carried out at the location of the client.

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The second category included tasks that needed to be carried out closer to the client.

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The third category consisted of tasks that could be done in remote locations, where processdriven technology centers with highly skilled manpower were easily available.

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The project work was carried out with teams located at different locations across the world working round-the-clock on the project.

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Infosys used two types of Global Development Centers (GDCs) – Proximity Development Centers (PDCs) and Offshore Development Centers (ODCs) to carry out the activities related to software development.

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The major components of GDM included – knowledge capture, daily handoffs, quality control, continuous improvement, mobilizing and demobilizing staff as required, recruiting and training the right kind of people, billing for cross-border teams and connectivity of the locations.

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Infosys developed People Knowledge Map which had contact information of the individuals who were expert in specific areas so that people working on a particular project could contact them in need.

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Infosys benchmarked its IT services against international quality standards like ISO 9000, CMM and the Malcolm Baldrige framework.

IMPLEMENTATION OF GDM MODEL

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Infosys used the services of several service providers along with a mix of satellite and fiber optic links with facilities for alternate routing. Video conferencing was used for executive level discussions and training.

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As a part of expansion, Infosys launched GDM Plus, an enhanced service delivery model, a combination of more services and excellence in execution. GDM Plus was Infosys’ strategic response to changing market conditions and the competitive landscape to deliver high volumes to customers. Execution excellence was to be achieved through business solutions, technology, domain expertise, quality, operational efficiency and people development.

ADVANTAGES FROM GDM         

Rapid growth in revenues Lower risks Talented workforce Best results Flexibility Round the clock productivity Faster response Shorter lead time Cost benefits

RESULTS AFTER THE IMPLEMENTATION OF GDM  Infosys’ revenues grew four-fold in the past four years and it also continued attracting a pool of high quality talented professional.  In 2005-06, Infosys derived more than 40% of its revenues through new GDM based services like package implementation, independent validation, business process management, infrastructure management and systems integration  The benefits to clients included 35% reduction in cost and 75% reductions in time to market for various products across various geographical regions.

CHALLENGES  MNCs like Accenture, IBM Global Services, and Electronic Data Systems have started operating from India and began offering the same offshore rates as Indian companies.  The entry of multinationals has put pressure on Infosys in terms of retaining talented manpower.  Infosys faced stiff competition from other Indian IT companies which were adopting new structures.  Infosys and its GDM were heavily dependent on US-based companies. Since the IT spending of the US companies was decreasing and was expected to reduce further, it could put Infosys in a tight spot.  Infosys also faced growing competition from countries like China and the Philippines which were offering lower wages and more facilities.

RECOMMENDATIONS  Infosys has the first mover advantage in the domain but in order to retain the skilled employees under highly competitive scenario it need to come up with some schemes for the employees. It could hike the salaries or increase the perks that it has been offering so far.  As Infosys was a pioneer with the GDM model, they have already gained an expertise on this front and can try discovering newer horizons and think of newer services that can be provided to the existing and prospective customers. As the competitors are still trying to build their model from scratch, it will take them time to acquire skills to the GDM model as well as to compete with the newer services that Infosys would offer in the consequent time period.

COMMUNICATION It is a well known fact that a sincere two way dialog is very important for any business organization to win and keep the trust of its stakeholders. Infosys has always ensured that they have open and collaborative communication channels with their customers, employees, investors and vendors. Intensive customer interaction As an IT services company, Infosys has a commitment to exceed the customer expectations as one of it defined values. They make use of CSAT, an annual Customer Satisfaction Survey, to gauge the satisfaction of their customers globally. This survey enables the customers to rate the company on key parameters, including comparison with other global IT service companies. The company then analyzes the feedback and identifies key areas for improvement like business strategy, people capabilities, delivered solutions and services and innovation. Confluence, Infosys’ annual customer leadership summit, is held for customers in Europe, Middle East and for customers in Americas. Selected senior executives from global organizations share their ideas and best practices in the areas of innovation, business, leadership and other sustainability aspects. Facilitating employee-employer dialog

The company treats their employees as their greatest assets and value their opinion and feedback to improve the company’s performance as an employer. The company has developed multiple channels to enable employees to express their opinions and participate in organization specific policy and process definition exercises. These include:

Employee Satisfaction Survey (ESAT) The company has partnered with Gallup, the world leader in employee engagement surveys, to conduct the survey. The results of the survey indicate workplace strengths and weaknesses and examine the drivers of the company’s workplace culture. This helps

Infosys in benchmarking their workplace quality

against other organizations. Quarterly Town Hall (QTH) These meetings are held at organization and unit levels in order to share the quarterly progress of the company with the employees. The senior management also conveys corporate strategies and new policies through these meetings. Sparsh Sparsh is the name of the company’s intranet. It is an important tool for communicating key business achievements, policies, operational strategies and messages from senior management. InfyTv India’s first corporate TV channel, InfyTv has created a decentralized, collaborative platform for rich media content. It has emerged as a compelling communication platform. CEO-employee column The interactive column, hosted on Sparsh, allows employees to connect directly with the company CEO every month. Any employee can directly share suggestions or raise queries on policies and strategies and receive responses from the CEO. This serves as a platform for employees to approach, interact and communicate with the top management. HRD Blog The internal communication team (IC) maintains the HRD blog, which enabled the employees to share their views on the company policies, benefits, values and culture. The company takes employee grievances and complaints seriously. Hearing Employee and Resolving (HEAR) is a formal mechanism to help employees express unresolved grievances and instances of discrimination.

The Anti Sexual Harassment Initiative (ASHI) allows employees to report sexual harassment in the workplace and cases are heard and resolved by an unbiased group. Infosys has established control systems for complying with local laws on anti-corruption in the geographies they operate. Infosys believes that employee participation is crucial in strategizing and influencing the company’s business policies and operations. The employees are provided with the following channels in order to participate in decision making processes: Strategic and Action Planning meet (STRAP): Tier leaders participate in this annual meet to strategize on the organization’s business plan for the year ahead. Voice of Youth (VoY): Infoscions who have less than 5 years of work experience and are below 30 years in age, are elected to the VoY team. These teams act as an important communication channel between senior management and employee to recommend and plan location specific operational issues. The Annual General Meeting (AGM) is the most important forum for direct communication with the investors. A report on the company’s operations and financials along with select highlights is presented to all shareholders who attend the meeting in person or view it on the company website.