TERM PAPER

Of

Business Environment
On
PESTLE ANALYSIS OF IT

Submitted to;
Mrs.Maneet Kour
Lect.of BE

Submitted by;
Md Reyaz Aqubal
R.No.RT1901A01
Reg.no.10900173
MBA 1st
 ACKNOWLEDGMENT

I am thankful to Mrs. Maneet Kour for providing me the chance

to work on the PESTLE ANALYSIS OF IT. The term paper tested
my patience at every step of the preparation, but the courage
provided by the teacher helped me to swim against the tide.

The most precious moments are those when we get an

opportunity to remember and thank everyone who has in
some way or the other motivated and facilitated us to
achieve our goals.

First of all I thank to GOD ALMIGHTY for giving me power to

pen down the term paper in its present shape. I thank the
entire teaching staff especially Mrs.Maneet Kour for sharing
his valuable knowledge with us & for providing his able
guidance and support. I also thank to my classmate who
every time helped me out and encouraged me for carrying
out the task.

I fall short of words to thank my family, who stood beside me

while completion of my task.
 INFORMATION TECHNOLOGY

We are using the term information technology or IT to refer to

an entire industry. In actuality, information technology is the
use of computers and software to manage information. In some
companies, this is referred to as Management Information
Services (MIS) or simply as Information Services (IS). The
information technology department of a large company would
be responsible for storing information, protecting information,
processing the information, transmitting the information as
necessary, and later retrieving information as necessary.

History of Information Technology:

In relative terms, it wasn't long ago that the Information
Technology department might have consisted of a single
Computer Operator, who might be storing data on magnetic
tape, and then putting it in a box down in the basement
somewhere. The history of information technology is
fascinating! These Information Technology resources for
information on everything from the history of IT to electronics
inventions and even the top 10 IT bugs.

Modern Information Technology Departments:

In order to perform the complex functions required of
information technology departments today, the modern
Information Technology Department would use computers,
servers, database management systems, and cryptography. The
department would be made up of several System
Administrators, Database Administrators and at least one
Information Technology Manager.

In India, the software boom started somewhere in the late

1990s. Most of the Indian software companies at that moment
offered only limited software services such as the banking and
the engineering software. The business software boom started
with the emergence of year2000 problem, when a large number
of skilled personnel were required to fulfill the mammoth
database-correction demand in order to cope up with the
advent of the new millennium.

The profile of the Indian IT Services has been undergoing a

change in the last few years, partly as it moves up the value
chain and partly as a response to the market dynamics. Ten
years ago, most US companies would not even consider
outsourcing some of their IT projects to outside vendors. Now,
ten years later, a vast majority of US companies use the
professional services of Indian Software engineers in some
manner, through large, medium or small companies or through
individuals recruited directly.

The market competition is forcing organizations to cut

down on costs of products. The professional IT services on the
other hand are becoming increasingly expensive. The offshore
software development model is today where onsite professional
services were ten years ago. There is a high chance (almost a
mathematical certainty), that in less than ten years, the vast
majority of IT services (software development being just one of
them) from developed countries, will be, one, outsourced and
two, outsourced to an offshore vendor.

Despite the global economic slowdown, the Indian IT software

and services industry is maintaining a steady pace of growth.
Software development activity is not confined to a few cities in
India. Software development centers, such as Bangalore,
Hyderabad, Mumbai, Pune, Chennai, Calcutta, Delhi, Noida,
Gurgaon, Vadodara, Bhubaneswar, Ahmadabad, Goa,
Chandigarh, and Trivandrum are all developing quickly. All of
these places have state of the art software facilities and the
presence of a large number of overseas vendors. India’s most
prized resource is its readily available technical work force.
India has the second largest English-speaking scientific
professionals in the world, second only to the U.S. It is
estimated that India has over 4 million technical workers, over
1,832 educational institutions and polytechnics, which train
more than 67,785 computer software professionals every year.
The enormous base of skilled manpower is a major draw for
global customers. India provides IT services at one-tenth the
price. No wonder more and more companies are basing their
operations in India.

The industry is in an expansion mode right now, with

dozens of new offshore IT services vendors emerging every day,
the industry has a high probability of being subjected to the
80:20 rule in not too distant a future. In perhaps another ten
years, 80 percent of all outsourced offshore development work
will be done by 20 percent of all vendors, a small number of
high qualities, trusted vendors. Only a few select countries and
only the most professional companies in those countries will
emerge as winners. India will definitely be the country of choice
for offshore software development. It has the potential to
become and remain the country of choice for all software
developments and IT enabled services, second only to the USA.
The third choice could be far distant.

India is among the three countries that have built

supercomputers on their own. The other two are USA and
Japan. India is among six countries that launch satellites and
do so even for Germany and Belgium. India's INSAT is among
the world's largest domestic satellite communication systems.
India has the third largest telecommunications network among
the emerging economies and it is among the top ten networks of
the world.

To become a global leader in the IT industry and retain that

position, India needs to constantly keep moving up the value
chain, focusing on finished products and solutions, rather than
purely on skill sets and resumes. It also needs to be able to
package its services as products, rather than offering them as
raw material. It needs to be able to recognize and build up on its
strengths and work on weaknesses.

Another extension of the IT industry is the ITES (Information

Technology Enabled Services) which is a sector dependent on IT
sector.

Information technology consulting (IT consulting or business

and technology services) is a field that focuses on advising
businesses on how best to use information technology to meet
their business objectives. In addition to providing advice, IT
consultancies often implement, deploy, and administer IT
systems on businesses' behalf.

The PC industry is one of the strangest in the world. There is

probably no other type of product that is so technologically
sophisticated, sells for so much money, and yet is sold by so
many companies for so little profit. The severe competition in
the industry is the one reason why so many problems are
encountered by those who deal with PC vendors. While I
consider there to be absolutely no excuse for a company not
treating its customers fairly, at the same time I think customers
should have some idea of what vendors are up against in this
demanding marketplace.

PESTLE ANALYSIS

There are many factors in the macro-environment that will

effect the decisions of the managers of any organization. Tax
changes, new laws, trade barriers, demographic change and
government policy changes are all examples of macro change.
To help analyze these factors, managers can categorize them
using the PESTLE model.
 PESTLE stands for Political, Economical, Social, Technical,
Legislative and Environmental. It is a strategic planning
technique that provides a useful framework for analyzing the
environmental pressures on a team or an organization. It
describes a framework of macro environmental factors used in
the environmental scanning component of strategic
management. It is a part of the external analysis when
conducting a strategic analysis or doing market research and
gives a certain overview of the different macro environmental
factors that the company has to take into consideration. It is a
useful strategic tool for understanding market growth or
decline, business position, potential and direction for
operations. PESTLE factors play an important role in the value
creation opportunities of a strategy. However they are usually
outside the control of the corporation and must normally be
considered as either threats or opportunities.

Kotler (1998) claimed that PESTLE analysis is a useful

strategic tool for understanding market growth or decline,
business position, potential and direction for operations. The
headings of PESTLE are a framework for reviewing a situation,
and can in addition to SWOT and Porter’s Five Forces models,
be applied by companies to review strategic directions,
including marketing proposition.

•Political factors –

These refer to government policies such as the degree of

intervention in the economy. What goods and services does a
government want to provide? To what extent does it believe in
subsidizing firms? What are its priorities in terms of business
support? Political decisions can impact on many vital areas for
business such as the education of the workforce, the health of
the nation and the quality of the infrastructure of the economy
such as the road and rail system, Government rules and
regulations can also affect a business heavily. Rules and
regulations such as environmental regulations, industry
specific regulations, competitive regulations, consumer
protection and various kinds of employment laws.

•Economical factors –

These include interest rates, taxation changes, economic

growth, inflation and exchange rates, governments spending
levels, unemployment, job growth, tariffs, consumer confidence
index and import or export rations. Economic changes can have
a major impact on a firm's behavior.

• Higher interest rates may deter investment because it

costs more to borrow.

• A strong currency may make exporting more difficult

because it may raise the price in terms of foreign currency

• Inflation may provoke higher wage demands from

employees and raise costs

• Higher national income growth may boost demand for a

firm's products

•Social factors –

These often look at the cultural aspects and include health

consciousness, population growth rate, demographics (age,
gender ,race, distribution), career attitudes and emphasis on
safety , lifestyle changes, population shifts, education trends,
fads, diversity, immigration/emigration, housing trends,
fashion, attitudes to work, leisure activities, occupations and
earning capacity.

Changes in social trends can impact on the demand for a

firm's products and the availability and willingness of
individuals to work. Today the aging of population has become
a huge problem. This has increased the costs for firms who are
committed to pension payments for their employees because
their staff is living longer. It also means some firms have
started to recruit older employees to tap into this growing
labour pool. The ageing population also has impact on demand:
for example, demand for sheltered accommodation and
medicines have increased whereas demand for toys is falling.

•Technological factors –

Technological factors include ecological and

environmental aspects and can determine barriers to entry,
minimum efficient production level and influence outsourcing
decisions. Technological factors look at elements such as R&D
activity, automation, technology incentives and the rate of
technological change. New technologies create new products
and new processes. MP3 players, computer games, online
gambling and high definition TVs are all new markets created
by technological advances. Online shopping, bar coding and
computer aided designing are all improvements to the way we
do business as a result of better technology. Technology can
reduce costs, improve quality and lead to innovation. These
developments can benefit consumers as well as the
organizations providing the products.

•Legal factors-

These are related to the legal environment in which firms

operate. In recent years in UK there have been many significant
legal changes that have affected organizations behavior. The
introduction of age discrimination and disability
discrimination legislation, an increase in the minimum wage
and greater requirements for firms to recycle are examples of
relatively recent laws that affect an organization’s actions.
Legal changes can affect a firm's costs (e.g. if new systems and
procedures have to be developed) and demand (e.g. if the law
affects the likelihood of customers buying the good or using the
service).

•Environmental factors –
 Environmental factors include the weather and climate
change. Changes in temperature can impact on many industries
including farming, tourism and insurance. With major climate
changes occurring due to global warming and with greater
environmental awareness this external factor is becoming a
significant issue for firms to consider. The growing desire to
protect the environment is having an impact on many
industries such as the travel and transportation industries (for
example, more taxes being placed on air travel and the success
of hybrid cars) and the general move towards more
environmentally friendly products and processes is affecting
demand patterns and creating business opportunities.

Introduction:
Infosys Technologies Ltd. (NASDAQ: INFY) was started in 1981
by seven people with US$ 250. Today, we are a global leader in
the "next generation" of IT and consulting with revenues of over
US$ 4 billion. Infosys defines designs and delivers technology-
enabled business solutions that help Global 2000 companies
win in a Flat World. Infosys also provides a complete range of
services by leveraging our domain and business expertise and
strategic alliances with leading technology providers.
Infosys' offerings span business and technology consulting,
application services, systems integration, 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 over 50 offices and
development centers in India, China, Australia, the Czech
Republic, Poland, the UK, Canada and Japan.
Infosys has over 103,000 employees. Infosys takes pride in
building strategic long-term client relationships. Over 97% of
our revenues come from existing customers.

In an increasingly globalised world, significant

complexity and uncertainty is getting attached to the
unprecedented economic crisis. The Indian economy has also
been impacted by the recessionary trends, with a slowdown in
GDP growth to seven per cent. The focus and exponential
growth in the domestic market has partially offset this fall and
insulated the country, resulting in net overall momentum. The
IT-BPO industry in India has today become a growth engine for
the economy, contributing substantially to increases in the
GDP, urban employment and exports, to achieve the vision of a
“young and resilient” India. During the year, the sector
maintained its double digit growth rate and was a net hirer.
This growth has been fueled by increasing diversification in the
geographic base and industry verticals, and adaptation in the
service offerings portfolio. While the effects of the economic
crisis are expected to linger in the near term future, the Indian
IT-BPO industry has displayed resilience and tenacity in
countering the unpredictable conditions and reiterating the
viability of India’s fundamental value proposition.
Consequently, India has retained its leadership position in the
global sourcing market. The Indian IT-BPO industry is
estimated to achieve revenues of USD 71.7 billion in FY2009,
with the IT software and services industry accounting for USD
60 billion of revenues. During this period, direct employment is
expected to reach nearly 2.23 million, an addition of 226,000
employees, while indirect job creation is estimated to touch 8
million. As a proportion of national GDP, the sector revenues
have grown from 1.2 per cent in FY1998 to an estimated 5.8 per
cent in FY2009. Software and services exports (including BPO)
are expected to account for over 99 per cent of total exports,
employing over 1.76 million employees. While the current mood
is that of “cautious optimism,” the industry is expected to
witness sustainable growth over a two-year horizon, going past
its USD 60 billion export target in FY2011. While the industry
has significant headroom for growth, competition is increasing,
with a number of countries creating enabling business
environments aimed at replicating India’s success in the IT-BPO
industry. Hence, concentrated efforts are required by all
stakeholders to address the current challenges, to ensure that
India realizes its potential, and maintains its leadership
position.

Vision
"To be a globally respected corporation that provides best-of-
breed business solutions, leveraging technology, delivered by
best in class people."

Mission
"To achieve our objectives in an environment of fairness,
honesty, and courtesy towards our clients, employees, vendors
and society at large."

STP Analysis Segmentation

Geographical regions: US, India, Australia, China, UK

Psychographics: MNC, BFSI, Hospitality Sector

Demographic: Population or Employee strength of consumer
company: +5000

Targeting
Infosys Technologies Ltd, which offers its core banking
solution under the brand ‘Finacle’, is targeting regional rural
banks to achieve higher growth. There are over 90 rural banks
in India & they have come up with a solution called ‘The Finacle
Bank in a Box’ for this segment. The expenditure that each rural
bank would have to make would depend on its existing level of
automation. IT service providers would benefit a great deal if
more people from rural areas were included in the banking
services, and Infosys has. The solution will be deployed by a
third party who will do the banking transaction on behalf of
different banks as the model is expected to be cost-effective
Infosys BPO is targeting the hospitality industry for it’s
outsources processes offering. The company has formed a
strategic alliance with New York-based hospitality consultancy
major HVS International The alliance will help Infosys BPO
(formerly called Progeon) to target hotels and other customers
in the hospitality industry. HVS is a well-known consulting firm
in the hospitality segment.

Positioning
Infosys is seeking to move away from its image as a cheap
Indian offshore service factory to that of a global business
technology (BT) leader. The company is investing in measures
to enhance its visibility and footprint across a wider group of
client stakeholders and markets. The aim is to position Infosys
as a prototype for successful companies in a globalized market
environment. While Infosys can justifiably point to its ongoing
business growth as a major success story, its corporate
positioning suffers from inconsistencies in its underlying
messaging.
Furthermore, its product positioning continues to mainly focus
on technology and cost-related benefits, which represents a
disconnect with Infosys' corporate ambitions.
Leadership Style:
Infosys believes that leadership is one of the most essential
ingredients of organizational success which is provided by its
Chairman, N R Narayanmurthy. Leadership is based on high
business vision and predominantly supportive styles. There is
emphasis on developing leadership qualities among employees.
For this purpose, it has established “Infosys Leadership
Institute”. Top management emphasizes on open door policy,
continuous sharing of information, takes inputs from
employees in decision making, and builds personal rapport
with employees. As we have seen over last few years, we have
seen smooth transition from N R Narayanmurthy to Nandan
Nilakeni and from Nandan Nilakeni to Kris Gopalkrishnan
without any adverse effects on the company outlook and each
one has proved to be an able leader taking company forward.
Staff (Human Resources): Since Infosys is in knowledge-based
industry, it focuses on the quality of the human resources. Out
of total personnel, about 90 per cent are engineers. At the entry
level, it emphasizes on selecting candidates who find the
company’s meritocratic culture satisfying, superior academic
records, technical skills, and high level of learn ability. The
company emphasizes on training and development of its
employees on continuous basis and spends about 2.65 per cent
of its revenues on up gradation of employees‟ skills, and
around 50% as employee costs. In spite of thousands of people
joining every month, Infosys has been able to maintain its
training standard mostly due to its highly matured processes
capabilities and investment in infrastructure.

SWOT Analysis

STRENGTHS:
• Leadership in sophisticated solutions that enable clients to
optimize the efficiency of their business.
• Proven “Global delivery model”
• Commitment to superior quality and process execution
• Strong Brand and Long-Standing Client Relationships
• Ability to scale Innovation and leadership.

WEAKNESSES:

• Excessive dependence on US for revenues, – 67 % of revenues

from USA.
• Weak player in domestic market. Only 1 % of revenues from
India – low as compared to peers.
• Low R & D spending as compared to global IT companies –
only 1.3 % of total revenues.
• Low expertise in high end services like Consultancy and KPO.

OPPORTUNITIES:

• Domestic market set to grow by 20%.

• Expanding into new geographies – Europe, Middle East etc.
• Infosys is cash rich (Around US $ 1 Billion).
• Acquiring companies to increase expertise in Consultancy,
KPO and package implementation capabilities
• Opening offices and development centers in cost advantage
countries such as those in Latin America and Eastern Europe.

THREATS:

• Global economic slowdown may continue for several years –

hence low IT spending globally.
• US Govt. against outsourcing.
• Shrinking margins due to rising wage inflation, Rupee-dollar
movementaffects revenue and hence margins.
• Increased competition from foreign firms like Accenture, IBM
etc.
• Increased competition from low-wage countries like China,
Indonesia etc.

Strategy:
 Infosys has adopted a client-focused strategy to achieve
growth. Rather than focusing on numerous small
organizations, it focuses on limited number of large
organizations throughout world. In order to cater its clients,
the company emphasizes on custom-built software’s. Another
differentiating factor for Infosys is that it commands premium
margins. Company does not negotiate over margins beyond a
certain limit and some time prefers to walk-out rather than
compromise on quality for low-cost contracts. This has helped
in building an image for quality driven model rather than cost-
differentiating model. Increase business from existing and new
clients: Infosys has focused on expanding the nature and scope
of engagements for the existing clients by increasing the size
and number of projects and extending the breadth of its service
offerings. For new clients, it provides value added solutions by
leveraging its in-depth industry expertise. It increases its
recurring business with clients by providing software re-
engineering, maintenance, infrastructure management and
business process management services which are long-term in
nature and require frequent client contact. Expand
geographically: Infosys plans to establish new sales and
marketing offices, representative offices and global
development centers to expand its geographical reach. It plans
to increase presence in China through Infosys China, in the
Czech Republic and Eastern Europe directly and through
Infosys BPO, in Australia through Infosys Australia and in
Latin America, through Infosys Mexico.
Enhance solution set: Infosys focuses on emerging trends, new
technologies, specific industries and pervasive business issues
that confront our clients

Pestle of Infosys:
Political:
1. Political stability: Indian political structure is considered
stable enough expect the fact that there is a fear of „hung
parliament‟ (no clear majority).

2. U.S. government has declared that U.S companies that

outsource IT work to other locations other than U.S. will not get
tax benefit.

3. Government owned companies and PSUs have decided to give

more IT projects to Indian IT companies.
4. Terrorist attack or war.

Economic:
1. Global IT spending (demand)

2. Domestic IT Spending (Demand): Domestic market to grow

by 20% and reach approx USD 20 billion in 2008-09 - NASSCOM

3. Currency Fluctuation

4. Real Estate Prices: Decline in real estate prices has resulted

reducing the rental expenditures.

5. Attrition: Due to recession, the layoffs and job-cuts have

resulted in low attrition rate.

6. Economic Attractiveness:
Due to cost advantage and other factors

Social:
1. Language spoken: English is widely spoken language in
India, English medium being the most accepted medium of
education. Thus, India boasts of large English speaking
population.

2. Education: A number of technical institutes and universities

over the country offer IT education.

3. Working age population

Technological:

1. Telephony:
a. India has the world’s lowest call rates (1-2 US cents).

b. Expected to have total subscriber base of about 500 million

by 2010.

c. ARPU for GSM is USD 6.6 per month.

d. India has the second largest telephone network after china.

e. Teledensity – 19.86 %

f. Enterprise telephone services, 3G, Wi-max and VPN are

poised to grow.

• Internet Backbone:

Due to IT revolution in 90’s India is well connected with

undersea optical cables.

• New IT Technologies:
 Technologies like SOA, web 2.0, High definition content, grid
computing, and innovation in low cost technologies is
presenting new challenges & opportunities for Indian IT
industry.

2. Internet Backbone:

Due to IT revolution of „90s, Indian cities and India is well

connected with undersea optical cables.

3. New IT technologies:

Technologies like SOA, Web 2.0, High-definition content, grid

computing, etc and innovation in low cost technologies is
presenting new challenges and opportunities for Indian IT
industry.

Legal:

1. IT SEZ requirement: IT companies can set up SEZ with

minimum area of 10 hectares and enjoy a host of tax benefits
and fiscal benefits.

2. Contract / Bond requirements: Huge debates surrounding the

bonds under which the employees are required to work, which
is not legally required.

3. IT Act: Indian government is strengthening the IT act, 2000

to provide a sound legal environment for companies to operate
esp. related to security of data in transmission and storage, etc.

4. Companies operating in Software Technology Park (STPI)

scheme will continue to get tax-benefit till 2010.

Environmental:

Energy Efficient processes and equipments:

Companies are focusing on reducing the carbon footprints,
energy utilization, water consumption, etc

BIBILIOGRAPHY

http://www.businessballs.com/pestanalysisfreetemplate.htm

http://www.alacrastore.com/storecontent/datamonitor-
premium-profiles/

http://jobsearchtech.about.com/od/careersintechnology/p/ITD
efinition.htm

http://www.wikipedia.com

Book: Shaikh Saleem