With annual revenues soaring 44% to US$3.1 billion in fiscal 2006, Infosys Technologies (INFY on Nasdaq) has more than 72,000 employees. Most are based in India, home to a vast supply of highly educated but comparatively lower-paid workers.
Infosys sales should continue to shine. Based on Standard & Poor’s growth projections, the blossoming global market for information technology (IT) services will be about US$500 billion this year.
Global Delivery Model
Infosys is best known for global software and business process engineering solutions. Principal services include software development, maintenance, package implementation, testing, consulting and business process management.
Company revenues come from a wide range of international business sectors, led by banking (28.5% of 2006 revenues), telecom (16.5%), manufacturing (13.9%), retail (10.1%), insurance (7.5%) and transportation (5.1%).
The company’s Global Delivery Model enables Infosys to organize its system projects into components. These building blocks can then be worked on simultaneously at client sites and at Infosys development centers in India or worldwide.
Because the major part of Infosys’ offshore business is located in India, the company has a strong competitive advantage in producing low-cost technology exports.
International Revenues
Infosys did business with clients in 51 countries in 2006. The company generates the largest part of its revenues from North America (64.5% of 2006 revenues) and Europe (24.5%) followed by other countries including India (10%). According to its annual report, Infosys plans to expand its service offerings in fast-growing markets in China, Australia and Latin America.
Last year, Infosys added 144 clients for a total customer base of 460 companies. Its largest client generated more than $90 million or 4.4% of total 2006 revenues. The top 10 clients accounted for 30% of that total.
U.S. Work Visas for Foreign Workers
Non-immigrant foreign workers in the U.S. must have either an L-1 or H-1B work visa. Employees of a multinational employer, with offices in both the U.S. and in the employee’s home country, can apply for an L-1 work visa which generally is for two years. Otherwise, skilled foreign workers with at least a Bachelor’s degree can apply to work for an American company or university under an H-1B work visa.
Some American states have legislation that restricts government agencies from outsourcing work to foreign countries. And, although there is no limit to the number of L-1 visas, no more than 65,000 H-1B visas may be issued per year.
According to BusinessWeek (India Links Visa Flap with Doha Talks, May 18 2007), two American senators sent letters to 9 foreign outsourcing companies including Infosys asking for details on how temporary work visas are used to bring foreign workers into the U.S.
Some analysts are nervous about what appears to be building political pressures to protect American jobs.
Outsourcing: An International Trade Issue
However, Infosys is probably insulated from drastic American restrictions on work visas because IT outsourcing is so closely interrelated to U.S. trade with the fast-growing Indian economy.
U.S. Indian Commerce & Industry Minister Kamal Nath considers that any further U.S. restrictions on work visas for outsourcing as non-tariff trade barriers. As a result, India may walk away from further World Trade Organization (WTO) talks despite significant progress in opening up global trade through lower Indian tariffs.
Furthermore, the Indian government has awarded many large contracts to American IT firms, even though local alternatives exist. Indian companies also hire local nationals in all countries in which they operate, while a considerable number of foreign national recruits now work in India.
The shortage of tech talent faced by U.S. companies combined with business pressure to lower costs make it more likely that Infosys will end up hiring more Americans. Then, the U.S. should have no problem issuing more H-1Bs.
 |
