As we at Everest Group study issues in service industry growth, it’s clear that Infosys has effectively doubled its growth rate under CEO Vishal Sikka. In fact, Infosys has gone from a six percent growth rate to 12 percent, putting Infosys back into the leaders quadrant in terms of growth. Today it’s one of the faster growing service providers.
What has not been recognized about this growth is that when a firm of Infosys’ size doubles its growth rates, it contributes to the slowing of other firms’ growth. Basically, we believe Infosys has taken share from the rest of the industry, and we can attribute this as a cause of the slowdown in some of the star performers in the industry.
How is Infosys taking so much share? The firm has become a price challenger. As I mentioned in a prior blog post, the firm addressed its issue of high price and is now competitively priced and often the low-price provider. This has allowed Infosys to increase its growth rate and take share from others. So the two firms that historically enjoyed the benefits of everyday low prices – TCS and Cognizant – now find Infosys often undercutting them in the marketplace.
So far, we have not seen TCS, Cognizant or other firms really respond and retaliate to Infosys taking share. At one level, this has been good for the industry because it hasn’t created a price war. But you have to ask yourself how long other providers can allow Infosys to steal share from them before they respond. And if they do respond, what will that do to industry pricing?