Sales management principles and practices

Infosys

In light of the U.S. recession, there remain three key ways for Infosys to build U.S. sales growth. They can increase sales to existing customers, they can move into new U.S. markets and they can move more aggressively into international markets.

Infosys currently earns 90% of its revenues from existing clients. This indicates a historical marketing strategy focused on inside sales, rather than new client acquisition. The company's rapid growth indicates a competency in this area. It is likely, however, that other firms have cut into Infosys' business. This is to be expected. The solution, therefore, is for Infosys to develop new applications that its existing customers want, but are getting from somewhere else.

This requires a wholesale change at the company. Coding is relatively simple compared with wholesale software design. Infosys does have, however, some of the latter as evidenced by their projects for Nordstrom, Cisco and Nestle. The marketing shift needs to be product-oriented. Infosys must trade on its established reputation for quality when dealing with existing clients, but must focus on the newer, higher margin solutions rather than cheap code. The company has long succeeded on its value proposition and should continue to leverage the cost advantages of being in India and having the ability to outsource coding to lower-cost nations. Infosys needs to be committed to this change from the top down, because it represents a shift in the mindset of the company from a low cost provider to a differentiated provider.

The second means by which Infosys can increase sales is to move into U.S. markets. They have succeeded without focus on the "old economy" industries, but there is substantial work available as those businesses increase their degree of computerization. For example, at this time the U.S. government has passed a new law with respect to health care information, to be enacted in 2003, known as HIPAA. This law is the first step towards the digitalization of health care records and soon health care providers will need complex information management systems. The ability to identify potential new, large markets within the old economy can help drive new business even in the midst of a recession.

The third means by which Infosys can increase sales is to diversify their markets to better include Europe and Asia. The English-speaking staff gave Infosys a competitive advantage in the U.S., but this does not translate to these markets. However, if the company is able to hire sales representatives who speak languages such as Japanese, Korean or German they might be better positioned to increase orders in those countries.

2. The decline of the software industry is overstated. If anything the software industry is expanding. The nature of the industry, however, is shifting. The types of work that Infosys did to build itself in the 1980s and 1990s are beginning to dry up as firms have now implemented their information systems and software. This means that the first step for Infosys is to examine the market for software going forward to look for opportunities.

An environmental scanning tool such as PEST can be used in order to help the firm determine the trends. Given that the company is in the business of producing customized programming, the product part of the marketing mix is only determined in consultation with the customer. What this has meant traditionally is that the customer comes to Infosys, rather than the other way around. This has resulted in 90% of sales coming from existing customers. Infosys needs to adjust is strategic marketing management to bring in more customers, with more diverse needs.

The sales force must then be oriented towards bringing in new customers. They must be motivated to seek out new opportunities for the programmers outside of the existing customer base. This will mean a shift in emphasis in the compensation program to new business from simple sales volume. Dedicated new sales people may be required. There will always be new opportunities from existing clients as they upgrade software or systems. However, the existing sales staff can leverage their relationships to bring in this business. New staff can be oriented towards new customers. The recession matters little -- companies haven't stopped doing business. The reason firms with deep pockets survive economic downturns better is because they are able to increase marketing spending (by bringing in new talent, for example) to take advantage of cutbacks that other firms are making in marketing (Quelch, 2008).

3. I do not think that Infosys' "holistic" compensation system is an appropriate means of motivation for sales people. That compensation system is designed for software engineers and other programmers. If you consider the hierarchy of human needs, sales people are driven by two particular types of needs -- one is money (status) and the other is achievement. The emotional aspect is intended to meet social needs, but the majority of sales people are individualists, as evidenced by their being drawn into a field where individual achievement is paramount. The average sales person is not attracted by jobs that meet their social needs -- that is something they can get outside of work. Programmers, conversely, are stereotyped as introverted people, for whom the social aspect of a job may actually be a valuable benefit.

Learning is another aspect of the motivation system that is inappropriate for sales people. Programmers have an aptitude for learning and probably enjoy it, and they have the high level of education to show for it. Sales people are less motivated by learning, unless the learning helps them sell more. Unlike with programmers, learning is less directly related to the job of a sales person.

This leaves the financial rewards system. At Infosys, this is said to "grow and erode" with the industry. Sales people understand if they make less when they sell less, but if commissions decrease during tough times, Infosys will lose good sales people. Infosys needs to maintain their sales commission rates going forward in order to continue to motivate their sales staff.

There is nothing in the existing motivation system to address the sales people's need for achievement. Non-financial rewards must be in place to recognize the achievements of sales people. This is particularly important in light of the added challenge they now face of opening up new markets for the company.

4. At present, Infosys has a complicated sales organizational structure with product-based units and geographic "practice" units. With a product-based unit, the sales staff can focus on maximizing revenue for a specific product type. As Infosys moves from a one-product environment to a multi-product environment, the company will benefit more from having the different strategic business units. However, the downfall of this type of system has to this point been the overwhelming focus on the U.S. market. As the sales staff builds expertise in the U.S. market, they tend to ignore the potential in other markets.

The geographic units (practice units) have the benefit of focusing sales people on specific geographic markets. These units, however, will force the sales people to have expertise in all of the product offerings. This is becoming increasing different as Infosys expands its product line.