State of the market Sobha Meera

1. State of the market Sobha Meera

2. Corporate IT spending continues to be sluggish in the immediate term – even though budgets exist or market forecasts have indicated otherwise • Industry analysts have forecasted slower short-term growth forecast for the IT Services industry • 11% in FY’01 v/s 5-year CAGR of 12% (IDC, Jul 01) • 12.5% in FY’01 v/s 5-year CAGR of 15.6% (Gartner, Jul 01) • Recent CIO polls show greater than expected impact to IT budgets • 6% growth in IT budgets for next 12 months, down sharply from 19% in Nov’ 00 • 52.7% CIO’s indicate that the slowdown will have a negative impact on IT spending (CIO Magazine Tech poll, Jun 01) • Recent predictions and forecasts have been proven wrong in the market • The European market, believed less affected by any US downturn, is seeing downward adjustment of growth estimates • Various security software and services firms missing estimates in June quarter, contrary to most survey indications • There is visible demand or move towards services delivered online, despite doomsday forecasts for the ASP model

3. Corporate IT spending continues to be sluggish in the immediate term – even though budgets exist or market forecasts have indicated otherwise • The economic environment and resulting negative sentiment has driven actual spending down, well below IT budgets planned earlier • Significant portion (over 50%) of IT spending is discretionary • New technology investment decisions are being put on hold • Thus, bottom line targets or cost reduction strategies are impacting IT spending

4. The sluggishness in the market presents both a challenge and an opportunity for Infosys • Cost consciousness making the global delivery model more attractive – clients more open to sourcing a range of consulting, IT and IT-enabled services from global or remote sites • Shakeout and consolidation of Consulting & IT services firms – Clients look to financial stability, quality of management and brand when selecting vendors • The worst is not yet over in the worst-hit telecom sector – we continue to de-risk across multiple industry sectors • Despite increased interest, client readiness is low and decisions are on hold for strategic outsourcing – inked deals also having slower ramp-up and missing planned project starts

5. We are focusing on our strengths to convert this market environment to an opportunity for Infosys to build a position of strength going forward • Cost consciousness of IT buyers allows Infosys to penetrate areas like Consulting & SI • The flight to quality andthe Infosys brand continue to drive increased interest our way in areas like strategic outsourcing Brand leverage for Infosys High Competition – High Pricing pressure – High Decision cycle - Medium Competition – Medium Pricing pressure – High Decision cycle - High Strategic Outsourcing Tactical Outsourcing Consulting/SI Competition – High Pricing pressure – High Decision cycle - Low Opportunity size for Infosys Low High Low Source: Infosys Analysis

6. The Infosys value proposition continues to be relevant in these market conditions

7. Multiple initiatives mark Infosys’ response to the challenges and opportunities in today’s market environment • Broader range of services for existing clients and to drive new business growth • Recent high-end consulting engagements in the areas of Supply Chain Optimization, post-merger integration, IT strategy & planning • Increasing interest in "process consulting" – based on our internal process & quality capabilities • Growing share of package implementation and solution integration opportunities • Creating a competitive edge in this space using the global delivery model in today’s market, and also improving or sustaining our margins with these services • Deeper client relationship through demonstrated relationship value and long-term partnering strategy to help clients manage their business and IT challenges • Client information sessions (e.g. technology trends, project management processes, etc.) • Best practices sharing sessions (e.g. annual client meet, facilitated client information exchange) • Higher top management exchanges including (across functions like HR, Leadership, Quality, etc.)

8. Multiple initiatives mark Infosys’ response to the challenges and opportunities in today’s market environment • Mid-market initiative – Workadia • Infosys plans to tapping the high growth hosted applications and web services market through Workadia – the recently announced JV with American Express and TIBCO • Infosys will build Workadia’s hosted environment and also provide integration services to Workadia clients • Focused sales initiative to provide consulting services leading to IT services in this market • Building and leveraging the Infosys brand to compete for large or strategic outsourcing opportunities • Competing with consulting & SI majors based on Infosys high value – reasonable cost equation • Building client readiness among “new” outsourcing clients – through advisory consulting to jointly evolve their outsourcing strategy including organizational change management support

9. Multiple initiatives mark Infosys’ response to the challenges and opportunities in today’s market environment • Pursue parallel geography and segment specific penetration and growth strategies • Expanding into newer geographies and intensify focus on specific geographies • Specific offerings for high growth opportunity segments e. g: Healthcare (HIPAA), Straight through processing, Germany Banks (ISIN), etc. • Adapter Competency Center approach – to demonstrate better value in the emerging enterprise integration market opportunity (starting with the TIBCO Adapter Factory, jointly with TIBCO)

10. The current environment has validated the growth strategy we chose to pursue – positioning us well for the long term • The flight to quality continues to drive business our way • The inherent stability of our model vis-à-vis competition means that our staying power is much higher in difficult times • Expanding into higher value services • Continuing to invest in & nurturing the brand through multiple initiatives • Client relationship programs • Industry analyst relationship programs – traction already yielding rich dividends • Focused brand building initiatives • Extending the brand to leverage our end to end services capability • Entry into new remote or global service delivery opportunities such as BPO and IT Outsourcing

11. Thank You