Intangible assets score sheet
We caution investors that this data is provided only as additional information to them. We are not responsible for any direct, indirect or consequential losses suffered by any person using this data.
From the 1840s to the early 1990s, a corporate’s value was mainly driven by its tangible assets – values presented in the corporate Balance Sheet. The managements of companies valued these resources and linked all their performance goals and matrices to these assets – Return on Investment and capital turnover ratio. The market capitalization of companies also followed the value of tangible assets shown in the Balance Sheet with the difference seldom being above 25%. In the latter half of the 1990s, the relationship between market value and tangible asset value changed dramatically. By early 2000, the book value of the assets represented less than 15% of the total market value. In short, intangible assets are the key drivers of market value in this new economy.
A knowledge-intensive company leverages know-how, innovation and reputation to achieve success in the marketplace. Hence, these attributes should be measured and improved upon year after year to ensure continual success. Managing a knowledge organization necessitates a focus on the critical issues of organizational adaptation, survival, and competence in the face of ever-increasing, discontinuous environmental change. The profitability of a knowledge firm depends on its ability to leverage the learnability of its professionals, and to enhance the reusability of their knowledge and expertise. The intangible assets of a company include its brand, its ability to attract, develop and nurture a cadre of competent professionals, and its ability to attract and retain marquee clients.
Intangible assets
The intangible assets of a company can be classified into four major categories : human resources, intellectual property assets, internal assets and external assets.
Human resources
Human resources represent the collective expertise, innovation, leadership, entrepreneurship and managerial skills of the employees of an organization.
Intellectual property assets
Intellectual property assets include know-how, copyrights, patents, products and tools that are owned by a corporation. These assets are valued based on their commercial potential. A corporation can derive its revenues from licensing these assets to outside users.
Internal assets
Internal assets are systems, technologies, methodologies, processes and tools that are specific to an organization. These assets give the organization a unique advantage over its competitors in the marketplace. These assets are not licensed to outsiders. Examples of internal assets include methodologies for assessing risk, methodologies for managing projects, risk policies and communication systems.
External assets
External assets are market-related intangibles that enhance the fitness of an organization for succeeding in the marketplace. Examples are customer loyalty (reflected by the repeat business of the Company) and brand value.
The score sheet
We published models for valuing two of our most important intangible assets – human resources and the ‘Infosys’ brand. This score sheet is broadly adopted from the intangible asset score sheet provided in the book titled, The New Organizational Wealth, written by Dr. Karl-Erik Sveiby and published by Berrett-Koehler Publishers Inc., San Francisco. We believe such representation of intangible assets provides a tool to our investors for evaluating our market-worthiness.
Clients
The growth in revenue is 25.8% this year, compared to 3% in the previous year (in U.S. dollar). Our most valuable intangible asset is our client base. Marquee clients or image-enhancing clients contributed 49.8% of revenues during the year. They gave stability to our revenues and also reduced our marketing costs.
The high percentage of revenues 98.0% from repeat orders during the current year is an indication of the satisfaction and loyalty of our clients. The largest client contributed 4.7% to our revenue, compared to 4.6% during the previous year. The top 5 and 10 clients contributed around 15.4% and 25.7% to our revenue respectively, compared to 16.4% and 26.2% respectively, during the previous year. Our strategy is to increase our client base and, thereby, reduce the risk of depending on a few large clients. During the year, we added 139 new clients compared to 141 in the previous year. We derived revenue from customers located in 71 countries against 66 countries in the previous year. Sales per client grew by around 16.6 % from US$ 8.35 million in the previous year to US$ 9.74 million this year. Days Sales Outstanding (DSO) was 63 days this year compared to 59 days in the previous year.
Organization
During the current year, we invested around 2.57% of the value-added (2.34% of revenues) in technology infrastructure, and around 2.13% of the value-added (1.94% of revenues) on R&D activities.
A young, fast-growing organization requires efficiency in the area of support services. The average age of support employees is 31.8 years, as against the previous year’s average age of 30.4 years. The sales per support staff has increased during the year compared to the previous year and the proportion of support staff to the total organizational staff, has marginally decreased over the previous year.
People
We are in a people-oriented business. We added 43,120 employees this year on gross basis (net 17,024) from 27,639 (net 8,946) in the previous year. We added 15,883 laterals this year against 4,895 in the previous year. The education index of employees has gone up substantially to 3,43,407 from 2,96,586. This reflects the quality of our employees. Our employee strength comprises people from 88 nationalities as at March 31, 2011. The average age of employees as at March 31, 2011 was 27. Attrition was 17.0% for this year compared to 13.4% in the previous year (excluding subsidiaries).
Notes
- Marquee or image-enhancing clients are those who enhance the Company’s market-worthiness, typically, Fortune 500 clients. They are often reference clients for us.
- Sales per client is calculated by dividing total revenue by the total number of clients.
- Repeat business revenue is the revenue during the current year from those clients who contributed to our revenue during the previous year too.
- Value-added statement is the revenue less payment to all outside resources. The statement is provided in the Value-added statement section of this document.
- Technology investment includes all investments in hardware and software, while total investment in the organization is the investment in our fixed assets.
- The average proportion of support staff is the average number of support staff to average total staff strength.
- Sales per support staff is our revenue divided by the average number of support staff (support staff excludes technical support staff)
- The education index is shown as at the year end, with primary education calculated as 1, secondary education as 2 and tertiary education as 3.
External structure – our clients
2011 |
2010 |
|
Growth / renewal |
||
Revenue growth (%) |
||
In U.S. dollar terms |
26 |
3 |
In rupee terms |
21 |
5 |
Exports / total revenue (%) |
98 |
99 |
Clients |
||
Total |
620 |
575 |
Added during the year |
139 |
141 |
Marquee clients |
||
Total |
138 |
126 |
Added during the year |
22 |
19 |
Revenue contribution (%) |
50 |
50 |
Revenue derived – number of countries |
71 |
66 |
Efficiency |
||
Sales / Client |
||
US$ million |
9.74 |
8.35 |
|
44.36 |
39.55 |
Sales and marketing expenses / revenue (%) |
5.50 |
5.21 |
DSO (days) |
63 |
59 |
Provision for debts / revenue (%) |
0.01 |
– |
Stability |
||
Repeat business (%) |
98.0 |
97.3 |
No. of clients accounting > 5% of revenue |
– |
– |
Client concentration |
||
Top client (%) |
4.7 |
4.6 |
Top five clients (%) |
15.4 |
16.4 |
Top ten clients (%) |
25.7 |
26.2 |
Client distribution |
||
1 million dollar + |
366 |
338 |
5 million dollar + |
187 |
159 |
10 million dollar + |
126 |
97 |
20 million dollar + |
73 |
59 |
30 million dollar + |
53 |
41 |
40 million dollar + |
41 |
33 |
50 million dollar + |
28 |
26 |
60 million dollar + |
24 |
16 |
70 million dollar + |
19 |
12 |
80 million dollar + |
15 |
10 |
90 million dollar + |
11 |
8 |
100 million dollar + |
11 |
6 |
200 million dollar + |
2 |
1 |
crore
Internal structure – our organization
2011 |
2010 |
|
Growth / renewal |
||
R&D |
||
R&D / total revenue (%) |
1.94 |
1.93 |
R&D / value-added (%) |
2.13 |
2.09 |
Technology investment |
||
Investment / revenue (%) |
2.33 |
2.37 |
Investment / value-added (%) |
2.56 |
2.58 |
Total investment |
||
Total investment / total revenue (%) |
4.73 |
2.89 |
Total investment / value-added (%) |
5.20 |
3.14 |
Efficiency |
||
Sales per support staff |
||
US$ million |
0.92 |
0.84 |
|
4.20 |
4.00 |
General and administrative expenses / revenue (%) |
7.17 |
7.16 |
Average proportion of support staff (%) |
5.35 |
5.36 |
Stability |
||
Average age of support staff (years) |
31.8 |
30.4 |
Competence – our people
2011 |
2010 |
|
Growth / renewal |
||
Total employees added during the year |
1,30,820 |
1,13,796 |
Gross |
43,120 |
27,639 |
Net |
17,024 |
8,946 |
Laterals added |
15,883 |
4,895 |
Staff education index |
3,43,407 |
2,96,586 |
Employees – number of nationalities |
88 |
83 |
Gender classification (%) |
||
Male |
66.2 |
66.5 |
Female |
33.8 |
33.5 |
Number of non-Indian national employees |
7,805 |
6,064 |
Efficiency |
||
Value-added / employee ( |
||
Software professionals |
0.22 |
0.21 |
Total employees |
0.20 |
0.20 |
Value-added / employee (US$ million) |
||
Software professionals |
0.05 |
0.04 |
Total employees |
0.05 |
0.04 |
Stability |
||
Average age of employees (years) |
27 |
27 |
Attrition – excluding subsidiaries (%) |
17.0 |
13.4 |
Attrition – excluding involuntary separation (%) |
15.5 |
10.4 |
Note : The above figures are based on IFRS financial statements.