Infosys Back on Road to Recovery

MYSORE, India: Infosys (NSYE:INFY, NSE:INFY) staged a massive show of leadership strength at its sprawling 337-acre campus, known as world’s largest training centre, apparently to send out a message that all is well at the erstwhile bellwether.

Infosys Press Conference 14 Jan 2014

Executive chairman N R Narayana Murthy, who was not seen participating in results conferences since his return to the company in June, on Friday led from the front during the Q3 results announcement, happily taking a host of questions and candidly answering them, often topping his answers with a bit of wit and humour to liven up the flavour.

So is he happy with the performance of the company? Murthy said, “I have been brought up to aspire for better and better things. Therefore, I don’t want to rest till I am happy. We want to achieve bigger things, pursue bigger aspirations.”

Murthy has always said that he wants to see Infosys growing faster than the industry. So when will we see your aspirations translating into your performance? At this stage, the company is more concerned about putting in place various initiatives. When completed, they will hopefully give benefits. “I would be less than honest if I were to give you specific date. But our goal is to get back to days when we were an industry leading company. We want to get back to those old days. But that depends on how well we execute the various initiatives that we have started.”

In the past seven months since Murthy’s return, the company has seen several high-profile exits, including those of two board members. Speculation has been rife that many more will quit following last weeks’ major organizational restructuring announcement that saw senior executives B G Srinivas and U B Pravin Rao being made presidents, and dissolving of its 30-member executive council within three months after its expansion.

Justifying the two-president structure and dismantling of the executive council, Murthy said two groups were formed — one to look at expanding the executive council and another to oversee organizational restructuring. “Organizational restructuring was an important initiative that took much longer and we all expected it. In the meantime, we got the report on expanding the executive council. So I said, like a man in a hurry, that the company wants to see some progress. I said let’s go ahead and expand the council. But when we got the report on forming two presidents, we realized that the new structure was such that they (each of the presidents) would have their own governance structures and the executive council would become superfluous. And we felt eliminating the council would not affect the future growth trajectory of the corporation.”

Asked whether the exodus of top-level employees worried him, Murthy said Infosys is the first Indian Company to start a leadership drive that started the process way back in 2000 in Mysore. “We realize the importance of developing a large pool of leaders. Every one of the senior people in the company participated in the training of the leaders. We have three tiers of leaders about six hundred or so. While it is sad to see some of the talented people leaving the company, we wish every Infosian the all the very best in their career. Some of them quit to pursue their passion, while some of them had ambitions that did not match with the company. We have several wonderful leaders. For example, look at the two presidents — one is in his early 50 while the other is in his late forties. Most of the people sitting at the dais are in their forties, some sub-forties. They people have shouldered bigger responsibilities in the company. We are very confident there are several potential leaders in the company. Finding new leaders is not my worry at all.”

Like a father of a marriageable girl strives to find a suitable groom from outside the local community, would he also look outward for hiring the next CEO? Murthy did not rule out the possibility of hiring the next CEO from outside, but he underlined that most people in the company would like to see either of the presidents to become the CEO after SD Shibulal’s retirement in 2015. “But this is not for us to decide, this is for the nominations committee to decide.”

In the December quarter, Infosys’ employee attrition rate stood at 18% — the highest among tier-1 software firms. It is also the highest for the Bangalore-based company in the past two years. Is the tech giant going to hire more people? Shibulal explained, “Recruitment is the reflection of the company’s performance. All the candidates we hired last year have joined and are undergoing training. We would be recruiting in Latin America and also in our local markets.”

Murthy was, however, quick to clarify that it is very important to remember that the recruitment numbers are not the only criterion to judge whether a company is doing good or not. “If we want to improve the productivity of people, then we need to ensure that the people perform much more this year compared to last year. Therefore, the number of the people a company recruits is not the only parameter that decide how the company is doing. There are several other factors that come to play such as markets and our ability to sell well.”

Elaborating on his the larger strategy for the company, Murthy said there was nothing wrong with Infosys 3.0. Historically Indian IT industry has received a significant share of its revenue from large outsourcing projects in business IT services and applications development among other.

The company wanted to get larger and larger share of the revenue from transformational projects that provides it better margins. “We had around 33 % revenue coming from that leg. Under the 3.0 strategy, the company continues to grow with a linear equation between revenue and number of people. Therefore, we will work towards products, platforms and solutions that will help us create a non-linear relationship between revenue and numbers. All these changes are meant to making the organization more robust. That will make sales more effective and ensure timely software delivery. All these measures will be help the organization do better cost optimization,” he added.

Like always the company was modest about giving guidance for the next year. Generally, the company has seen marginal improvement in the client’s confidence. But they are still reluctant to take large investment decisions. Shibulal said, “They are very much focused on cost and that has given us an opportunity to create solutions which will reduce their total cost of ownership using technology. That will give us an opportunity to grow. Our observation is that the budget will be flat from last year to this year, though we are seeing variations in the budget across various verticals. Guidance for next year is nil.”

Commenting on his son’s future plans, Murthy said: “Rohan is assisting me in my office and he is doing a brilliant job. I am grateful to him. What he wants to do it would be his decision given that he is 30-year-old. What position he will hold in Infosys that is not for me to decide. All these questions are completely speculative. Right now he is on a leave from Harvard, my understanding is that he will go back to Harvard. But who knows he might change his mind and decide to do something in India itself. So I cannot commit what he will do in his future. That’s not fair.”

Some members of the chairman’s office are being given different roles. Does that mean the chairman’s office will cease to exist? The chairman’s office has three-year tenure. Though some members of chairman’s office have been given additional responsibilities, chairman’s office will not cease to exit. “It will happen only after I leave,” summed up Murthy.

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