Infy outsources chief, reboots with ex-SAP director Sikka

Written by fe Bureau | Bangalore | Updated: Jun 13 2014, 09:43am hrs
InfyThe 47-year-old Sikka, a technology whiz, will take charge at the Rs 50,133-crore software firm on August 1 with UB Pravin Rao as his chief operating officer.
The outsider is in. Vishal Sikka, former SAP executive board member, will be Infosys first non-founder CEO, the company said in an announcement on Thursday. The 47-year-old Sikka, a technology whiz, will take charge at the Rs 50,133-crore software firm on August 1 with UB Pravin Rao as his chief operating officer. In a complete overhaul of the top management, all the founders of Infosys will give up their positions in the company after 33 years. Executive chairman NR Narayana Murthy, who returned to the firm in June last year to try and arrest the slide in the companys performance, will be appointed chairman emeritus. Incumbent CEO and MD SD Shibulal will demit office and step down from the board on July 31.

A US citizen and likely to be working out of California, Sikka has not indicated whether there would be any major change in the way Infosys pursues business. There is no change in strategy and my message will be to work with all the leaders, learn the business and work closer with the customers, the MD and CEO designate said at a press conference. Emphasising the learning quotient as a key requirement for any leader, he promised to restore to employees a sense of pride and confidence.

While some analysts have expressed concern at Sikka being more of a products person and his lack of experience at running a services business, others have pointed out that the elevation of president and director Rao to the position of COO should help forge a strong combination. Sikkas strengths in the field of technology, some believe, could help Infosys become a thought leader.

We view the new CEO announcement positively as it resolves the longer-term leadership issue. Further, with the strong technological background of Mr Sikka and services background of Mr Rao, we believe Infosys could be uniquely positioned for its next leg of growth, Barclays analyst Bhuvnesh Singh wrote in a report.

Commenting on the appointment, Partha Iyengar, country manager (research), Gartner India, said, The news of Sikkas announcement is extremely important for Infosys since it ends the uncertainty that was the main enemy of Infosys. The new CEO will have to move very quickly to first calm the three key stakeholders, employees, customers and the investors, in that order.

Sikkas credentials clearly impressed the nominations committee; on Thursday Murthy too applauded his academic qualifications. I am the son of a teacher and in our family the highest honour is reserved for scholars. If theres only one chair, that chair is first given to a scholar. Therefore Vishal is something special to me. He is a PhD in computer science from Stanford. Getting such a degree is perhaps the highest recognition one can get as an intellectual, Murthy said at the conference. Incidentally, Sikkas mother too is a teacher.

Sikka, whose appointment as CEO is effective August 1, will have a tenure of five years. His compensation details, Infosys said, will be declared at a later date.

When the board asked me to become the next leader of Infosys, it was a matter of tremendous pride and honour to accept that. Having lived my entire adult life in the world of software, the unique opportunity that I see is the world around us is becoming reshaped and completely transformed by software, digital technology, computing, Sikka said.

Murthy and S Gopalakrishnan will continue to serve on the companys board till October 10 as non-executive chairman and vice-chairman, respectively, to ensure a smooth transition, after which Murthy will assume the title of chairman emeritus.

Murthy said the executive chairmans office will be dissolved with effect from Saturday and, significantly, Murthys son Rohan, who was assisting his father in his second innings, will also exit the company on the same day. Murthy said the title of chairman emeritus is just a recognition of the role he has played for the company and will hold no executive powers.

The countrys second largest software services exporter will also effect a host of changes in its leadership structure. Lead independent director KV Kamath will once again become non-executive chairman on October 11. Besides, whole-time director Srinath Batni will step down from the board on July 31. Infosys will also promote 12 leaders as executive vice-presidents with additional responsibilities.

The task before Sikka is quite onerous as growth at Infosys in the last two years has slipped. From a revenue growth rate of 26% in FY11 it had slipped to 5.8% in FY13. Though for FY14 it grew by 11.5%, its projected revenue guidance for FY15 stands at 7-9%. The changing landscape in the industry with companies having to move from a services mindset to the realm of technology also represents a significant challenge to a company like Infosys. Said Sikka, The distinction between product and services is rapidly blurring and we are also seeing the transformation in the clients mindset.

This will be a completely new beginning for Infosys as it restarts with a clean slate with a free hand to the incoming leadership and once again attempt to define its leadership in the new kind of technology play. Jaideep Mehta, vice-president and general manager, IDC South Asia, said, To further accelerate the transformation process, and to continue its journey on to a higher growth trajectory, Infosys needed a heavyweight external CEO and he brings the necessary gravitas to the role.