Infy repositions itself

Jun 13 2014, 01:13 IST
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SummaryFirst outsider, non-services lineage to help in future

NR Narayana Murthy’s second watch at Infosys as executive chairman was never expected to make a big difference to the fortunes of the tech major which was quickly losing momentum. Murthy’s return, in June last year, to the company he co-founded was aimed more at rejuvenating the organisation and boosting employee morale at a time when the company was losing top executives. At best, it was a stop-gap arrangement.

Whether the many top-level exits over the past one year have caused major damage to the firm’s business isn’t clear, but the gaps in the second rung of management do give Vishal Sikka, the MD & CEO designate, a chance to pick his team. Indeed, the 47-year-old Sikka, an ex-SAP hand, will have a free rein without any of the founders—Murthy, SD Shibulal and Kris Gopalakrishnan. Given his lack of experience in the services space, Sikka’s appointment is being viewed with some degree of concern; after all, Infosys is primarily a services provider. However, he will surely benefit from the presence of Pravin Rao, an old Infy hand, as his chief operating officer. Fresh blood is definitely what Infosys needs most right now and the combination of Sikka’s strengths in the products space and Rao’s in the services space should work to the company’s advantage. Moreover, the new CEO comes with enough client relationships to command the confidence of his juniors and he should be able to leverage these to take the business forward. Of course, he has his work cut out for him and if he is to put Infosys back on track and match the performance of peers, he needs to quickly fill up the senior level vacancies. Moreover, analysts point out that although large deal wins at Infosys have seen an uptick in recent quarters, the company has given up some clout in the marketplace which could be hard to win back. More worrying, employee attrition has jumped 2.5% in the last four quarters despite two wage hikes. Murthy, of course, did attempt to put the company back on course, initiating a major cost-control initiative—better employee utilisation and more offshore work—that resulted in a margin expansion of 200 basis points over four quarters. EBIT margins, nevertheless, remain well below the peak levels of 29%-plus and it will be left to Sikka to make Infosys more profitable. Murthy’s efforts to improve the productivity of the sales team too paid off

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