Finally, Infosys open to outsider as CEO, but insiders may have edge

Written by P P Thimmaya | Bangalore | Updated: Apr 12 2014, 06:59am hrs
InfosysShibulal took over as the CEO in August 2011 and was expected to retire in March 2015 when he turned 60. Reuters
Infosys, Indias second largest IT services exporter, announced on Friday it has begun the search for a new chief executive officer to succeed SD Shibulal, who retires next year. The company announced the door open was open to an external candidate, a first for the IT major.

Shibulal took over as the CEO in August 2011 and was expected to retire in March 2015 when he turned 60. Fridays announcement would mean that Shibulal is unlikely to complete his tenure.

In a statement on Friday, Infosys said, The Nominations Committee of the companys Board of Directors has begun the search to select the successor to SD Shibulal, Chief Executive Officer and Managing Director. Shibulal has expressed his desire to retire as the CEO and MD of the company and as a member of the Board of Directors either on the date of the last board meeting before his superannuation January 9, 2015 or when his successor is ready to assume office, whichever date is earlier.

The nomination committee includes three of its board members: KV Kamath, Kiran Mazumdar-Shaw and R Seshasayee. Kamath will head the committee.

Talking to FE, TV Mohandas Pai, chairman, Manipal Global Education and former Infosys board member, said, It is a very good move and the timing is right. Hopefully Infosys will have a new CEO latest by December end.

Pai added that the new CEO will have enough time to plan things for the financial year 2015-16. For the first time, since its inception in 1981, Infosys will have a CEO who will not belong to the founders group.

The Nominations Committee will short list and evaluate an internal slate of candidates with the assistance of Development Dimensions International, a company specialising in corporate executive evaluations. The Board has also appointed Egon Zehnder, an executive search firm, to assist the Nominations Committee in identifying an external slate of candidates, the release said.

Among the potential CEO candidates from within are the two presidents of Infosys BG Srinivas and UB Pravin Rao. As things stand today, Srinivas has emerged as a strong candidate to take over as CEO. His experience in handling and meeting clients, besides running multi-billion-dollar business units within Infosys, will hold him in good stead. The $8-billion IT major will also prefer somebody who has a greater understanding of the markets compared to Pravin Rao, whose expertise largely lies in the ambit of delivery or back-office operations.

There are other business heads like Sanjay Jalona, Manish Tandon and Sandeep Dadlani who also stand a fair chance of becoming CEO. At one time, it was believed former Microsoft India chairman and current Infosys board member Ravi Venkatesan could take over from Shibulal. An industry observer said it would be difficult for an outsider to align with the companys culture and this would take a considerable amount of time, which Infosys cannot afford during these challenging times.

Second, the presence of NR Narayana Murthy within the company, with his larger-than-life image, could be a challenging factor for an outside CEO as the Infosys chairman is expected to remain till 2018. During an investor call with Bank of America-Merrill Lynch on February 19, Murthy had said that Infosys would not be changing its current strategy even with the new CEO taking over. That (strategy) will continue as we move forward and the new CEO will be in place by the time Shibulal is ready to leave, sometime in March 2015. I will be available for him to ensure that there is a proper transition, Murthy had said.

A section of the industry is convinced Infosys needs to appoint an outsider as the CEO so speed up its recovery with fresh ideas. This time there is a stronger possibility of an outsider taking the role, they said.

The potential CEO search could also see Infosys taking the bold step of appointing a non-Indian, preferably somebody from the US, to head the organisation. Murthy has in the past said that there is always a possibility of a foreigner heading Infosys, which would be very unlike its peers, Tata Consultancy Services and Wipro. Industry observers believe the entire process of CEO selection by Infosys is expected to be more rigorous this time unlike in the past, now that the company is going beyond the founder group to choose the CEO.

Shibulals tenure was marked by a considerable degree of instability within Infosys. The firm steadily lost its position as the pre-eminent leader of the Indian IT industry, necessitating the return of Murthy as executive chairman in June 2013 to help steady the ship. Murthys son Rohan Murty joined Infosys as the chairmans executive assistant. The period also marked the exits of several top-rung leaders, leaving an uncharacteristically thin leadership at Infosys.