Infosys decentralisation gives more control to vertical heads

Infosys, India?s second-largest IT company, is on a major decentralisation drive that will give greater autonomy to its key business verticals, making them more agile and accountable.

Internal streamlining will see vertical heads playing the role of a CEO with more control over their daily financial operations. Infosys has four main verticals that manage manufacturing, banking, insurance and financial services (BFSI), retail and life sciences, energy, utilities, communications and services.

According to sources FE spoke to, the changes will give more flexibility to the verticals with the business heads having better operational freedom. The Bangalore-headquartered firm will start implementing the changes from April 1.

According to multiple sources, different departments have been given some level of operational freedom in the recent past, especially in areas such as budget allocations, salary hikes and promotions. Typically, the corporate planning division manages budgets and other allocations to different business units. The variable salary component and promotion slots are also decided at the corporate level and the units adhere to the same.

In response to an email query, Infosys spokesperson said, ?We do not comment on rumours and speculation.?

Sources point out that the business units will now be able to decide on the variable pay component and promotions within their team. Line managers have already communicated the upcoming changes in structure to their team members in an informal manner. Essentially, the corporate planning team would still set the overall targets, but units will now have the freedom to decide on the road map to achieve it.

According Infosys sources, the move may also be a response to units attributing under-performance or inability to meet targets to non-availability of budgets, uncompromising stand on margins and slow decision making. Experts point out that the decentralisation model would enable business heads to make quick decisions and accelerate the company?s growth engines.

The current multi-layered structure in Infosys is slowing the decision-making process leading to losing out on contracts to increasing competition.

With these changes, verticals can now have the complete freedom on deciding project margins, which was earlier limited to certain projects.

Traditionally Infosys, which prefers not to sacrifice margins to gain higher volumes, has enjoyed better operating margins compared with other top-tier Indian IT vendors.

But over the last few years, close competitor TCS has consistently managed to deliver better margin performance, narrowing the gap with Infosys. In Q2, TCS had overtaken Infosys on the operating margin front.During the October-December stretch TCS widened its lead, outpacing Infosys for the second time in a row.

?Meeting with Infosys management indicated that the firm is undergoing a major cultural shift with significant changes in its go-to-market strategy, HR policies, business planning procedures among others. On balance, this implies a pick-up in revenue trajectory at expense of some margins at least in the immediate term. This should decidedly reverse the perception that Infosys is losing market share,? said CLSA, a brokerage house.

The over $7-billion software services company has seen a management transformation over the last two years, including a reshuffle of its top executives.

Infosys in January announced leadership role changes for two of its top officials ? Nandita Gurjar and Srikantan Moorthy. Gurjar stepped aside as head of human resources to oversee the company?s education and research department. Moorthy took on her portfolio.

In February last year, the Bangalore-based firm announced role changes for BG Srinivas and Ashok Vemuri. Srinivas moved from the manufacturing and engineering business to head the company?s financial services and insurance vertical, while Vemuri took on Srinivas? portfolio.

Last year, the then chief financial officer V Balakrishnan stepped down from his role to shoulder responsibilities in crucial product platforms, BPO and India business space.

Rajiv Bansal, vice-president (finance), took over as the new CFO from November.

Recently the combined entity of Tech Mahindra and Mahindra Satyam announced plans of forming a team of 30-40 ?mini CEOs? who will head various verticals across the world. The Mumbai-based software exporter said the new heads will be responsible for their verticals and geographies and will manage their own profit and loss (P&L) account.