This Article is From Jul 22, 2015

What Infy's Doing Right - by ex-CFO Mohandas Pai

Infosys has been disappointing in its performance for the last four years. Everybody expected a consistent performance from Infosys and this virtue was lacking. As a market leader, it's been the first to face changes in the marketplace all along its history, and lead from the front. But in the recent past it seemed to lack direction and unable to make the change. 

Infosys is now under the leadership of  Dr Vishal Sikka - a truly global manager, who comes from the product and market side, and who has a very clear vision of where the company should go, both in terms of business offerings and strategy. The CEO has articulated an ambitious target of $20 billion revenues by 2020. This obviously calls for the organization to morph into a very different organization from what it is today, and to take full advantage of the digital revolution - using techniques of automation and artificial intelligence  as the core of its service offering. But Infosys is clearly ahead of other Indian IT players in facing a changed market and with a new global leadership. Others still need to respond adequately to this change. 

The first quarter has been a good one, the market seems to be have re-discovered Infosys. The volume growth has been very encouraging and obviously the results have beaten the estimates of analysts. 

There are multiple factors for the big new results. Obviously, the hard work put in by Narayana Murthy when he came back is among those. He restructured the organization, made it much more focused, helped bring in greater energy and faster decision making, found a new CEO  and left. There is also the new direction set by the new CEO, as well as a much more energized, focused and passionate group of Infoscians. All this together has led to these results. 

It's important to focus on getting back the old magic of consistent performance, growth and focus on excellence. Customers now prefer to re-orient their IT spending, they are impatient, they want to use apps, etc. The power is moving from the CTO (Chief Technology Officer) to the CMO (Chief Marketing Officer) and the Sales side. This implies that more and more projects are going to be in the hands of people who are leading the Sales effort who want quick responses, more innovation and easier process: and because of the lesser challenge of legacy tech, availability of the cloud, and lower cost of hardware, the CTO's office has become that much less important. Selling for IT Services companies has changed. 

There is no reason why Infosys cannot achieve an industry-leading growth rate, as promised by Vishal Sikka. It requires strategic planning, marketing and sales excellence, quicker decision-making, a focused and passionate leadership, innovation, and delivery excellence. You must not forget that the employees of Infosys are the best-in-class of their generation, and at par or better than any leading company worldwide. The strategy in the recent past was not very clear, the leadership was weak and  results and execution suffered. But all these issues appear to be behind the company.

Infosys wants to become a company with $20 billion revenues and 30 per cent ebidta margins by 2020. The target is certainly ambitious. The quality of revenues is what is very important. What is required is greater productivity, faster moves in the marketplace and higher degree of innovative technology - and all this requires greater focus from the management on all fronts.

The important thing to note is that there is a target, the target is ambitious and the company appears to be confident of achieving this target. 

Many start-ups are coming forth with innovative solutions and business models, which could pose challenges to larger companies like Infosys. But these large companies cater to very large enterprises - who by their own nature are slow to change because of the huge risks involved. It's not easy to change a very, very large enterprise's business model, and very few of the start-ups really grow to a size where they can threaten the dominance of a big player. In IT Services, to challenge the dominance of Accenture and IBM, the Indian IT industry took 15 years, and because of the consistent growth of the Indian IT industry, the top player, IBM Global Services, has not done well in the last five years. HP Services, which is very large, has not been doing well too. Accenture has changed its model and is doing very well. Start-ups will obviously leverage technology using innovation and capital; and if large enterprises are agile, respond to the marketplace and obviously do well, there is a great chance of being competitive and growing. 

A lot of people from the senior management quit Infosys in the last few years. Some said they were upset that an outsider was brought in for the CEO position. 

I think the company's belated decision to get a Next-Generation leader is fully justified. That it got a leader from outside is more a function of the fact that many senior and younger people left for various reasons. But on a whole, it is a positive development. The real impact of having an outsider come in and lead. We must wait a little bit more before victory is declared. 

(Mohandas Pai was the CFO and then the head of HR at Infosys. He is now Chairman, Aarin Capital Partners.)

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