Infy's Leadership Woes:Time for a Checkup!

Infosys of today is no longer the same small, nimble-footed competitor which it used to be a decade ago or earlier and whom rivals would fear. Or, to be fair to Infosys, it might just be a temporary blip in an organization which has been hailed for its impeccable credibility, transparency and global standards of corporate governance not just in India but globally.

Things have changed so dramatically at Infosys, India’s second largest software exporter that even its staunch rivals would find it hard to believe. Till a quarter ago, even though its results fell short of the street’s expectations, most market analysts maintained positive stance on the technology bellwether’s stock, hoping for a turnaround in the forthcoming quarter. However, that was not to be as the fourth quarter result of FY 2010-11 shows. But what is more disturbing is the exodus of two top-level executives: Mohandas Pai, a veteran of 17 years who was touted as its chief firefighter and speculated to be the first non-founder to take the reins of the Bangalore-headquartered firm anytime soon and K Dinesh, one of the co-founders of the company. 

Though later in a statement the IT biggie clarified that Dinesh, who will retire by rotation at the company's annual general meeting (AGM) to be held sometime in the coming June, chose not to seek re-appointment, this does not veil the vexed issue of ongoing attrition at the tech giant, attributed largely to the lingering management reorganization (perhaps the former is the fallout of the latter), which led many senior executives to seek better opportunities outside after failing to get larger role in the big organization. Though Wipro, Infy’s cross-town neighbor, too is not better off on this front, as it too has been struggling with similar issues for some time and recently effected an ambitious management overhaul which saw the ouster of its joint CEOs and replaced that with a new CEO structure besides engineering other changes.  

Both these firms are now finding it hard to compete with smaller rivals like HCL Tech (which has just declared its March’11 quarter results that comfortably beat analysts’ expectations) and Cognizant, as well as the grand daddy of Indian IT, TCS (you may find the following story interesting: http://businessviewsreviews.blogspot.com/2011/01/stories-abound-about-how-cognizant-is.html). 

Expectedly, brokerages, particularly foreign ones, have been quick to downgrade Infosys stock. CLSA, which has downgraded the IT major’s stock to outperform from buy citing concern that the ‘protracted exercise (organizational overhaul) could weigh on company performance for another quarter or two.’ Credit Suisse, another leading brokerages, has downgraded Infosys stock to neutral from outperform, on the concerns over a weak fourth-quarter revenue growth and lower-than-expected margins.

Notwithstanding a slew of downgrades, no one is bearish on Infy for the moment. But then the fact is that it is ageing. But then you ask, so is TCS. That leads us to another issue: TCS is still run by the group patriarch, the maverick Ratan Tata, where as in case of Infosys, it looks like all the co-founders are in a hurry to call it a day, deserting the company at a crucial juncture when it needs their services more than ever. Even in case of Wipro, despite the recent CEO shake-out, the company has not elicited strong reactions from the street as the patriarch Azim Premji remains at the helm of the country’s third largest IT exporter. Also, the Indian IT giants are smaller compared to global peers like IBM and Microsoft. So, all the concerns over ageing and thus decline in growth appear unfounded.

What Infosys needs are entrepreneurs. Though organizational restructuring would take time to fructify, there is a need for the co-founders to be around, acting like a beckon, as they have been for all these years, for the new generation of managers at the helm of the company’s affairs. 

Maybe it sounds like we’re a bit more demanding on the co-founders. Probably these are the challenging times Infosys has to go through before the young guns start delivering. 

Maybe Infosys can take a leaf or two out of the Team India’s book: Dhoni & Co. achieved through sheer focus and team work minus the earlier flaw of overdependence on individual brilliance.

Down but not out!

Infosys’ stock price

Source: Company

Am, Chief Editor

You can contact the author at businessbanter@gmail.com