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Can Murthy revive Infosys?

New chairman's presence will instill confidence among stakeholders. Murthy knows that the road ahead for Infosys will be bumpy and, hence, he is now stressing on the need for tough decisions. Vivek Sinha reports. Murthy's challenges

business Updated: Jun 03, 2013 11:00 IST
Vivek Sinha

Hours after he assumed charge as executive chairman of Infosys on Saturday, NR Narayana Murthy wrote to the IT company’s employees: “We have much to do. The need of the day is to …take quick, tough and firm decisions.”

Murthy knows that the road ahead for Infosys will be bumpy and, hence, his stress on the need for tough decisions.

He was pulled out of retirement to once again lead the company that has faltered in recent times, falling behind in growth and ceding market share to rivals such as TCS, Cognizant and HCL Tech.

Murthy will have to put Infosys back on the growth track. This may require a tweaking of its business model. He had recently said that between top line (revenues) and bottom line (profits) he worries more about the latter.

“Infosys needs to change this mindset. With competition getting intense, Infosys is losing market share simply because others operate on lower margins,” said Achen Jakher, an IT analyst and CEO of US-based Svelte Systems, a tech consultancy.

Then, Murthy will have to put in place policies to convince ambitious professionals that they can rise to the top at Infosys. Several star executives have quit over the last four-to-five years because of a perception that a glass ceiling existed in the company.

"All employees will be happy to have Murthy at the top," said TV Mohandas Pai, former Infosys board member. He was believed to be a CEO aspirant but quit in April 2011.

And finally, the newly appointed executive chairman will have to shed some of the conservatism that has characterised the top Infosys management and use at least a part of its R24,000-crore cash reserves to spur growth. Many analysts feel a global acquisition may be the best way to deploy this money.

But the scenario in 2013 is vastly different from the one in 2002 when Murthy stepped aside as Infosys CEO.

Consider this: today, global giants such as IBM and Accenture have bases in the country and employ thousands of Indians, thus, depriving Indian IT companies of a major cost advantage.

Infosys will have to provide a competitive advantage that goes beyond location and cost arbitrage. To complicate matters, "outsourcing" today carries a negative connotation in a slowdown-hit US where a proposed immigration bill is seeking to place curbs on the number of visas a company can seek for its engineers.

This means Indian IT firms will need to tweak their delivery models and hire greater numbers of locals in the US and other countries they operate in. A natural corollary: costs will rise. Infosys could be hit harder than other Indian IT firms as it does not compromise on margins.

Murthy's presence will also provide CEO SD Shibulal with some breathing space. The new chairman is an excellent communicator and will, in all probability, become the public face of Infosys once more, leaving the CEO, who is not very good at communications, free to get on with implementation.

Then, there is widespread resentment among Infosys employees over some new HR policies. This has led to high attrition levels of 15-17% for several quarters in a row. And many of who quit had 10-15 years experience - an important employee group for any company.

Analysts said Murthy's stature and presence will ensure an end to all squabbles and power struggles within the senior management.

Pai said the company needs a strong leader at this juncture and Murthy is just the right man for the job.