The huge hole left by the resignation of Infosys CEO Vishal Sikka is the ultimate, cataclysmic end to a period marked by incessant warring between co-founder, visionary, and former longtime company chief Narayana Murthy on one side and the company’s board as well Sikka on the other.
Any aspiring Infosys CEO will have such a mammoth task ahead of him or her that accepting the job, if it were offered, would reveal said person to be either a glutton for punishment or one who harbors a desire for the kind of edge-of-your-seat challenge that seems, at least at this point in time, destined for near-certain doom.
For one, the pit bull in the room, namely Murthy, has built his — and the company’s reputation — on corporate governance, something that made Infosys the most admired (until recently) company in Indian IT. Other than technical expertise, this is what sent customers to it in droves.
However, for better or worse, detractors suggest that Murthy went way overboard by pressing these issues in scenarios that did not seem to warrant it. On the other hand, defenders suggest that there was definitely something rotten in the boardrooms of Infosys, and Murthy was on the money when suggesting that Sikka was overpaid.
Salaries: To anyone who works in the global tech firmament, Sikka’s salary may not have solicited more than a cursory glance — hiked 55 percent to $11 million in 2016. However, what apparently got Murthy’s goat was that Sikka’s wages were 283 times larger than the median salary of an Infosys employee and that others in the company who were not necessarily toiling so hard got stratospheric salaries as well.
For a company that for so long under Murthy prided itself on creating the most number of millionaires out of regular employees via its stock, which was known for an egalitarian ethic and one where its co-founders drew paltry salaries as many old-school South Indian entrepreneurs do, this new era of sky-high compensation was just not right. (Of course, amidst this tale of humble self-abnegation it is worth keeping in mind that the co-founders were collecting fabulous sums thanks to dividends from their equity holdings.)
On the other hand, there were also apparently grumblings about excessive expenditures undertaken by having Sikka ensconced in the Palo Alto office (as per his preference), which would then necessitate flying back and forth from there to Bangalore.
For anyone who is not familiar or comfortable with the working landscape in India — and Infosys in particular — and is used to global tech paychecks and international travel, better watch out. This issue is not going to fade away as long as the Infosys pit bull is still in the room.
Acquisitions: One of the biggest ruckuses created at Infosys occurred when Infosys purchased automation technology firm Panaya from SAP in 2015 for $200 million. Murthy created a ruckus about two things: One, he suggested, after being tipped of by whistleblower emails that the purchase was overpriced. (Others suggest that despite valuation being a tricky and imperfect exercise it was a fair purchase). Two, and this is the more serious one, which I wrote about here, that there was something shady about the whole deal, which involved the board.
The gist of it is that Rajiv Bansal, then-CFO of the company, apparently objected to the acquisition and then recused himself from a board meeting that discussed it. Soon after, he was given a hefty severance of close to $3 million — around two years of pay. According to the Economic Times, Murthy went as far as to suggest that the severance was the equivalent of ‘hush money.’ The board promptly suspended 70 percent of his payments.
I’m with Murthy on this one — there is something exceedingly peculiar in the whole Panaya-Bansal-Infosys Board affair. That said, it is also clear that in an era where acquisitions may well be the only antidote to an existential crisis at IT services companies battling to stay relevant in the new era of all things digital, a new Infosys CEO will have a formidable challenge in having every one of his acquisition decisions scrutinized exhaustively by Murthy and company.
STRATEGY IN A TUMULTUOUS ERA
This gets directly to the next conundrum faced by a new CEO: How do you enact sweeping change that can position Infosys in an era where traditional bread-and-butter services such as infrastructure maintenance and application development is fading fast and replaced by cloud businesses and digital solutions?
The latter are rapidly becoming industry standards and new areas such as artificial intelligence and deep learning are new tools that almost every technology-driven solution relies upon, as I have written about extensively, most recently in this feature article in ZDNet. Meanwhile, automation has almost overnight begun replacing the low-medium-end Indian IT worker and some 28 percent of the workforce will be out of work in three years.
Not only has Infosys — like its Indian IT brethren — been slow to fully create opportunities and win new global business in this brave new world, it has decided to develop stuff in-house such as AI platform Nia (originally dubbed MANA). While this strategy can be successful on a one-off basis, to truly be a contender in the global digital stakes you have to cast your net wide, pick up promising businesses and expect some percentage to become successful and the others not, much like what a VC or a mutual fund manager would do.
Accenture for instance not only intends dishing out $2 billion to pick up companies over the next few years toward exactly this end, it has already spent over $2 billion in the last few years gobbling up firms of all hues and sizes toward its campaign for digital supremacy. These firms have also made a significant contribution to Accenture’s topline in addition to positioning the company well for the future. Many of these have been design firms.
Infosys, instead of being intelligently bold, has decided to play it conservatively. Not only has it made a paltry few purchases, it has now issued a $2 billion stock buyback in order to appease shareholders, a consummately foolish decision in these turbulent times. A new CEO would have a thankless task of trying to convince an out-of-date board as well as founders into thinking like Accenture or CapGemini, another global rival currently successfully negotiating the crests and troughs of IT’s future. God forbid the new CEO manages to convince the powers that be to spend some money on companies and have a few of them misfire.
NEGOTIATING WAR BETWEEN BOARD AND MURTHY
The board at Infosys has unleashed a massive salvo against Murthy in the form of a six-page memo to India’s stock exchange board, SEBI, accusing him of “continuous assault and misguided campaign” and blaming him for Sikka’s departure. “Mr. Murthy’s campaign against the board and the company has had the unfortunate effect to undermine the company’s efforts to transform itself,” it added.
Murthy has denied this but has been railing against the board over the last few years for what he thinks are its incompetence regarding governance and other issues. A new CEO would find a nightmarish scenario awaiting him or her where any move, from strategy to HR, would require an epic act of high-wire negotiation between the various factions. Simply unenviable, and for a company that is supposed to be an industry benchmark, nothing short of a travesty.
I could go on. There are huge ongoing challenges regarding retaining top talent (Sikka lost 10 out of the 16 top hires he had recruited from SAP since becoming CEO to execute his innovation vision, which is a pretty dismal record.) The stock market has pulverized Infosys stock, chomping 10 percent off the market cap since this imbroglio began. Investors are infuriated, margins are being brutally squeezed, the ghost of Brexit still hovers about, and the US is becoming increasingly protectionist by the day, with more stringent visa policies either currently implemented or in the works.
In other words, Infosys remains a quagmire of epic proportions that nobody in their right mind would want to run today.
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