DC Special: The importance of being Narayana Murthy

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When one of the world’s greatest technology companies, IBM, was fighting a life-and-death battle in the early 1990s, Lou Gerstner, the rank outsider who was called on to save it, wrote in Who Says Elephants Can’t Dance, no less than then US President Bill Clinton called him and said IBM was a 'national treasure' that had to be saved. To be sure, Infosys is not IBM, nor is it facing quite such a life-and-death situation. But Infosys is India’s IBM, a national treasure, if you will.
 
Not for nothing is it a $7 billion-plus revenue corporation whose rise has both spurred and symbolised the rise of India on the global stage. Not for nothing have nearly a hundred heads of state visited Infosys over the last several years to see what makes India the world’s IT outsourcing powerhouse. Still, one can be pretty sure, the Indian prime minister did not call N.R. Narayana Murthy in these past few weeks as he wrestled in his mind over whether or not to return from retirement  to save the company he founded 32 years ago, his ‘middle child’. Nor should the prime minister have had to. If anyone knows what Infosys needs at this juncture, it is NRN. 
 
But questions persist: Why did Murthy have to take charge again, after having said that he would retire at 65, and that would be that? Couldn’t somebody else have done the job? Even more intriguing, for a man who once said he hadn’t even let his wife Sudha Murthy visit him in his office in all the years that he ruled there, let alone be part of the company, why is he now bringing in his son Rohan Murthy? Most importantly, though, what ails Infosys? Can NRN do much about it?
 
Michael Dell stepped down as CEO of his company in 2004 but returned to the position in less than three years, began its transformation from being a mere PC-maker to a full-spectrum solutions and services provider and is right now in the midst of a corporate battle as he makes a courageous bid to take the company back into his own hands, out of the harmful reach of stock-market short-termism, and complete its transformation. 
 
Infosys is not in such dire straits that it must take Dell’s path, nor is it under the same kind of investor pressure as an American corporation comes under when in trouble, say analysts. “It’s not a life-and-death situation at Infosys. When it was a billion-dollar company, it was growing at 25 per cent. That meant it added $250 million to its revenues every year. Now, as a $7-8 billion company, if it grows at 10 per cent, it will add $700-800 million a year. Infy is still adding at least one new Zensar or MindTree every year”, says Zinnov Management Consulting’s Sundara-raman Vishwan-athan.
 
Infosys’ problem, rather, seems partly a problem of perception, of the media, investors, and increasingly even customers and employees. Given the high standards of financial performance, corporate governance and the moral high its leaders, especially Murthy himself, had taken and, for the most part of these 32 years, have performed to, it had become a habit for everyone to expect the best and the highest from the company every quarter, and at every turn. 
 
So, what are Infy’s problems
 
Sales Engine. When an outsourcing contract with the financial arm of a US car giant was up for grabs some quarters ago, Cognizant offered money upfront to buy its assets and get the outsourcing deal. Infosys recoiled at the idea. Instead, it offered to put 25 engineers on the contract free of cost for a period of time. Cognizant walked away with the deal, according to a person close to contract negotiations.
 
“Among the top five IT services providers, Infosys spends the least amount on sales and marketing,” says Sudhin Apte, CEO of Pune-based research firm Offshore Insights. “Their whole approach to and interaction with customers is rigid and inflexible.”
 
Business Mix
 
In 2011, Kris Gopalakrish-nan announced the Infosys 3.0 strategy just months before passing the CEO-MD baton to S.D. Shibulal. That strategy essentially was to move Infosys away from traditional IT services — Application Development and Maintenance, what may now be called the low-end or ‘sweatshop’ part of IT outsourcing, and increasingly, Infrastructure Management — in a bid to become a more Consulting and Systems Integration-led organisation. Also, as new technologies arose — social, mobile, analytics, cloud — Infosys was to embrace those for growth.  
“Infy 3.0 is ahead of the curve,” says Viswanathan. 
 
The Intangibles
 
But these are the kinds of problems that almost any other company faces. They could have been solved by means other than having to resort to recalling Murthy, who had publicly said he would retire at 65, and demonstrated it as the last act of a career-long act of leading by principles and example. A mere change in the business mix that the company was going after, empowerment of sales heads, going slow on Infy 3.0 while going back to old and assured lines of business could perhaps have mitigated Infosys’ performance issues at least partially.
 
But Infosys, where Murthy’s famous dictum “You can disagree with me so long as you are not disagreeable” ruled so long as he was the boss, was wounded in a more serious way. The first injury happened when former CFO T.V. Mohandas Pai left in 2011 when it became apparent that Shibulal would be CEO after Kris Gopalakrishnan. Since then, the wounds have worsened.  
 
“Overlaying the business problems were more leadership and organisational issues. Shibulal, for no fault of his, could not command the respect of his top generals quite like NRN or Nandan Nilekani could, or even Kris, for that matter, do”, said a former top executive of Infosys. 
 
“Murthy had to step in because Infosys is in a special situation. Its second-rung leaders have to be lined up. They are running their own fiefdoms. That has to stop, but Shibulal can’t do it,” said one analyst who closely tracks Infosys. “Unfortunately for Shibulal, while he is not the charismatic and authoritative leader that Murthy or Nandan Nilekani were, the latter were around during the good times. Shibu came in during the bad times”.
 
Another long-time observer had an even more charitable view of Shibulal. “NRN, Nandan and Kris had Shibulal, who was a great operations guy. But Shibulal does not have a Shibulal”. 
Murthy’s return, therefore, became necessary both to raze down his own constructs on such issues as sales and profit margins, as well as to line up the second-rung leaders behind the company’s strategy, if not behind its current leadership. Murthy was also necessary to boost employee morale in the way only he can - at once, both hard-headed and soft-hearted. 
 
Profit & Principle: Sibling rivalry
 
Almost nobody doubts that Murthy will do whatever it takes to get Infosys back on the growth path in the short-to medium-term. Questions remain, though, on what changes to its culture and principles - the intangibles that make Infosys, Infosys — Murthy will have to make in the process, and how that will affect his own legacy. 
 
The ‘son temptation’ is a particularly difficult issue to convince the world about, despite Murthy’s explanation for it - that Rohan is not being injected into the Infosys hierarchy but will only help him do his job. There are charitable and uncharitable ways to look at it. Unfortunately, regardless of almost anything he does now, Narayana Murthy is bound to be seen as just another founder, CEO, businessman. Nothing more.   
 

Next: Why NRN had to come back
 

 
Why NRN had to come back
 
DC/Sangeetha Chengappa

 
When Murthy was at the helm, the top management reported to him and connected with him. After he left, most of the top management dissociated from the CEO because they started to consider themselves the CEO’s peers. Each of them did their own thing and there were multiple views projected by multiple leaders. Decision-making suffered as there was no central decision-maker. This confused juniors, who had no direction and did not know what course of action to follow. NRN’s return is the best step to set Infy back on track.
 
Why no COO
 
Shibulal was very effective as COO. Now that he is CEO, he needs an operations man, but that post has been left unfilled since his elevation. Shibu continues to be bogged down with day-to-day operations and has no time to drive strategy. The COO position has been traditionally filled by a co-founder — first Nandan Nilekani, then Kris, then Shibu — who then went on to become CEOs. Now if one of the non-founders in the second-rung is made COO, it will look to the others that he is being groomed to be the next CEO. So, that won’t happen 
 
No Sales head
 
Infosys did not have a sales head for about four years between 2005, when Basab Pradhan left, and 2009, when Subhash Dhar was appointed to that job. Dhar left Infosys in 2011, and Infosys brought Pradhan back into the seat. But how can a company like Infosys be so complacent as to not have a sales and marketing head for four long years? What you see today of Infy’s financial performance is a result of that decision. 
 
After Shibu, Who?
 
B.G. Srinivas, Head of Europe and Global Head of Financial Services & Insurance; Ashok Vemuri, Head of Americas and Global Head of Manufacturing and Engineering Services; and V. Balakrishnan — Head of Infosys BPO, Finacle and the India Business Unit have been talked about as the front-runners, although it is not certain that any of them will make it. But Bala being made Chairman of Lodestone, the Swiss company Infosys acquired, replacing Srinivas, looks like a signal. 
 
Even so, the company will continue with NRN and Shibu at the helm for as long as it can, because the one person Murthy is most comfortable working with is Shibu.