Business

Technology and Governance Are Two Major Challenges Infosys Must Tackle

The Infosys brand has taken a beating, paradoxically in the hands of Narayana Murthy, who built it. Where does its future lie?

Infosys founder Narayan Murthy. Credit: Reuters

Infosys founder Narayan Murthy. Credit: Reuters

Now that Nandan Nilekani, as chairman of Infosys, is actively engaged in reconstituting the board and finding a new CEO, public focus and attention have shifted. From recording the acrimony between the board and N. R. Narayana Murthy, there is now speculation over the likely outcome of Nilekani’s efforts.

While the advent of a powerful and distinctive board is more or less taken for granted, the field of conjecture is wide open on what kind of a CEO the somewhat battered Infosys is likely to have. After what happened to Vishal Sikka, it is being increasingly argued that not only will an outsider find it difficult to fit into Infosys with its highly defined ethos, few outsiders of any standing may want to come in.

So speculation is now veering round to the reality that the new CEO will have to be an Infosys man. Those who know the global scene say that in view of the many departures that have taken place from senior positions in Infosys in the last few years, there is a lot of talent out there among Infosys alumni. It is not difficult to visualise one of them coming in at the top.

But this will solve only half the problem. The global software industry is undergoing a transformation and a new technology-driven industry is not just emerging but is already here, staring down at the IT industry.

The majority opinion amongst global media has been that India’s software leaders have been slow to change. Hence, they have to run fast to remain in business. Sikka was ideal in offering a new technology vision and taking the company towards that goal.

Since hardly any Infosys senior, either from the past or current, has that kind of technological acumen, there is scope for a new chief technology officer (CTO), a rank outsider, coming in along with a new CEO. This ties up with the notion voiced by some in India that Sikka would have made a great CTO and was not really equipped as CEO to supervise the housekeeping along with outlining and pursuing a technology vision.

Beyond the next decade  

The new duo at the top, if the foregoing scenario actually bears out, will be driven by two imperatives – technology and governance. The company will have to technologically transform itself to remain in business beyond the next ten years. Plus, with Murthy having made such an issue about governance, the company will not just have to pursue a high benchmark on governance but also be seen to be doing so. This may turn out to be a bit of an onerous task.  

On technology, the mood within the company can be gauged from what a young Infosys techie with ten years industry experience had to say just before Nilekani came in. “I am a first-hand witness of how he [Sikka] brought about change and challenged the entire machinery – one that had grown too big and therefore too lazy…. We have been an enthused lot under his leadership and vision. Time will tell how the current board, under the constant bullying of the founders and their henchmen, can perform and to what extent…. I for one am very upset with this exit [of Sikka]. Very difficult for an external person to keep the reins and yet keep things moving…. They [the founders] will always rock the boat on them.”

On governance, it is important to go back in time to see how the issue has come to play the role that it has in the company. Over ten years ago, while researching an article on the brand play of India’s three software leaders, I came upon a fascinating reality. The three were almost identical in every way, yet they had highly differentiated marketing strategies and were anything but me-too brands.

To make the point, Harish Bijoor, the brand consultant, wove an allegorical tale. There were these three chickens which all laid eggs. One was shy, one was honest and one was a chicken with hype. All laid an egg each, ordinary looking, whose product quality was identical, 100.

The first (TCS) made a noise of two decibels, very few heard of it and came to see it. But with those who did come, it scored 98+. The second (Wipro) was the honest chicken. Its product quality was 100, it made a noise about being 100. Everybody came expecting 100, got 100. The end result was even or neutral, neither positive nor negative. The third chicken (Infosys), whose egg was of quality 100, made a noise that it was 400, everybody came expecting 400, but got 100, that is -300.

The three, I had written then, represented a fine conundrum. They offered near identical services of nearly identical quality and there was little to distinguish them in the way they met standard customer requirements. But they were so different – in age, pedigree and history of growth. Not unexpectedly, in an attempt to differentiate themselves they had followed vastly different marketing strategies and sought to makes themselves into distinctive brands.

Phaneesh Murthy, the then CEO of iGate and former Infosys highflier, allowed a peep into how this marketing exercise was conceived by describing Infosys as “the lotus in the marsh. In a country where business is mostly opaque, it is transparent. You can build a brand from a core or a context. Core means the kind of work you do, but this was no different from what the others did. So I had to choose context and invest along the line. One manifestation of this differentiation was to present your annual report in as many GAAPs as possible, including all kind of information which was not relevant to customers in terms of the software you created for them but projected a clean company.”

In marketing themselves, could the three more or less continue to do what they had been doing? Shombit Sengupta, strategist and brand specialist, looked into the future and asked, quite prophetically, it now seems, “Where is the intangible premium, apart from size? In a monodirectional business, commoditisation can happen very easily. The value proposition of low-cost manpower is there today but eventually, value will shift to brands. Are Indian IT companies creating big business stars? The young 19-27-year-olds all want to be stars. They can see a career for themselves in brands like GE and McKinsey. These youngsters are intellectually advanced, highly researched, job flirtatious. Do they see the Indian IT companies as brand stars where they can become rising stars? The intellectual property in these companies, which are facing global competition, is not showcased.”

The enthusiasm and subsequent anguish of the young techie quoted earlier ties up with the need for them to work for a star.

Sengupta went on to add, “When I see Wipro I see a businessman. For TCS the field is wide open. The Tatas have been around for over a hundred years. In that sense, TCS is not a baby of the new economy. Bombay House has a spirit of sustaining businesses. Is Narayana Murthy like Anita Roderick of Body Shop? Many tried to emulate Body Shop but couldn’t, and the company declined after she sold out. Narayana Murthy has created the same philosophy of integrity, corporate governance and excellence in communication as Body Shop has by projecting a lifestyle.”

After Murthy, the Infosys brand has taken such a beating, paradoxically in the hands of Murthy who himself built it. Now it will be difficult for anyone to take it back to its earlier distinctiveness. The new leader will have to restore standards of corporate governance not just for its own sake (Infosys has traditionally reaped a brand premium for its transparency) but also because high governance standards are built into its brand.  

Subir Roy is a senior journalist and the author of Made in India: A study of emerging competitiveness (Tata Mcgraw Hill, 2005) and the forthcoming Ujjivan: The microfinance frontrunner (OUP).