Infosys chairman NR Narayana Murthy bids adieu to the iconic company he founded and welcomed the IT major's new MD and CEO Vishal Sikka in its 33rd Annual General Meeting (AGM) on Saturday.
Experts believe the induction of Sikka as CEO is positive for the company and has the potential to turn around the fortunes of the company, which has been struggling due to top management exits since last year.
However, Sikka's absence from the AGM disappointed a few.
Sudin Apte, CEO and Research Director, Offshore Insights believes Sikka should have attended the AGM as it was great opportunity for him t connect with the shareholders. He also says that the AGM left industry analysts with an uncomfortable feeling as it was all about the past and the review of 33 years.
"The company is not in a stage where it can afford to spend time on reviewing the past, it should focus more on future," he adds.
Former Infosys CFO V Balakrishnan believes the new CEO will have to create emotional connect with the staff because it is majorly a services company, founders had a great emotional connect with their employees but all of them are getting off and therefore, the new CEO has to re-connect with the employees and create the emotional connect.
Sikka is the first non-founder CEO of the company. Ex-Infoscion TV Mohandas Pai, chairman, Manipal Universal believes there is no problem in having an outsider as the CEO once in a while. He also adds that the company should not have different standards for the founders and the non-founder members.
On growth prospects going ahead, Moshe Katri of Cowen & Co expects to see a dollar revenue growth of 6-7 percent for FY15 and around 8 percent in FY16.
Ravi Menon, IT Analyst, Centrum Broking also contributed to the discussion.
Below are excerpts from the discussion:
Q: How would you rate this AGM? What is the key thing that stood out for you?
Balakrishnan: I have not attended the AGM but it's a beginning of a new era. The founders have built a great organization like Infosys and you can't build another organization like Infosys in India. In standards, in technology, in corporate governance, in way a company can be run and become globalized so it is a big change in era from a founder driven company to a non-founder driven company and that is a big change for Infosys.
Two, the values practiced by Infosys all along setting standards in the industry as to be ablated by the whole industry is a great case study to write about founders how the built the company from scratch to become a global corporation and of course the new leader coming in with fresh slate has to create a new team and create a new path and we have to see how that is going to be.
So, it's a big changeover from the past to the future and there is a total cutoff from past and the future and we will see a new Infosys from now on.
Q: You heard Shibulal talk about the challenges that were behind him, there are challenges ahead. You were there during the tough times. What do you think are the key issues that the new management will face from the earlier mistakes and that is something even Murthy said in his speech that there were mistakes, there were challenges and they are working to overcome them. What will be the key areas that we will need to look for?
Balakrishnan: The biggest challenge for the company has always been on the sales front because the customer connect needs to be improved, they have to invest more in sales and marketing, get the growth back because in the last few years what they lagged behind as compared to peers in the industry is on the revenue growth more than the profitability because Infosys has a great execution engine. What they lagged is in sales so that is going to be the biggest challenge.
Now, the second biggest challenge for the new CEO will be creating an emotional connect with the employees because at the end of the day it is a services company, founders had a great emotional connect with their employees but all of them are getting off now so the new CEO has to re-connect with the employees and create the emotional connect.
Two, he has to build a second level team because most of the leaders are left in the last one-two years and you need to create a team, the team was missing today and that is what has differentiated Infosys from the rest of the peer group in the industry. So, he has to re-built a team, connect with the clients and also connect with the employees and all that he has to do being in the public market so that is going to be a big challenge for the new CEO.
Q: From attrition to the way forward to admittance of mistakes made, what do you think about Murthy's speech and what do you have to say on this?
Pai: First of all people should stop living in denial. We must accept that Infosys made mistakes, Infosys should rectify it and make sure they put a structure in place and do not make mistakes. For somebody to say we have retained those we wanted and the people who left were low performers is a very wrong statement and that is a bad reflection of the person who makes that statement because the people who left are gone on to higher positions in many large companies and they are the ones who actually built this company, not only the founders.
The company was built by the hard work of the thousands of people who spent 12 to 14 hours a day without getting extra compensation year after year all over the world, so he must acknowledge that. The key challenge like Bala said was the lack of sales growth because the company had become complacent and the company was not quick in decision making.
Whenever a management team is in place for so much of time they have taken a company from 1x to 500x and created tremendous value everybody become defensive, they rather defend the value than create greater value and that is why management team should change every seven to ten years. If we have the same set of people being CEOs they will start becoming extremely defensive and not go after aggressive growth.
In the last three years the markets were not so bad as the company used to say because other companies have grown very well and we have seen that two or three other companies accelerate and take over the company. This means they were lacking in sales, they were lacking in quicker responses to clients, they were lacking in taking appropriate pricing decisions and they were not focusing enough for external world to internally focus. They did not do the internal structures well and all these were the mistakes that they made and they have to be rectified.
I am happy that NRN has come back and rectified some of them though not all. The area where he has not been able to do well is keep the team together. There were three people who were put on the board in June 2011; Bala, BG and Ashok Vemuri. All three have left.
Somebody has to take responsibility that all three have left. These were extraordinary people which any large company in any part of the world would have been proud to have and they left because they were not empowered adequately, they were not given a great role to play and they were very constrained and they were not very sure of the future. This is something that is wrong for the corporation.
Hopefully now they have learnt all the mistakes because investors have been harsh on them, media has been harsh on them, employees have been unhappy and they must make sure that they treat everybody equally whether you are a founder or a non-founder, if you fail you have to pay for it. You cannot have differential standards between founders and non-founders which has been the culture of the company for quite some time. So all that is behind us and Infy should come back on the future path and for me the biggest focus has to be on sales growth.
If the sales comes back and they start growing in double digits and they take a leading position rest of the things like compensation and all other issues will fall by the wayside, because it is revenue, revenue and revenue and for that you require aggressive growth, aggressive decision making very good empowerment for the front people and a good set of people who run behind customers, take the business and compete and win.
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