INDIA
S MOST RESPECTED COMPANIES INFOSYS
IT’s Time For A Reboot INFOSYS
Infosys,
which was regarded as Indian IT's bellwether, has seen its peers overtake it in
terms of growth
For
a remarkable decade (between 2001-2011), one company held the No. 1 position in
BW’s survey of India’s most respected companies. It was Infosys (formerly
Infosys Technologies), the poster child of the Indian information technology
(IT) industry. This period also coincided with Indian IT’s dream run. Export of
software and services grew from $6.5 billion to $69 billion. Infosys’s revenues
during the same period grew from $397 million to $5.7 billion, outpacing
industry growth.
But respect is not only about growth and shareholder returns. Infosys set benchmarks in financial transparency, ethics and corporate governance, innovation, talent management practices and global competitiveness. The past 18-24 months have, however, not been easy. Infosys has struggled to grow and slipped on other metrics as well. This finds reflection in the rankings. It has slid to the No. 3 spot overall, though it retains its sectoral leadership.
Infosys, which was regarded as Indian IT’s bellwether, has seen its peers overtake it in terms of growth. Employee morale has plummeted and its ability to innovate is being questioned. So much so, the firm was forced to recall its founder chairman N.R. Narayana Murthy in an executive capacity. Will it work?
It is early days yet and the jury is out. For now, though, there are incipient positive signals, as witnessed by the latest quarterly numbers, where it beat revenue and margin expectations. But one quarter’s results cannot be taken to forecast a long-term trend. Infosys needs to attract the best talent. It needs to be innovative and it needs to set newer and higher benchmarks on intangibles such as improving employee morale and thought leadership.
CEO and MD of the company, S.D. Shibulal, while acknowledging the challenges faced by the company, says, “Yes, we grew at 4.5 per cent in 2012, which was less than the industry growth rate.” He, however, points out that a number of steps have been taken to enhance innovation and improve competitiveness.
“Innovation is not a one-time effort. How many people recognise that we have been awarded 500 patents for the work we have done in the last five years? That 14 per cent of all global banking transactions have a Finacle connection? Whether it is the Airtel Money application or the software we developed for the Indian income tax department or the management software we delivered to Procter & Gamble, we have been continuously investing in innovation. Some of the investments we make today may pay off over the next 15 years,” insists Shibulal. But, where then did Infosys slip?
It was a perfect storm arising from a concatenation of circumstances, both external and company-specific, claims Shibulal. While growth in IT slowed, Infosys was impacted more than its peers because of its over-dependence on the financial services industry, which accounts for about 34 per cent of its revenues. Also, Infosys was far more dependent on discretionary spending unlike its competitors who focused more on the “keeping the lights on” parts of the business. Which is why Murthy, on returning as executive chairman, said the company would focus on lower margin but more predictable “bread and butter” businesses like application development and maintenance (ADM), infrastructure management services (IMS) and testing and validation services.
What about employee morale and talent management? Last year’s delayed salary hike (which was announced in October instead of April), did have an impact in the high attrition rate of 16.6 per cent that the company is suffering from, says Shibulal. “But one has to recognise that the industry is maturing and one cannot have disproportionate hikes out of whack with the growth of the company. We continue to be an employer of choice and are able to attract the best talent, but, yes, we do want to bring down the attrition rate,” he avers. He points out measures such as Infosys Bubble, an internal employee social media platform, set up to encourage employees to share their feedback.
He also points out investments made in the products, platforms and solutions business. “We are already seeing enormous traction in that part of the business.” The reason why Infosys tops the sectoral rankings, in spite of falling off its numero uno position in the overall rankings, is fairly straightforward. Be it in quality and depth of top management, ethics and transparency or return to shareholders, the company scores pretty high. So is its fall just a temporary aberration? Or, is it an indication of more trouble in store?
Shibulal, at least, is clear where his priorities lie: “My focus is on ensuring not just growth, but profitable growth by anticipating client requirements and taking care of employees. Remember, companies during their long cycles go through ups and downs. We have faced challenges in the past and have emerged stronger. I see no reason why we will not be able to do the same again.”
The market and most analysts continue to believe in the Infosys story. The firm’s shares have risen by more than 25 per cent since the return of its founder chairman.
Venkatesha Babu 130909
But respect is not only about growth and shareholder returns. Infosys set benchmarks in financial transparency, ethics and corporate governance, innovation, talent management practices and global competitiveness. The past 18-24 months have, however, not been easy. Infosys has struggled to grow and slipped on other metrics as well. This finds reflection in the rankings. It has slid to the No. 3 spot overall, though it retains its sectoral leadership.
Infosys, which was regarded as Indian IT’s bellwether, has seen its peers overtake it in terms of growth. Employee morale has plummeted and its ability to innovate is being questioned. So much so, the firm was forced to recall its founder chairman N.R. Narayana Murthy in an executive capacity. Will it work?
It is early days yet and the jury is out. For now, though, there are incipient positive signals, as witnessed by the latest quarterly numbers, where it beat revenue and margin expectations. But one quarter’s results cannot be taken to forecast a long-term trend. Infosys needs to attract the best talent. It needs to be innovative and it needs to set newer and higher benchmarks on intangibles such as improving employee morale and thought leadership.
CEO and MD of the company, S.D. Shibulal, while acknowledging the challenges faced by the company, says, “Yes, we grew at 4.5 per cent in 2012, which was less than the industry growth rate.” He, however, points out that a number of steps have been taken to enhance innovation and improve competitiveness.
“Innovation is not a one-time effort. How many people recognise that we have been awarded 500 patents for the work we have done in the last five years? That 14 per cent of all global banking transactions have a Finacle connection? Whether it is the Airtel Money application or the software we developed for the Indian income tax department or the management software we delivered to Procter & Gamble, we have been continuously investing in innovation. Some of the investments we make today may pay off over the next 15 years,” insists Shibulal. But, where then did Infosys slip?
It was a perfect storm arising from a concatenation of circumstances, both external and company-specific, claims Shibulal. While growth in IT slowed, Infosys was impacted more than its peers because of its over-dependence on the financial services industry, which accounts for about 34 per cent of its revenues. Also, Infosys was far more dependent on discretionary spending unlike its competitors who focused more on the “keeping the lights on” parts of the business. Which is why Murthy, on returning as executive chairman, said the company would focus on lower margin but more predictable “bread and butter” businesses like application development and maintenance (ADM), infrastructure management services (IMS) and testing and validation services.
What about employee morale and talent management? Last year’s delayed salary hike (which was announced in October instead of April), did have an impact in the high attrition rate of 16.6 per cent that the company is suffering from, says Shibulal. “But one has to recognise that the industry is maturing and one cannot have disproportionate hikes out of whack with the growth of the company. We continue to be an employer of choice and are able to attract the best talent, but, yes, we do want to bring down the attrition rate,” he avers. He points out measures such as Infosys Bubble, an internal employee social media platform, set up to encourage employees to share their feedback.
He also points out investments made in the products, platforms and solutions business. “We are already seeing enormous traction in that part of the business.” The reason why Infosys tops the sectoral rankings, in spite of falling off its numero uno position in the overall rankings, is fairly straightforward. Be it in quality and depth of top management, ethics and transparency or return to shareholders, the company scores pretty high. So is its fall just a temporary aberration? Or, is it an indication of more trouble in store?
Shibulal, at least, is clear where his priorities lie: “My focus is on ensuring not just growth, but profitable growth by anticipating client requirements and taking care of employees. Remember, companies during their long cycles go through ups and downs. We have faced challenges in the past and have emerged stronger. I see no reason why we will not be able to do the same again.”
The market and most analysts continue to believe in the Infosys story. The firm’s shares have risen by more than 25 per cent since the return of its founder chairman.
Venkatesha Babu 130909
(This story was published in BW |
Businessworld Issue Dated 09-09-2013) - See more at:
http://www.businessworld.in/news/business/corporate/it%E2%80%99s-time-for-a-reboot/1042078/page-1.html#sthash.uHooLNXg.dpuf
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