Wednesday, June 12, 2013

The ‘second coming’ of Narayana Murthy – a guest post

Once a darling of IT professionals and FIIs, and a beacon of transparency and corporate governance, the fortunes of Infosys have been on a downward drift for more than 2 years. What has been going wrong?

The global economic downturn affected all IT services companies. A strategy of moving up the services value chain by focussing on business consulting activities didn’t quite pan out as expected. Failure to make big ticket acquisitions despite a cash surplus reduced growth options.

Most crucially, the able stewardship of Narayana Murthy and Nandan Nilekani could not be emulated by lesser mortals like Gopalakrishnan and Shibulal. In this month’s guest post, Nishit takes a look at Narayana Murthy’s return to the helm of Infosys, and its likely outcome.  

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Last week, the markets were abuzz with the announcement that Narayanamurthy was returning to head Infosys. Let us try and examine if this is a good thing and if there will be any change in the fortunes of Infosys.

As we all know, Infy has been doing pretty badly when compared with top IT firms like Cognizant, TCS and HCL Tech. It was in danger of being left behind in the race. It was becoming a laggard like Wipro.

Much of Infy’s prime position was due to the aura built around Murthy and Nandan Nilekani. After the departure of these two, it became just another software company. It also had a weird succession plan. Each of the founders got to be the CEO in rotation. This wasn’t a good plan. Being one of the founders and being able to lead are two different things.

Also, this policy led to many talented second rung executives leaving the company, like Mohandas Pai. Infy had become just like some of our political parties, where leadership is all in the family. Here it was all with the founding fathers.

One more area of concern being raised is Murthy will be assisted by his son. Now, this may or may not be a good thing, although his son is well qualified.

Throughout history, one has seen companies where leaders have returned to revive stagnating fortunes like Steve Jobs for Apple, Starbucks CEO, Google founders, and so on.

The return of Murthy also means that his succession plan was flawed. The challenges in front of him are two-fold. First is winning back the confidence of customers, employees and shareholders. Second is getting the succession policy right the second time around.

In life, very few get a second chance and a third chance never happens. This is the last chance for Murthy to lay down his legacy. The second attempt is fraught with danger - if there is a mess up, his legacy may get tarnished.

We live in an era of fast food. People want quick results. Unfortunately, the results in this case, will take time to show up. It could take even two or more years. He will not have a magic wand which will conjure up results immediately.

Once upon a time, Infy was a place where people aspired to work. Salary was not the issue; it was the brand which people wanted on their CV. The brand has lost its allure now. Will the lost glory days return or will it be another failed experiment?

Another issue with the comeback is that all the talk of morality and Corporate Governance goes out of the window. For the immediate term, the move has been greeted with universal acclaim but will that be the story two years down the line?

All said and done, one must acknowledge and appreciate Murthy’s guts to come back and try and set things right. It is very easy to sit back and relax. At the age of 67, to take this risk speaks volumes of the courage and spirit of Murthy.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan.)

1 comment:

guna sekaran said...

come for the benefit of his son's development.