Infy 5.0: Change of Guard

On June 12 it was another Thursday morning, while early hours I was busy on checking regular emails after the daily status call. Suddenly a new mail popped in the mailbox as Subject: New CEO designate of the company. Within the next few hours it was the buzz of the business news channels across country. Infosys being a very media friendly company since its inception days, it was obvious. 24 hrs channels when nothing else to telecast, they started rolling the same story in loop. On lighter note; all the hike, exodus of people at senior roles and other organisations related news now a days infosions came to know by online news as internal mailers are most of the time delayed. But this time it was a big news; indeed, as company has chosen first time a person outside the usual founder members for this role.

3 Hours later myself sitting in the beautiful giant sized convention center in the campus, NRN along with new CEO and MD designate Vishal Sikka briefing the employees on this recent development & explaining how this will be driving force for the company for the next five years. 

Being in the news for all the wrong reason or in other words not for so called good reasons in past 12 months. This was a big boost and share prices shows this unison. But again the same time whatever damage done have fragmented  the organisation to its complexities, but in the deep down it is really important to understand the reason for this failure or much debated Infosys financials model. Company has had operating margins of between 28-30%, and sometimes, even up to 35%, whereas competitors such as IBM, Accenture and HP (and local competitors such as TCS and Wipro) have had much lower operating margins. The whole concept itself based on the superior margins. It have a fixed billing rate, which they don't normally change irrespective of the client profile or the business volume. 

Infosys quotes superior margins no matter what - even during uncertain times. Also, large number of projects at Infosys are based on the traditional TnM(Time & Material) and Fixed Billing model, which provide higher revenue visibility. While by and large these two models dominate the whole industry, some of its more aggressive competitors have started adapting customized business models.

But soon this simple formula: Revenue – Cost = Profit is not luring the employees anymore. Trouble time started for the company as the most important assets for any organisation - Employees are losing the focus. When attrition rate gone as high as 18% whereas the healthy no will be close to 10-11%. Company started paying less than 100% of variable salary to even its better performers. In effect, it started taking money out of the pockets of its employees to manage its profits. They forget that, the magic of Infosys was created by thousands of employees going beyond the call of duty; today, that bond between the company and its employees is broken and the relationship has become largely transactional. 

But again there is some silver lining are intact. Make no mistake about it, Infosys is still a very strong company with robust fundamentals, talented employees and an awesome delivery engine. At some point or the other, it has intended to do everything that I've outlined here. The problem is that it has confused “objective” with “strategy”. Strategy implies a rapid mobilization of resources behind a particular path (among many) and that includes investments. The financial model comes in the way of investments.

With a new leadership team that's hungry for success, one hopes that the credo of the financial model (however instrumental it may have been in making Infosys magical) is re-evaluated and Infosys regains its charm once again.

From tomorrow; Aug 1 the new leadership team is taking the guard. Lets hope for the best that it will shine and recollects its mojo soon!!!

(PS: Excerpts from discussion forums, Quora, ET, Aditya Jha and personal understandings)