Infosys has new app, but can he deliver the numbers?

Vishal Sikka, the IT services firm’s high-profile ‘servant-leader’, wants to go fast forward by pressing the innovation key. Will it click?
Vishal Sikka keeps shaking his head to stop the steward from refilling his plate every time he shifts his attention to something else.

“This is Indian culture. They want to pamper you, quite unlike in the US where you are expected to help yourself.

"You feel flattered, but you tend to gain fat as well,” Infosys’ new managing director and chief executive officer jokes during a lunch he hosted for the media on his first day in office on August 1.

But Sikka seems to have already found a way to control the after-effects of all this pampering. A colleague recounts his experience of finding himself far away from the office while discussing something with Sikka.

That’s because the CEO has this habit of walking for miles to work out a strategy, often taking along colleagues with him.

“I am now wiser. Infosys has a 170-acre complex. I would better have my walking shoes on before meeting him,” the colleague says, with a smile.

Please click NEXT for more...

Shedding the flab, however, is the least of the challenges that the 47-year-old PhD in computer science from Stanford University faces as he begins his innings as Infosys’ first non-founder CEO.

The real problem is getting Infosys out of the widespread perception that it has lost its plot and is in a crisis-like situation -- something that forced N R Narayana Murthy to come back from retirement before handing over the baton to Sikka.

Though the numbers have improved somewhat, the fact is that the 33-year-old company has lost its bellwether status to Tata Consultancy Services in the last couple of years. Worse, it has been overtaken in profit and revenue by Cognizant, and even HCL Technologies is giving it a hot chase.

For 2014-15, Infosys’ revenue guidance is much below that of industry body Nasscom’s.

Infosys’ employee attrition hit a record high of 19.5 per cent in the April-June quarter of 2014-15 and the company has lost more than 10 senior executives in the last one year.

The other question of course is how the 160,000 Infoscions, especially the senior and middle-level employees, would react to the transition to an outsider CEO.

Will investors continue to have patience with the new management for long? The man himself is trying his best to play down expectations by saying Infosys could do without the “intense scrutiny”.

“The results that you see now are the results of activities that were done quarters or even in some cases years ago. Therefore, no matter what we do now will be reflected on our results after a certain amount of time,” Sikka says.

Others agree about the challenge Infosys faces in acceptance of the new CEO.

“From a cultural perspective, Infosys is a ‘deeply inwardly’ focused organisation, and what Sikka brings in is an outsider approach.

"But that will be healthy for Infosys as the new CEO will bring a fresh perspective and a customer-oriented perspective,” says Peter Bendor-Samuel, founder & CEO, Everest Group.

Please click NEXT for more...

Focus back on employees

Sikka says he is deeply aware of the “emotional attachment” that many employees still have with the founders, all of whom have left the organisation for the first time and his first task would be to assuage their concerns. 

But he believes what Andy Grove, the founder of Intel (Sikka was once an intern at the chip-maker), once said about founders of iconic companies: “Founders’ instincts should be institutionalised through processes”.

That’s easier said than done as the old instincts are still strong.

For example, one of the first few things he did even before taking charge was to reach out to senior-level employees and ask them to show him the best software codes they have written.

While he wanted to have a first-hand experience of the kind of work Infosys did in the past, his move had an opposite effect.

Many of the employees reached out to their friends and former colleagues and even recruitment firms assuming that perhaps their days are numbered. It took lengthy discussions before employees were convinced about the real reason.

Infosys, thus, has big plans for employee engagement to make a break from the overhang of the larger-than-life presence of the founders. Srikantan Moorthy, HR head of Infosys, says Sikka’s “endearing personality” would help break the ice faster.

But Sikka obviously wants a more tangible demonstration effect and that is why the company has started an initiative, called Murmuration, to crowdsource ideas from all employees in significant areas of operation.

Murmuration is a word used to describe a flock of starlings, a species of birds that is highly social -- hence the relevance to crowdsourcing.

The idea has worked as 2,400 substantive ideas have already come in, which Sikka and Praveen Rao, the chief operating officer, would personally look at.

“I believe in Rabindranath Tagore’s servant-leader model. No one man can have monopoly over innovation anymore,” Sikka says. He is also engaging with the employees quite vigorously through town-hall meetings and blogs, and wants to take classes regularly -- both the online and physical versions.

Please click NEXT for more...

The CEO as a brand

His global brand equity is perhaps the greatest thing Sikka has brought in apart from his intellectual prowess. He is known in the C-suites of all leading global companies and when he talks, people all over the world take him seriously.

He would have to become a visible standard bearer for the Infosys brand, something that the Indian IT services companies need at the level of maturity they are at, long-time Infosys watchers say.

Many experts agree that what Infosys actually needed was not a CEO who is a master sales person but someone who has a strong brand recall. And in all these categories, Sikka supersedes many of his counterparts in Indian companies.

The management change at Infosys signifies many things, says Harish Bijoor, a well-known brand and business strategy specialist. One of the big things is the fact that Infosys is moving on to become a Silicon Valley-based leadership from the earlier Bangalore club, he says.

Besides, Infosys has brilliantly revived the earlier CEO-COO model. While Rao, an Infosys veteran would be his second-in-command and would manage the day-to-day operations and ‘manage the show’ in his absence, Sikka would himself focus on Americas and Europe, which account for 90 per cent of the software major’s revenue.

He would of course spend a week every month in India. According to Sudin Apte, CEO and research director of advisory firm Offshore Insights, the new model under Sikka may gradually evolve like the ‘Nandan (CEO) – Kris (COO)’ format wherein all the delivery and sales organisation will report to the COO.

“Sikka will be the external face to clients, will make Infosys visible at various avenues and platforms, create its ‘thought leader’ image and will be expected to work as a rainmaker to get the deals inflow,” Apte says.

Please click NEXT for more...

Intellectual property all the way

While these are still early days and the new leadership will take some time to frame out the specifics of its new strategy, one thing is crystal clear: Sikka is not going to change the founders’ focus upside down. Rather, he would focus more on products, platforms and intellectual property (IP) creation.

“Many people ask me, ‘Are you going to help Infosys into becoming a product company?’ They miss the point. We will continue to be a services company, but bring in the efficiency of intellectual property into services business,” says Sikka.

It is not a particularly new strategy for India’s second largest IT services provider. Infosys 3.0 (this is the second year of the implementation of that strategy) was primarily aimed at growing the non-linear revenue stream and position the company away from the commoditised services. But the plan could not click due to the changing requirements of the clients on the back of the global slowdown in spending.

That was the reason why one of the first things Murthy did after returning to the company as the executive chairman in June last year was to bring back focus on the company’s ‘bread and butter’ application development and maintenance business, a low-hanging fruit which is primarily based on labour arbitrage.

Everest’s Bendor-Samuel, however, says Sikka’s appointment is a clear indication that Infosys will go back to its emphasis on IP, instead of just labour arbitrage-led businesses. “Given his pedigree, the IP space would certainly drive growth and profitability going forward,” he says.

Please click NEXT for more...

Sikka doesn’t disagree with that view. He clearly has plans that are radically different from the way Infosys ran all this while. And if implemented, this is going to fundamentally change the way Indian IT services companies serve the clients. To start with, Sikka has serious reservations about the whole concept of ‘staff augmentation’ wherein clients hire resources from service providers to do the work their existing team has been doing.

But the very fabric of that business has been laid on cost saving. “To me, it’s very depressing for IT companies to say we will do whatever you were doing but more cheaply. I think it’s about doing more than what was being done before — bringing more to it, being innovative,” Sikka says.

For example, he wants to focus more on “staff amplification” whereby end-users (clients) become more powerful and can do more what they are capable of. He talks about the huge opportunities in oil and gas, retail and automobiles. Think about the number of car breakdowns all over the world, he says.

They are an expensive proposition as you have to call the mechanic, get it repaired and waste a lot of time. That’s a huge opportunity as we can help clients by offering predictive maintenance solutions.

There is more. Infosys, as a part of its infrastructure management services practice, runs the infrastructure of hundreds of clients and because of this, the company has deep insights into the clients business. “We can give them feedback like ‘hey, if you did this or that, you would improve things by this much’. That’s the opportunity I see,” Sikka says.

Please click NEXT for more...

Traditionally, the IT services industry is overly focused on utilisation of employees or what per cent of their overall employees are engaged in some productive ‘billable’ works in a quarter. Sikka wants to change this ‘disproportionate’ focus and use the bench for more training and education.

Sarabjit Kour Nangra, vice-president, research, Angel Broking, says Sikka’s focus is on four broad areas — delivering high operating margins to maintain Infosys’ leadership in the sector; actively managing and strengthening client relationships; and put the unutilised cash on books to use by scouting for acquisitions, provided the company to be acquired meets the required return on investments criteria.

That would be a great way of running Infosys. But everyone agrees at the end of the day, investors and stakeholders would want Sikka to live up to his name, which literally means “coin” in Hindi. And he will be measured precisely by that — revenues — in the coming months in an organisation struggling to keep pace with the blistering growth of some of its competitors.

Sikka’s big claim to fame so far has been development of HANA, SAP’s flagship product that allows customers to organise and process massive amount of data quickly. The former chief technology officer and executive board member of SAP often referred to it as his “little girl”.

Infosys is eagerly waiting for another “little girl” from its new CEO.