Nandan Nilekani of Infosys has had a great year. So great that he faces a daunting problem: He has to hire 28,500 workers--in a single year. Oh, and while he's at it, he has to reshape his company's strategy, selling higher-value services to keep ahead of competitors that try to imitate Infosys by hiring low-wage Indian workers.
And while doing both, he has to add nearly $1 billion to last year's revenue to keep his word to Wall Street analysts--he promised them Infosys would be a $3 billion company by April. "We have a unique challenge," he says, "and it is a nice challenge to have: How do you at the same time have rapid growth and rapid change?"
Unique, maybe not, but nowhere is this challenge more stark than at a company whose rise is an example of the outsourcing phenomenon that is reshaping Western business. And Nilekani, 51, must build on what is already a standard for excellence. With its sustained profitability--aftertax profit has grown more than 30% for each of the last three years--Infosys Technologies Ltd has been a consistent shoo-in for FORBES ASIA's Fabulous 50 big companies list.
Nilekani has been chief executive of Infosys since 2002 but took sole charge of the company in August when legendary lead founder Narayana Murthy retired, and the results have only improved. The most recent quarter was its best on record, prompting analysts to raise their earnings estimates for the year.
Infosys revenue reached $746 million for the three months ended September 2006, up 13 per cent from the previous quarter and up 42 per cent from the same period a year ago. Net income reached $199 million for the quarter, up 14% from the previous three months and up 44 per cent from the year-ago period. At that pace Infosys will make more money this year than Central Japan Railway, Fujifilm Holdings or Sharp, for example, all considerably bigger.
His record to date makes Nilekani our choice as FORBES ASIA's Businessman of the Year.
But, as we said, his is a work in progress. Nilekani is spending $140 million on training this year and has built a $300 million center in Mysore to mold new hires into the "Infoscions" who write software, design airplane components, process mortgage applications and maintain computer systems on behalf of multinational companies.
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After hiring more people in a single year than most companies have on the entire payroll, he says "we have to deploy them and train them and do it in a way to make sure quality is not compromised in any way. While we are growing, we also want to morph ourselves."
He is readying new hires as well as experienced workers to provide more higher-end services like consulting, computer-aided engineering and even R&D; at the same time, Nilekani has called on his experienced hands to gun for ever bigger contracts.
Every time Infosys spreads its wings, it knocks some established company or process aside. "We have created a new, destructive business model," Nilekani says. "Business is being taken away from legacy players and given to us because we are better."
Bigger and bigger clients of the sort that used to rely on old-line companies like America's IBM, EDS and Accenture are increasingly going with Infosys. For instance, ABN-AMRO recently chose the company for a five-year global outsourcing contract worth $250 million--the Infosys sales team called it the "monsoon deal." At the end of September Infosys had 34 clients paying more than $50 million a year, up from 14 a year before.
Infosys' two big domestic competitors--Tata Consultancy Services and Wipro Technologies--have also done well as the industry expanded dramatically, but in the past year Infosys has been outdistancing them by growing faster. (TCS, although India's largest offshorer, has a lower profile than either Infosys or Wipro because it is not listed on the U.S. exchanges, trading only in India.)
"Offshore IT outsourcing has now become a mainstream option, and we think scale and scalability--along with an ability to move up the value chain--are key criteria for successful offshore IT vendors," wrote Surendra Goyal, an analyst at Citigroup. "In this respect Infosys appears well positioned among the Indian IT vendors and continues to gain disproportionately, given its strong branding and industry-leading sales force."
The thoughtful, unassuming Nilekani is the leader of that effort, one largely playing out outside India. For the past four years he has been a fixture at the Davos meeting of the World Economic Forum, opening doors for Infosys by schmoozing with CEOs from the world's biggest companies.
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And in 2004 Nilekani said to New York Times columnist Thomas L. Friedman, "Tom, the playing field is being leveled." Friedman credits Nilekani for showing him that "the world is flat," and Infosys now alludes to Friedman's bestselling book of that title as it markets itself to potential clients, urging them to "win in the flat world."
This is the year Nilekani's world has changed, too, after longtime Infosys boss Murthy retired from day-to-day duties this summer. The professorial Murthy remains nonexecutive chairman and concentrates on preserving the Infosys culture and mentoring employees. It was Murthy who recruited Nilekani to join the company that would take on America's biggest IT outsourcers, transform the way business is done worldwide and help tens of thousands of well-educated Indians earn middle-class salaries.
Infosys didn't set out to engage in a David-and-Goliath competition. In fact, it started like many entrepreneurial enterprises: A few talented people with an idea scraped together some cash to start a company.
It all began 25 years ago, when Nilekani was working for the soft-spoken Murthy at an Indian software exporter called Patni Computer Systems, in Mumbai. Murthy, Nilekani and five others quit their jobs to follow their dream of starting a computer services company. It wasn't easy: In Socialist India in 1981 Infosys couldn't even get modest bank loans.
So Murthy, Nilekani and partners scraped together $250, much of it borrowed from their wives, and ran Infosys from the bedroom of Murthy's apartment. Infosys' big break came when a Bangalore subsidiary of Germany's Bosch Group hired Infosys to run its data center. The fledgling tech company moved its headquarters to Bangalore to be close to its first big customer.
While Murthy stayed in India, Nilekani and the other founders moved to the US to drum up business. Nilekani first moved to Tampa, Florida, where he was paid so little that he and his wife shared a two-bedroom apartment with roommates and rode the bus because they couldn't afford a car.
He worked programming computers and managing projects there before moving to other projects in Chicago, Grand Rapids, Michigan and Kenosha, Wisconsin. In 1987 Nilekani moved back to India but helped Infosys land some of its biggest American clients--including General Electric--by promising cost savings of 50 per cent for work outsourced to Infosys. In 1992, after India began economic reforms, Murthy, Nilekani and the others redoubled efforts to win outsourcing business from US customers.
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Soon, selling Infosys wasn't such a hard slog. Offshoring--the movement of white-collar jobs overseas--really began to take off in the US when the Y2K computer crisis triggered dramatic shortages of code writers who could reprogram company computer systems to make sure they wouldn't crash when the year 1999 gave way to 2000. US companies raced to outsource the work, with many gambling on hiring Indian companies for the first time.
After those experiments paid off, the Indian offshoring industry flourished--not just Infosys, but its big rivals TCS and Wipro, along with smaller companies like WNS Global Services and Satyam Computer Services. The growth has accelerated since, as U.S. companies race to cut costs by moving white-collar work to India.
Indeed, Infosys is setting its sights on competitors outside India--the big multinational IT consulting and outsourcing firms that have been rushing to move jobs to India to lower their costs. Following the example of Indian offshorers, IBM, EDS and Accenture have hired tens of thousands of workers in India, who earn about one-fifth what U.S. workers make, to answer tech support and customer service calls, to write computer code and do other white-collar work on behalf of big US clients.
All the competition pushed up wages an average of 14 per cent last year at Infosys. As Indian wages rise, and as the big American outsourcers lower their costs, too, Infosys is moving up the value chain. Instead of racing to the bottom by competing on costs, Infosys is persuading its Western clients to send ever-more sophisticated work offshore to Infosys.
"We don't really do call centers," Nilekani says. Indeed, Infosys' business process outsourcing unit--which comprises call centers and other more routine white-collar work--represents only 4.5 per cent of its revenue.
The leafy Infosys campus in Bangalore has a gym, a 24-hour restaurant and volleyball and basketball courts, and has gotten so big that its more than 40 buildings are known by their numbers. In Building Three a security guard rigorously checks whether an Infosys employee visiting from a different building should be granted access to this one, guarding against disclosure of Infosys customer information, even to other Infosys employees.
Inside, two gray car seats sit on the floor near two red minivan doors. Infosys designed them for an American auto supplier. Infosys also designed part of the wing of the new Airbus A380 jet, in addition to developing software for the company.
Infosys has a 500-person-strong research and development department based in Bangalore, with more researchers in other locations worldwide. The researchers are not waiting for customer orders but are striving to invent services that Infosys can later offer to clients.
Last year the Infosys R&D department applied for 58 U.S. patents. One patent pending is for complex mobile banking technology that extends Internet banking capabilities to nearly any PDA model, and soon to mobile phones. The technology is being folded into Infosys' popular banking software called Finacle.
Whether Nilekani can pull off his ambitious goals of growing and transforming an already wildly successful company rests on the shoulders of the 66,150 "Infoscions," whose average age is 26. Seventy percent of Infosys' new employees are hired upon graduation from college. After four months at the company's new training center in Mysore, most new hires are sent to Infosys headquarters 80 miles away in Bangalore. There they blend into the crowd of young strivers wearing security ID cards around their necks.
Meantime, success has redounded to wealth for Nilekani and the other founders, 4 of whom made FORBES ASIA's 2006 list of India's 40 richest people. Infosys sets aside up to one per cent of corporate profits each year for the Infosys Foundation, which has built hospitals and orphanages, donated books to rural school libraries and provided thousands of scholarships to poor children.
A quarter-century ago the founders of Infosys dreamed that the company could tap India's underutilized talent to help meet the world's growing need for software, and they strove to create a truly entrepreneurial company in a nation that favored state-owned companies or old-line family-run conglomerates. "We want to be a visible sign of what is possible in India," says Nilekani. "We had no clue we would reach this scale and size."
