Shrinking outsourcing budgets continue to plague company

The resignation of three top executives including Ashok Vemuri within months of N.R. Narayana Murthy’s return to Infosys has sent shock waves inside the company, once the poster boy of India’s IT industry.

Among the three, Vemuri was seen as a strong contender for the CEO’s job once Shibulal retired two years from now.

Though the reasons for Vemuri’s exit is not known, it is clear that he did not see himself leading the company he served for 15 long years at any point of time.

Else, he did not want to wait for that long to assume the crucial post.

For the record, in the June-ended quarter, manufacturing, which Vemuri headed, contributed 22.5 per cent to Infosys’ revenue, which was better than the previous quarter and slightly ahead of Cognizant, which was at 21.4 per cent. But this was lesser than HCL Tech which, in the last quarter, saw revenues from manufacturing stand at 28.8 per cent.

There is enough speculation that Vemuri might become the CEO of iGate, a post which was earlier held by Phaneesh Murthy, another Infosys veteran.

“We will get to know whether Vemuri was part of the operation clean up or he left on his own depending on where he joins,” an analyst with a brokerage firm told Business Line. While Vemuri’s colleague, Basab Pradhan, joined a start-up in California, CliQr, Sudhir Chaturvedi has become the COO of NIIT.

Those who have replaced Chaturvedi as well as Pradhan are the next-in-line colleagues, and analysts say that this is where there are opportunities for Infosys to bring in fresh talent from outside.

The recent resignations also mean that apart from the COO’s post, now the crucial posts of the head of sales as well as that of a board member lie vacant.

It remains to be seen whom will Murthy turn to to fill up these posts as he goes through one of the most difficult times in the company he founded with six others in 1981.

The analyst who did not wish to be quoted also said that it is unlikely Pradhan as well as Vemuri might have quit because of the expanding presence of Rohan Murty, son of Narayana Murthy, at Infosys.

“They were too high in the hierarchy to have seen Murty (Jr) as a competitor,” the analyst said.

Larger issues

But larger issues within the company remain. “We are less convinced as far as growth is concerned,” the analyst said.

And, according to a recent report by Viju George of J.P. Morgan, Infosys’ strategy in the last couple of years to distinguish itself as a consulting firm and to take a business transformation route are turning out to be a tough agenda.

According to Ankita Somani, IT & Telecom analyst at Angel Broking, the management had indicated in the last quarter that outsourcing budgets in manufacturing are flat to marginally down, indicating a change in strategy to get deals in this vertical.

After the first quarter results for the June quarter, CFO Rajiv Bansal had told Business Line that Murthy, after his return, was interacting with the senior management across all business functions to understand issues plaguing the company. “The message that I got is that we have to be more effective in our sales and his insistence that we deliver greater value to our clients,” Bansal said.

Bansal added that in conversations, Murthy had also stressed on the need for the organisation to be nimble.

“As a large organisation, there would be areas where we have developed some flab and we are looking to address those issues,” he said.

What remains to be seen is if Infosys will witness more exits at a time where there aren’t many top leaders left. giriprakash.k@thehindu.co.in

venkatesh.ganesh@thehindu.co.in

(This article was published on August 28, 2013)
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