Recalling Narayana Murthy may not be enough for Infy: Analysts

Venkatesh Ganesh | | Updated on: Mar 12, 2018

Recalling its founder is only one of the many steps that Infosys needs to take to recapture its leadership position, as it battles with changing technology trends, employee dynamics and possible changes in US immigration laws.

The recalling N.R. Narayana Murthy, the founder of India’s third largest software exporter, did not considerably cheer the market. The stock, at the end of trading day, was up merely 4.42 per cent.

Leadership issues

Analysts that Business Line spoke to expressed concerns about leadership issues within the company and indicated that customers are not buying into the new strategy. “His coming back goes against the prevailing retirement norms and is a clear acknowledgement by the board of the management’s inability to deliver up to investor expectations over long periods,” said Gautam Sinha Roy, VP of Equity, Motilal Oswal Securities.

“It aims to reinforce the leadership but at this present condition when the company is showing a fragile growth, that is a lot of work,” said Jagannadham Thunuguntla, Chief Strategist at SMC Global Securities.

This can be gauged from the fact that Infosys has performed below industry in the last two years. This has created low employee morale and has led to several top performers exiting the company.

“There are several cases of employees in certain teams meeting or exceeding in their performances but could not get bonuses as the company did not perform,” said the CEO of a Bangalore-based headhunting firm.

The company has seen an exodus of star performers in the last couple of years, which included a bunch of ambitious professionals who were unable to grow within the company due to a glass ceiling perception.

Apart from internal employee issues, industry watchers say that the 3.0 strategy needs a hard second look. “Murthy's appointment will give Infosys 3.0 more direction, clarity and greater momentum,” said Peter Schumacher, CEO of Value Leadership Group. “However, it will need Murthy’s special attention,” opines Rumit Dugar, IT and Telecom Analyst at Religare Institutional Research.

Infosys has seen competition heating up significantly with analysts claiming TCS to be the bellwether stock and Cognizant and HCL Tech gaining ground rapidly. This, coupled with competition from IBM, Accenture, Capgemini which have India-related pricing for their customers, is something that Murthy will have to face now, according to K. Lakshmikanth, Managing Director, Head Hunters India.

US immigration Bill

Finally, there is a possible overhaul of the existing immigration Bill in the US that would increase Infosys’ human resource expenses. “The company should look at hiring greater number of locals in geographies that they operate in, which would push up costs, and achieving a happy medium is something that they need to address urgently,” said Schumacher.

Published on June 03, 2013
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