Infosys needs to think big in technology

Subir Roy | Updated on January 27, 2018

Vishal Sikka Let him do his thing   -  G R N SOMASHEKAR

Under Sikka, the IT company could learn from Japan how to leverage technology to lead the world. Financials come later

The high decibel public warfare between the founders of Infosys and its board and management began over issues of governance and ended (for the time being at least) with a demand for share buyback and Infosys’s apparent willingness to oblige.

It is worth seeing if some insights can be gleaned by looking at the standoff as an accountant versus engineer/technologist clash. Who is best placed to lead a large firm — accountant, engineer or marketer?

Starting over

At the end of World War 2, Britain, Germany and Japan went different ways. Britain, which had built an empire on the strength of its industrial revolution, declined as an industrial power. Germany, whose industrial might was physically devastated, rebuilt itself with incredible speed but remained within its manufacturing space. Japan did notjust rebuild an industrial base, it went on to dominate the market for consumer products.

The received wisdom from all this gives primacy to technology moving in concert with marketing. Britain’s decline is attributed to too many of its large firms being led by accountants who were focused on the bottomline and had a short-term perspective. Consequently, they did not boldly invest in technology. Most German firms were led by engineers who knew only one route — investing in technology. They successfully rebuilt the country’s industrial strength.

Japan positioned itself at the intersection of technology and marketing (focusing on the consumer ), succeeded splendidly and for a time during the eighties caused considerable angst among Americans over fears of being beaten by Japan. Japan’s industrial leaders, either independently or through their government, imported technology and used it to devise products that swept the world.

The firm which came to symbolise this process was Sony which took the world by storm with the transistor radio and the Walkman. Sony was led by two people — Akio Morita who focused on marketing and Masaru Ibuka who handled technology. The transistor technology was bought from Bell Labs and Sony’s contribution was to miniaturise and sell a quality product at a highly affordable price.

In the eighties when Japan threatened to beat the Americans with products like high definition TV and prowess in the mass production of computer chips (notably DRAM or dynamic random access memory) there was much soul-searching among Americans. They identified two reasons which held them back and propelled the Japanese.

One was the role of the Japanese government in working an industrial policy driven by the iconic MITI or ministry of international trade and industry. Americans, on the other hand, abhorred big government. The other was US firms’ investment decisions in technology being hamstrung by the compulsion to focus on quarterly financial results. Japan eventually was set back by bursting asset bubbles and rigid social structures.

Where innovation scores

America’s ability to recapture the high ground is attributed to the central position that innovation enjoys in its social system. It is symbolised by firms such as Microsoft and Apple. The latter, in particular, excelled in understanding and coming up with products the customer loved because they were easy to use, elegant, and filled a need.

Technology plus customer-centricity played a critical role in the case of Sony and Apple. Today, for a firm like Infosys, survival depends on the successful embrace of technology. Automation, artificial intelligence, cloud, digital — all point to the imperative to understand, acquire and use technology.

At this juncture, for Infosys not to have an investment plan can lead to not knowing what to do with its reserves. The former CFOs and large institutional investors would have us believe that this is the case and so are demanding a share buyback. Vishal Sikka, on the other hand, is consumed with the drive to transform the firm into a technology player far removed from a service provider living off cheap labour.

The board must give Sikka a free hand in acquiring technology firms and not worry about the price. Putting a price tag on technology can be a gamble; it is easy for a number cruncher to feel that an acquisition is overpriced. God help Infosys if it comes to be driven by financial caution and not technology vision.

The writer is a senior journalist

Published on March 16, 2017

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