Infosys saga: from Narayana Murthy to Vishal Sikka

Infosys for technology outsourcingNarayana Murthy, founder of Infosys, seems to have triggered the resignation of Vishal Sikka from the software services company.

Vishal Sikka, who did not have the CEO portfolio at business software major SAP before joining  Infosys, was not the pick of Narayana Murthy.

Narayana Murthy had an interim role to play before the appointment of Vishal Sikka in August 2014. Rohan Murthy, son of Narayana Murthy, has also assisted his father during this interim period.

The way the 50-year old Vishal Sikka resigned from the technology outsourcing company is giving wrong signals to Infosys employees, shareholders, board and enterprise clients across the world.

Apparently, Vishal Sikka was the first outsider to head Infosys. At present, Infosys selected another insider Pravin Rao to manage the business during the interim period of turbulence.

Has Infosys delivered?

The immediate reaction was from Indian stock market. Infosys stock plunged over eight percent on Friday following the resignation of Vishal Sikka.

At 12.30 p.m., the IT major’s scrip on the BSE dipped by 8.46 percent to trade at Rs 934.75 per share.

The plunge in the stocks of the company led the overall S&P BSE IT index to decline by 289.84 points or 2.77 percent.

The Infosys board says Vishal Sikka received the full support to run and transform the company with the assistance of artificial intelligence. Social media says Vishal Sikka is the first CEO level victim of the upcoming artificial intelligence.

Narayana Murthy, in a letter, attacked the integrity of the Board and Management of the company alleging falling corporate governance standards in the company.

Infosys board said Narayana Murthy’s ongoing assault, including this latest letter, is the primary reason for the resignation of Vishal Sikka despite strong support from board.

Infosys board said Narayana Murthy’s campaign against the Board and the company has the negative effect to undermine the company’s efforts to transform itself.

The Infosys Board has been engaged in a dialogue with the founder to resolve his concerns over the course of a year, trying to find solutions within the boundaries of law and without compromising its independence.

Infosys has, under the leadership of Vishal Sikka, developed and articulated a strategy to transform itself to meet the rapidly changing needs of the marketplace in the 21st century. The company was lagging significantly behind industry in growth rates when Vishal took over and now we are in top quartile from a performance perspective.

Infosys has grown in revenues, from $2.13 billion in Q1FY15 to $2.65 billion this past Q1. This was done while keeping a strong focus on margins, closing this past quarter at 24.1 percent operating margin, beating some competitors for the first time in many years, and improving against nearly everyone in the industry.

The revenue per employee of the company has grown for six quarters in a row. Attrition has fallen, from 23.4 percent in Q1FY15 to 16.9 percent this past Q1, and high performer attrition is much lower than the overall company attrition.

The company grew its $100M+ clients from 12 in Q1FY15, to 18 this past Q1, and increased its large deal wins from ~$1.9B in FY15 to ~$3.5B this past year. This has all been done while improving overall utilization (excluding trainees), to a 15-yr high this past quarter, and an all-time high including trainees.

Narayana Murthy has demanded that the Board adopt certain changes in policy, else he will attack board members in the public, which threat was carried out when the Board did not acquiesce.

He has demanded that the Board appoint specific individuals onto the Board under similar threat, without appropriate disclosure and without regard to basic determinants of appropriateness or fit of the candidate for the role as a Board member.

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