Bengaluru: Infosys Ltd’s goal of becoming a $20 billion firm by March 2021 is a target and not an aspiration, and for this reason, its board has linked its chief executive’s annual compensation to the progress it makes in achieving the target, its board chairman said.
This statement is significant because until now, the management of India’s second-largest software services company, including chief executive officer Vishal Sikka, have repeatedly maintained that the goal of becoming a $20 billion firm, with average revenue per employee of $80,000 and an operating margin of 30%, are “aspirational” in nature.
Bengaluru-based Infosys had $9.5 billion in revenue, revenue per employee full-time equivalent (FTE, a metric that measures revenue generated by employees working on a project) of $50,700, and operating margin of 25% at the end of March 2016.
“There is nothing aspirational in this (long-term goal). This is a target which the company is looking at, (and) is pursuing,” R. Seshasayee, non-executive chairman of Infosys, said in an interview.
“The (CEO’s) compensation is linked to targets which are publicly given. There is a trajectory for this. The compensation is linked to that trajectory,” Seshasayee added.
The decision to link Sikka’s salary to Infosys’s long-term target means that it is putting its skin in the game, unlike cross-city rival, Wipro Ltd, which maintains that the goal of becoming a $15 billion firm is its “ambition”.
“This year will be a washout for not just Infosys but for all the large firms. Infosys will grow at-best at 9.5% (dollar revenue growth). This means that Infosys will end with $10.4 billion in revenue (at end of March 2017). Now, to achieve this target of $20 billion, Infosys will need to record a CAGR of over 18%. When most IT firms are struggling to report a double-digit growth, this ambitious target looks highly improbable,” said the Mumbai-based head of research of a domestic brokerage.
Sikka’s annual compensation of $11 million includes a $3 million fixed salary and a $8 million variable component, which will be paid by Infosys depending on the progress the company makes in meeting its targets.
Seshasayee declined to disclose the annual targets for each of the three metrics. He even added a disclaimer: These targets can be changed in future, depending on the growth of the industry.
“Now, nothing is cast in stone. But this is, at the moment, the target that we have,” he said, adding that “in the trajectory, we have to take into account many things. We need to take into account the indu-stry dynamics, the company dynamics, the people dynamics, all of that. That’s something which the board is charged with the responsibility to do and we will do so.”