Unhappy with execution at Infosys, Vishal Sikka cracks the whip

Second round of top-level changes in as many weeks comes days after Infosys cut its forecast for 2016-17

Analysts say senior management changes are essential to achieve CEO Vishal Sikka’s longer-term goal of making Infosys a $20 billion company by 2020. Photo: AP
Analysts say senior management changes are essential to achieve CEO Vishal Sikka’s longer-term goal of making Infosys a $20 billion company by 2020. Photo: AP

Bengaluru: Infosys Ltd chief executive Vishal Sikka has a stern message for the company’s senior management: Shape up or ship out.

A management reshuffle on Saturday, the second round of top-level changes in a fortnight, is the latest manifestation of Sikka’s message.

The changes were announced days after the company cut its revenue growth forecast for the year to 31 March after reporting a slower-than-expected sequential increase in dollar revenue growth at 2.2% in the fiscal first quarter. Sikka attributed it to poor execution.

Infosys made three senior management changes over the weekend. After executive vice-president Manish Tandon quit the company, it split his portfolio and gave Mohit Joshi, head of the banking and financial services segment, the additional task of overseeing clients in the healthcare and insurance verticals. Sandeep Dadlani, head of retail and consumer goods, will now also oversee the manufacturing segment.

Sikka also entrusted his former SAP colleague and head of technology, Navin Budhiraja, to work with Pramod Prakash Panda, Infosys’s head of education, training and assessment division, after Binod Hampapur, executive vice-president, was made the new head of the quality unit and government relations.

Infosys also elevated executive vice-president Rajesh Krishnamurthy, head of the energy and utilities vertical, to the rank of president. Krishnamurthy was earlier this year given the responsibility of overseeing Infosys consulting.

Analysts say the changes are essential to achieve Sikka’s longer term goal of making Infosys a $20 billion company by 2020.

“Sikka’s targets for Infosys—both for fiscal year 2017 and for 2020—are quite ambitious, and they require Infosys’s executive team to foster significant outperformance. Infosys’s revenue performance in 2017 got off to a disappointing start,” said Rod Bourgeois, founder and head of research at US-based DeepDive Equity Research.

“Infosys needs to gain substantial market share while also driving operating efficiencies and wrestling with maturation in its traditional businesses. So, it should be no surprise to see Sikka making executive team moves and pushing hard on performance,” Bourgeois added.

Sikka remained unfazed by the departure of three senior executives in the last month, according to an executive who reports to the CEO, who clarified that this is not to suggest that Sikka is arrogant but rather that he is making sure the senior leaders perform.

On 19 July, days after Infosys declared a weak set of first quarter earnings and revised downwards its full-year dollar revenue growth to 10.8-12.3%, Infosys named new heads for its merger and acquisitions (M&A) division and its cloud, infrastructure and security (CIS) arm.

“These changes are not knee-jerk reactions to the company not doing well in one quarter,” said the executive cited earlier. “We are rewarding mid-level managers with RSUs (restricted stock units). What message do the juniors take if the senior leaders are not delivering? We have our work cut out for the remaining part of the year, and everybody needs to work towards the stated goals.”

The executive, who spoke on condition of anonymity, declined to comment on whether any of the three executives who quit in the last month had been asked to leave.

Since the start of the October quarter of 2014 (Sikka took over as CEO in August 2014) until the end of June 2016, Infosys has managed to grow its quarterly revenue by 13.63%. During this time, the performance of the business units that saw the departure of senior leaders has been mixed.

Infosys BPO under Anup Uppadhayay did not report any growth since October 2014, though the life sciences and healthcare segment under Tandon reported 17% growth.

However, since the start of the calendar year, growth at the life sciences and healthcare division has been poor, seeing an 8.2% decline in the first half of the year and a 16% sequential decline in constant-currency terms in the April-June period.

Samson David, who took over as head of the infrastructure maintenance and security division in March last year, managed to grow the unit at 10.6% in 2015-16, higher than Infosys’s 9.1% dollar revenue growth for the year.

Analysts played down the impact of the executive departures.

“Under Vishal, Infosys has outperformed most of its Indian peers, yet as we have consistently suggested, there would be a bumpy ride to recovery. We are less concerned about changes in the executive team,” said Thomas Reuner, managing director of IT outsourcing research at HfS Research.

Since Sikka took over as CEO, six executive vice-presidents and eight senior vice-presidents have left the firm. July alone saw two executive vice-presidents (Uppadhayay and Tandon) and a senior vice-president (David) leave.

Some of the executives who have left the firm in the past 23 months include chief financial officer Rajiv Bansal, head of manufacturing and executive vice-president Sanjay Jalona, Infosys BPO head and executive vice-president Gautam Thakkar and Infosys EdgeVerve head and executive vice-president Michael Reh. Infosys now has four presidents, seven executive vice-presidents and about 25 senior vice-presidents.

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