Bangalore: Infosys Ltd’s chief executive officer (CEO) S.D. Shibulal has seen ups and downs since taking the helm of India’s second largest software services company in August 2011. As Infosys struggled to keep pace with rivals such as Tata Consultancy Services Ltd and Cognizant Technology Solutions Corp., it was forced to bring back iconic founder-chairman N.R. Narayana Murthy as executive chairman in June to engineer a turnaround. In an interview after the company posted better-than-expected first quarter results on Friday, Shibulal, the last of the seven Infosys co-founders to become CEO, spoke about near-term challenges to the company’s turnaround story, Narayana Murthy’s comeback, his 3.0 strategy and the company’s succession planning after he retires in 2015. Edited excerpts:
In Murthy, you now have a very active executive chairman who has come back. What has changed?
Mr Murthy is always focused on a superior financial performance, which is high-quality revenue and margins. Of course now (since) he has come back, there has been a renewed focus on these aspects. There have been a number of discussions about how to execute our financial performance.
We’re also looking at a bigger transition when you step down in a few years and the next generation of leaders will take over. What kind of Infosys would you like to hand over?
I would definitely like to hand over a stronger Infosys. Stronger in terms of clients, brands, in terms of predictability, employee connect— there are multiple dimensions to it. Our mission is to establish a stronger global corporation, so when I say stronger Infosys, our aim is to create a stronger global corporation.
And what kind of leader will it take to lead Infosys from there?
When you evaluate leaders, you look at markets, you look at strategies you’re trying to deploy, what are the strengths that the company has and then you look at the leader’s attributes. Infosys as a company has always believed that performance creates recognition and recognition creates support. One thing you will look for in a leader is the ability to be a performer. There will be short-term challenges—I have seen it myself. It’s about medium to long term and the ability to perform, and (there should be) leaders who consider performance as a very important aspect and that is very important to Infosys. Also, Infosys is an organization that believes in the highest levels of corporate governance, values, ethics—so that’s another important aspect.
That leader can be from inside or outside because you’re looking at what Infosys really needs, right?
These are all conversations that you should have with the nomination committee.
Infosys 3.0 versus your traditional “bread and butter” outsourcing business—how is that mix shaping up?
There is nothing called Infosys 3.0 versus bread and butter. Infosys 3.0 is actually three parts—there is consulting and systems integration, the global IT (information technology) operations, and products and platforms. This quarter if you look at it, there has been all-around progress. In business and IT operations, we had $600 million come in from seven deals—remember they take time to realize, they are multi-year deals
What is our strategy? It is making sure that all our three offerings grow at a somewhat similar pace. Not exactly the same because the smaller ones will grow faster than the larger ones. And it is very clear to us that our business and IT side was growing below our company average —we have put in more effort to win more deals in that space.
Despite reporting better earnings (in the quarter to June), Infosys has retained its full-year growth forecast. The worst is not over yet...
Our exposure to discretionary spending is quite high— discretionary spending while there is a pickup, it is still a very tight environment to be in. Some of the regulations aren’t backing us—for example, take this quarter. We lost 0.7-0.8% of growth because of cross-currency movements. Otherwise we would have made 3.4%. So, these are all challenges which we face. Our guidance is for us. This is a statement of fact based upon our business, our clients who are based in our pipeline and the countries in which we operate. We have a different profile of business compared with the rest of the industry. So, our guidance is what we feel.
But wouldn’t you aspire to regain industry leading growth?
Of course, we aspire to have superior financial performance, with our growth and margins, and that’s exactly what we have attempted.
How long does it take?
Many of the challenges look specific to Infosys because some rivals continue to do better in the same markets...
Some of it is behind us, actually most of it is behind us. One of them was in sales and sales always faces uncertainty and turbulence, which did impact us.
Number two, last year we had maxed out our visa applications, so we faced staffing challenges and we got our new visas in October. Because of that we added subcontracting, which is at normal levels right now—so that is something where we saw turbulence.