For Infosys’s Vishal Sikka, perform while you transform is an even bigger challenge
Infosys is yet to firmly choose the path that will take it to its cherished goalto transform into a powerhouse of software, services and products
Vishal Sikka inherits an organization in flux and with existential angst. Infosys Ltd today is a paler version of what it used to be in terms of the features that made it a mega success in its traditional business of bespoke software development and services. And it is yet to firmly choose the path that will take it to its cherished goal—to transform into a powerhouse of software, services and products which will be capable of generating far more revenue with far less effort and resources than the current business.
Infosys has been talking about transformation for a long time, but in a half-hearted, flip-flop, don’t upset the core business, don’t dilute margins kind of way—understandable given the daunting nature of the task. As co-founder Nandan Nilekani once described it, it is like “changing the engine of an airplane full of passengers, in mid flight”.
Sikka has to quickly provide clarity to all stakeholders on whether he wants to undertake this transformation journey, when, and most importantly, what this transformation should achieve, what paths will be chosen to achieve it, and what the cost and time and milestones of doing this would be.
Infosys has over the years confused many of us, and itself probably, with the way it has gone about its transformation journey. In 2004, it chose consulting as its transformation weapon which would enable it to participate early and upstream in the business decision-making process and thus capture all the related downstream software development and services work. This transformation seemed to be about finding a new way to generate more secure and loyal revenue for traditional businesses rather than to build a big, new, high-margin line of business.
Around 2006, its chief executive officer articulated a transformation strategy that was about being a trusted transformation partner that can help businesses win in a flat world. So the company put its might behind an end-to-end flat world offer which diagnosed clients’ flat-world readiness and provided a road map to get flat-world-ready using enabling software solutions.
Products and platforms were not the chosen transformation route for many years, because they guzzled investment and were not predictable in their outcome. The core banking platform Finacle, launched in 1999, got modest support despite its demonstrated potential, but is now the proud vanguard of the Infosys products business.
Around 2008, it had a new CEO and a new transformation initiative to componentize software, building re-usable building blocks which could achieve the goal of non-linear growth, that is, more revenue for less effort.
In 2011, with yet another CEO at the helm, came bolder moves at transformation—a concerted attempt was made to push the business mix towards less effort, more return offerings, organization structure changed to reflect this (so different market games would have different internal approaches) and acquisitions made to boost this mix.
However, in the midst of this, the traditional bread and butter business lost market share to rival Tata Consultancy Services Ltd (TCS) and the CEO fell prey to the war cry of the stock market to perform while you transform.
The board pulled the plug and said we don’t think this transformation is working plus management has taken its eye off the ball on the traditional business, so we want to go back to the future; let’s get the doyen, N.R. Narayana Murthy, back to re-focus and repair the traditional business.
Now barely a year later, the board has hired Sikka, who they call a transformational leader with what seems to be a mandate to transform the company. He is described as a technology visionary with a proven ability to build successful products and platforms. This suggests that the board wants him to move the company more in the direction that the last CEO wanted to take it rather than in the direction for which they brought Murthy back. But if the Street’s past insistence on perform while you transform is any indicator (and the board’s insistence as well), then Sikka has a tough task ahead of him and he should negotiate carefully with his board, his shareholders and the Street, especially on slowing down the speed as he tries to change the engine in the airplane in mid flight.
Here’s why he has a tough task ahead of him in restoring the traditional business to the pink of its earlier health. It appears from the past year at Infosys that recapturing the growth momentum in the traditional business is not like taking a willing Pekingese on a homeward bound walk, but more like dragging an unwilling Alsatian uphill to the vet. And with good reason. Infosys has traditionally been a promoter-managed business with a centralized management style. It has had a visionary patriarch at the helm, exceptionally skilled at moulding into a crack team a small band of diverse, highly competent people. Together they constituted an all powerful inner circle and command centre.
They decided the values, the policies, the navigational principles of the business from time to time. They also designed processes with the skill of a maestro composer who wrote music for a large orchestra and oversaw implementation as generals of a large army comprising lakhs of disciplined soldiers and thousands of officers and a handful of area commanders who commanded their section of the troops admirably.
Not just that, the command centre was also the key business generator. The Infosys model for growth was to hunt big whale clients and then cultivate (and harvest) them to generate increasing amounts of revenue over the years. Over 95% of the total company revenue usually came from repeat business of existing clients (from harvesting the whales, to use a mixed metaphor), but if there were not enough new whales coming in, the growth would slow in subsequent years. Similarly, not cultivating and harvesting the customers once they are in the system would also derail growth.
The command centre was where most of the crack whale hunters resided, ably supported by formidable cultivators. This business generation engine has been depleting with each command centre member leaving, and not getting replaced by equally formidable talent nurtured and waiting in the pipeline.
Sikka takes over a business built on the model of whaling and cultivating, with no whalers and no cultivators to speak of. The famed Infosys brand is an umbrella corporate brand that is designed to remove friction to sales. It is like air power in battle, but the infantry of sales people still has to march to customers to get projects.
The disciplined delivery army is probably a bit disoriented and demoralized too because many of its generals and brigadiers have left the battlefield. So perform while you transform is an even bigger challenge for Sikka. We wish him well, and hope his board will stand by him through the testing times ahead as he goes where no Infosys leader has gone before.
Rama Bijapurkar is an independent market strategy consultant and a former Infosys board member.
Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
Business NewsCompaniesPeopleFor Infosys’s Vishal Sikka, perform while you transform is an even bigger challenge
First Published:17 Jun 2014, 12:10 AM IST
- Top Gainers
- Top Losers
- 52 Week High