A year on, how Vishal Sikka has put his stamp on Infosys12 min read . Updated: 31 Jul 2015, 12:13 AM IST
Collated from multiple meetings with analysts, investors, rivals, and insiders, are eight ways in which the CEO has been changing things at Infosys
Bengaluru: One mid-summer day last year, Vishal Sikka, then recently named as the first non-founder chief executive officer (CEO) of Infosys Ltd, met with some senior executives of the company at a guest house in Hauz Khas in South Delhi.
Sikka, now 48, had a question for the group, which included then CEO S.D. Shibulal.
“How many projects are underway at Infosys?"
No one had an exact number.
“It took the team four-five weeks to assemble this data in one spreadsheet," Sikka said in an interview in May.
Once he joined the company in August 2014, Sikka—he is considered the brain behind German software firm SAP AG’s blockbuster data analytics platform HANA—made sure that all Infosys project managers updated the status of their projects and shared it with his executive assistant. Starting January, he has been getting a spreadsheet on each of the projects the company is working on.
“Every weekend, I go through this," said Sikka in the May interview.
There are around 8,500 projects on the spreadsheet.
On Friday, 31 July, Sikka completes a year in office.
The milestone comes less than 10 days after Infosys pleasantly surprised analysts. The company’s revenue grew by 4.49% sequentially to $2.256 billion in the three months ended 30 June, or about $30 million more than the consensus estimates of analysts. The most optimistic estimate expected the company to grow by 3.5%.
By then the valuation differential between Infosys and Tata Consultancy Services Ltd (TCS) had narrowed to under 10% from over 20% in early July, Mint’s analyst Mobis Philipose wrote after the results.
Sure, Philipose caveated that “investors shouldn’t get carried away with the good revenue performance in just one quarter. Other IT companies such as TCS and Cognizant Technology Solutions Corp. have been far more consistent with their performance," but the buzz about Infosys—all bad a year ago—is beginning to change.
The Infosys of today is a far cry from the late-1990s company that could do no wrong, but it is no longer the firm that, not too long ago, couldn’t seem to get anything right.
In his year on the job, Sikka has already been able to stabilize Infosys by building a stronger senior management team, lowering attrition, engaging better with customers, improving employee morale and winning more business from existing clients, according to industry veterans, analysts and company insiders who report to him.
In this period, Infosys has also embraced disruptive (and cool) technologies such as automation and intelligence (AI).
There have also been downs.
Infosys posted dismal fourth quarter numbers (January to March) and failed to meet its earlier guidance of growing at 7% in 2014-15.
Investors started getting jumpy and Sikka tried to assuage investor concerns. In the third week of May, over a two-day visit to Hong Kong, Sikka met with multiple large investors, five times. Since Sikka was appointed CEO last August, Infosys has briefed analysts 10 times—Sikka himself addressed them seven times.
But there has been more good news than bad in recent months.
So, has the risk taken by Infosys’ board and then chairman K.V. Kamath (now chief of the BRICS Bank) in tapping Sikka for the top job paid off?
Has Sikka transformed Infosys employees into innovative thinkers from mere order-takers, which will help the company regain its title as the bellwether of the country’s $146 billion outsourcing industry?
“His major achievement to date has been stabilizing Infosys after the turbulent times after (N.R. Narayana) Murthy’s return," Thomas Reuner, managing director of IT outsourcing research at HfS Research, said, referring to the Infosys co-founder’s failed attempt to revive its fortunes after coming out of retirement in 2013.
“The first year of Vishal’s tenure at Infosys can be characterized as a roller coaster of often conflicting perceptions, sometimes being the saviour of one of India’s iconic companies, sometimes being portrayed as daring to manage Infosys out of the (Silicon) Valley, thus eroding the Indian business culture," Reuner said.
Sikka declined to be interviewed for this story, but here, collated from multiple meetings with analysts, investors, rivals, and insiders, are eight ways in which the new CEO—he is still considered that—has been changing things at Infosys.
8. Getting people to stay
When Sikka took over, Infosys was struggling for growth and bleeding talent: In the April-June quarter of 2014, 10,627 engineers left the company and attrition touched around 20%. Promotions and hikes wouldn’t suffice, Sikka realised.
Employees are inspired when “they are part of doing something great", Sikka said in his May interview. Even before he officially came on board, Sikka started quizzing a few people working in the delivery side of the business if Infosys had any “interesting projects", according to an executive working in the product engineering unit. Sikka urged employees to look at embracing some disruptive technologies such as AI while working on some of the projects.
“Crucially, he gave his employees a renewed sense of pride and direction," said Reuner of HfS Research.
On 15 July last year, Sikka wrote an email on to all Infosys engineers to launch his crowdsourcing initiative “Murmuration", under which he asked them to share an innovative idea on which they believed clients should focus. To make sure it was not just another corporate exercise, Sikka and chief operating officer U.B. Pravin Rao have implemented 10 ideas shortlisted from the 2,700 entries in some projects.
Sikka has also made an effort to directly acknowledge good work, even when it is done by someone beyond his direct reports. “The biggest change is that anyone who does work which stands out can expect to be acknowledged by the CEO," said a senior Infosys executive who claims to have experienced this firsthand. “This is unheard of in a company of our scale." Infosys currently has around 180,000 employees. Abdul Razack, currently head of platforms at Infosys and one of Sikka’s former colleagues at SAP, said Sikka’s ability to “empathize" is one reason so many people to relate to him.
7. Turning order takers into innovative thinkers
Last August, Sikka took two dozen senior executives, including the company’s 12 executive vice presidents, to Stanford for a day-long class on design thinking, a user-centric approach of problem solving popularized by California-based consulting firm IDEO and now followed by companies across the globe—from SAP to Procter and Gamble Co.
Later that month, when Sikka visited Infosys’s training facility in Mysuru, he asked Binod Hampapur Rangadore, executive vice-president and head (talent fulfilment function) whether the company could start training its employees in design thinking.
By then, another of Sikka’s colleague from SAP, Sanjay Rajagopalan, had joined Infosys. He and Rangadore started conducting workshops for faculty members on design thinking. Meanwhile, back in Palo Alto, Sikka got two consultants, David Kelley, founder of the Stanford D School and his brother Tom Kelley, to help the team in Mysuru.
In October, the Kelley brothers spent two weeks in the company’s Mysuru facility, training future design thinking coaches at Infosys and setting up modules, according to one executive based out of Mysuru.
6. Building a strong A-team
Starting last August, Infosys has seen 16 of Sikka’s former colleagues from SAP join the company with ranks of associate vice-president and above. “The best transitions occur with a mix of internal promotions and external hires in order to avoid an “us" versus “them" mentality from taking root," said Mike Myatt, chairman of N2Growth, a US-based leadership consultancy. “In any new CEO transition, building bench depth/strength is critical. By embedding the hires deeper-down, it gives the new CEO visibility into the bowels of the organization where the real transformation must occur. It’s an expensive move short-term, but the ability to quickly impact day-to-day operations will pay huge dividends over the long-haul."
5. Seeking outside help
To catch up with rivals such as Nasdaq-listed Cognizant, Sikka knew Infosys would have to come up with a few platforms to bundle with its service offerings. On 8 October, Sikka first discussed an open-source analytics platform in a meeting with Navin Budhiraja, head of architecture and technology, and Razack at the company’s Palo Alto office.
Sikka reached out to his long-time friend Dina Bitton, author of TPC benchmark (Transaction Processing Performance Council), one among the many benchmarks for transaction processing and testing of online transaction processing capabilities, for help. Sikka also got Erin Liman, a Palo Alto-based design thinker, to work with Rajagopalan in curating design thinking workshops with clients, and Stanford professor Ashish Goel in helping the company design a better approach to improve engagement among its employees.
“A significant shortcoming of Infosys in the past was being overly insular and generally not open to good ideas and advice from industry experts outside of the company," said Rod Bourgeois, founder of US-based DeepDive Equity Research. “To the extent that Infosys is now better incorporating relevant external inputs, I think this is a meaningful sign of progress."
By January this year, Infosys had another reason to celebrate as it finally unveiled open source data analytics platform IIP—in a little less than three months since Razack and Budhiraja started with a team of 200 engineers to help companies make sense of the millions of structured and unstructured data sets. Currently, Infosys has about more than 100 ongoing projects running on IIP.
4. Shuffling managers
Despite the steady signs of progress, Sikka realized that a lot of the company’s clients were holding back on their technology spending.
Even as Sikka and Rao were deliberating on how they could improve the company’s delivery side of business, S. Ravi Kumar, the then head of cards and insurance business, offered to help. “Ravi had done a fantastic job in making the credit card business and he is strong when it comes to execution. So we thought it makes sense to have him head the entire delivery as it frees me to concentrate on other works," Rao said in a March interview. Infosys also decided that Kumar would move from New York to Bengaluru by the middle of August.
In February, Infosys undertook a management reshuffle on its delivery side under which each of its seven service lines, including Big Data and analytics and consulting, would work as “horizontals" and offer solutions to Infosys’s customers across industry segments such as banking and financial services, and energy and utilities. The management further started to infuse coherency into different businesses by clubbing together product units and merging consultancy practices, leaving the core to focus on the services side of the business.
In March, Sikka decided to bring in Infosys’ Swiss subsidiary, Lodestone, within the firm and merge it with its own small consulting business, and asked Infosys veteran Sanjay Purohit to head the unit. The company also merged the three units of the research and development arm of the firm, Infosys Labs, with its delivery-side operations with the objective of developing intelligent platforms. Finally, it carved out Finacle, the core banking platform business, and clubbed it with EdgeVerve, the products, platforms and solutions unit. The products businesses will be overseen by Michael Reh, until now boss of Finacle and another colleague of Sikka’s at SAP.
3. Direct supervision of key accounts
Sikka then got the company’s top 15 accounts, including Bank of America Merrill Lynch and Apple Inc., directly under his supervision. He assembled a team of three senior executives—Deepak Padaki, vice-president, strategy, and chief risk officer, Ranganath D. Mavinakere, executive vice-president and head of strategic operations, and Ritika Suri, head of mergers and acquisitions—to oversee the largest clients.
From having a little less than 200-odd projects in next-generation technology areas, such as open-source and AI, in March, Infosys is currently working on 400 such projects through which it aims to generate new revenue streams for the company.
“We have about 400 projects ongoing with clients on which we are working on AI, automation and are having very strategic design-thinking engagements with clients. This is helping us make a breakthrough and work on new projects," said Sikka.
2. Getting serious about M&A
Infosys has traditionally been wary of large acquisitions. That hasn’t changed under Sikka but his former SAP colleague Suri, now in charge of acquisitions at Infosys, has a different approach. “We actually listen more to our clients. Their needs. Unlike the traditional way of, you know, engaging with investment bankers," Suri said. Consequently, Infosys has made strategic acquisitions to help it better cross-sell its existing service offerings.
Since the start of the calendar year, Infosys has spent $320 million in buying automation technology provider Panaya and digital commerce firm Skava. In the three months ended 30 June, Infosys managed to win 15 new clients using Panaya’s automation technology and 14 through technology brought in by Skava. Not all these deal wins are from new clients. The company added 79 clients during the quarter.
Infosys has also picked up stakes in three start-ups for a total of $18.4 million. Infosys first invested $15 million to pick a stake in a spin-off of DreamWorks Animation earlier this year and later made an additional $2 million investment in Air Viz Inc., which has been spun off from Carnegie Mellon University and makes air quality sensors. In the last quarter, Infosys spent $1.4 million to pick a 5% stake in Bengaluru-based ANSR Consulting, which helps global companies set up service and delivery centres in India.
1. Focus on IP
Sikka has tasked his former SAP colleague, Yusuf Bashir, to oversee Infosys’ $500 million innovation fund, under which the company plans to invest in start-ups focused on disruptive technologies, including automation and AI, which will help the firm fill the missing innovation strand and help “renew" the way it has traditionally offered software to its customers. Sikka is betting that by using some of these technologies, Infosys will grow at a compound annual growth rate of 13-14% in its traditional outsourcing business, which is currently going through a challenging period, as pricing pressure erodes profitability across the industry.
For this reason, some are already calling Sikka’s first few months as the making of a “new Infosys".
“A new Infosys is forming, with a lot of potential to transform itself into a player with significantly more product IP (intellectual property) than ever before," said Holger Mueller, principal analyst and vice-president at Constellation Research.
However, some analysts said that the Street will only be pleased if the company outperforms its peers consistently. “To catch up with its rivals, Infosys has to outperform them consistently. Therefore, the plaudits for the most recent financial results will only be relevant if they can be sustained," said Reuner.
Bozhidar Hristov, analyst at US-based research firm TBRI, too, thinks “it’s too soon to make grandiose comments for the future", but that it is “refreshing to see Infosys executing its strategy".
1981 and 1999 were two important years for Infosys.
The company was founded by seven engineers in 1981.
Just before the turn of the millennium, the Bengaluru-based company put India firmly on the global outsourcing map when it became the first Indian firm to be listed on Nasdaq.
Will 2014, the year Sikka came onboard, be remembered as another watershed for Infosys?