Home / Companies / News /  Vishal Sikka hires former SAP executive to run $500 mn innovation fund

Vishal Sikka has hired a former SAP colleague to head Infosys Ltd’s $500 million innovation fund, mandating five of his trusted lieutenants from the German business software maker to help India’s second largest software services provider meet its $20 billion revenue target by 2020.

Yusuf Bashir, who was vice-president of new products and business development at SAP before joining the Indian company, will be the managing director of Infosys Innovation Fund, the size of which was increased fivefold this year by Sikka, the first non-founder chief executive of Infosys.

“Yusuf (Bashir) has been mandated to oversee this fund through which we will be making investments in start-ups focused on technologies which we believe we don’t have and our clients need. So through this, start-ups get access to our huge client base," said an executive who did not want to be named as he was not authorized to speak to reporters. Until now, Ritika Suri, head of mergers and acquisitions, had been overseeing the innovation fund.

Bashir is the 14th senior SAP executive to have joined Sikka at Infosys and the ninth to be based out of Palo Alto. He will also oversee the $250 million Innovate in India fund and the start-up incubator, under which the Bengaluru-based firm promises to scale up the business of technology start-ups, the executive said.

Infosys expects many of these start-ups to do the back work in the areas of open source, artificial intelligence and big data, which will help the 176,000-strong information technology (IT) 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 margins of the country’s $146 billion software industry.

Bashir joined Infosys last Friday, when Sikka first shared his “aspirational" 2020 vision, under which Infosys aims to generate at least $1.5 billion in revenue from acquisitions and another $2 billion, or 10% of $20 billion, from business brought in by its platforms, products and solutions business.

Since taking charge in August, Sikka has already put four of his former SAP colleagues in key positions, including Suri as head of mergers and acquisitions, and Michael Reh, who has been asked to revive the fortunes of the core banking platform, Finacle. Sikka has also hired Abdul Razack to head technology platforms and in March hired Kaustav Mitra to woo start-ups so that Infosys can take many of the their next-generation technologies to its more than 900 clients.

Significantly, all the five executives are based out of Palo Alto, California.

Some experts, however, have started questioning the strategy rolled out by Sikka, who reiterated last week that Infosys will come back to industry-matching growth numbers by September 2016. “I think it’s going to be extremely tricky for Infosys to focus on internal and external issues simultaneously and expect excellence within 15 months," said Patrick Heffernan, a Boston-based analyst at Technology Business Research. Heffernan said that while Sikka seems to be doing the right things, it won’t be easy to “implement all facets" when it comes to “moving the needle on revenue growth" and “maintaining margins while investing in innovative technologies".

“Something’s got to give," said Heffernan, adding that “with the uncertainty in the market (economic, regulatory and political), the September 2016 timeframe seems too soon".

Sikka’s vision of making Infosys a $20 billion company is a tall task as it will mean it will have to grow at a compound annual rate of more than 20% for four years, starting in April next year. This, at a time when the company has struggled to meet its forecast of growing at 7% this year, is a “bold bet", according to a Mumbai-based analyst working at a foreign brokerage, who asked not to be named.

Still, to be fair to Sikka, some of these executives have already started work to help Infosys achieve this ambition. Until last July, Infosys was “doggedly conservative", having made just five acquisitions since being founded in 1981. Since Sikka’s arrival, the firm has spent $320 million: it bought automation technology firm Panaya in February for $200 million and San Francisco-based e-commerce firm Kallidus (doing business as Skava) for $120 million this month.

“Acquisitions is always a risky bet. We had to get someone from outside who could take these bets, not bogged down by the fear of making a wrong bet," a company executive said last Friday on condition of anonymity.

Until now, Suri was overseeing Infosys Innovation Fund, under which 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.

Under Reh, Finacle has had two “impressive quarters", according to Sikka, and the core banking platform is being re-engineered, with the management even evaluating ways to incorporate applications based on the underlying technology of virtual currency Bitcoin. Razack has already helped come up with the firm’s first open source technology platform, Infosys Intelligent Platform, which it is using for 100-odd projects.

Some experts, however, did add a word of caution.

“Crucially, any necessary investments in future IP (intellectual property) have to be balanced by more consistent sales execution," said Thomas Reuner, managing director of IT outsourcing research at HfS Research.

Varun Sood
Varun Sood is a business journalist writing on corporate affairs for the last fifteen years. He also writes a weekly newsletter, TWICH+ on the largest technology services companies. He is based in Bangalore. Varun's first book, Azim Premji: The Man Beyond the Billions, was brought out by HarperCollins in October 2020.
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