Infosys And The New Order

If history had had its way, S.D. Shibulal may have never become the CEO and MD of Infosys. Not too many people know that when Infosys was still struggling, Shibulal took a five-year sabbatical and joined Sun Microsystems. Upon his return in 1996, Narayana Murthy reinstated him at par with the other founders and senior professionals. According to old-timers, it had led to significant bad blood among the founders and professionals, many of them sharply questioning Murthy’s decision by alluding to the bigger sacrifices that each of them had made by staying put.

Before he steps down from the post on August 20, 2011, Murthy has once again used the leverage he has with the board to ensure that the management reshuffle makes way for Shibulal to be elevated from the post of COO to the new CEO. Just that this time, Shibulal may no longer have the gentle hand of the patriarch on his head. He’ll have his best buddy ‘Kris’ S. Gopalakrishnan though, but equally, he’ll have to contend with the formidable K.V. Kamath, the first independent chairman in Infosys’ 30-year-long history.

The Gentle Touch
Ever since his name popped up in the public domain as a frontrunner to replace Murthy as Infosys’ chairman, Kamath has always maintained a dignified silence. A beatific smile would greet every query on the matter. A couple of times in media interviews, he even dismissed the possibility as baseless speculation.

Yet there was never any doubt about his appointment. Ever since the nominations committee headed by Jeffrey S. Lehman began the process of selecting Murthy’s successor 14 months ago, Kamath was the clear favourite. For one, the board had ruled out bringing in a rank outsider who wasn’t quite familiar with the company and its culture. And besides, Murthy’s successor couldn’t exactly be a pygmy. No one on the current board had either the experience or the stature to match his.

In the weeks leading up to the announcement, there was endless speculation in the media about the board’s choice, including a seemingly facile opinion poll of Infosys employees at the Electronic City campus. So when Murthy made the announcement about Kamath’s appointment at a packed press meet on April 30, it seemed like a bit of an anti-climax.

Now, here’s the sting in the tail: If you expected Kamath to be his usual, hard-charging, Mr. Fix-It persona as the new chairman of Infosys, you’d be way off the mark. The indication is that he will be everything but aggressive or demanding of his wards. When he sits at the helm of the Infosys board, expect a calmer, gentler elder statesman, who gives space to the executive management team of Gopalakrishnan and Shibulal to perform their roles, perhaps occasionally nudging them to look at strategic issues they may have overlooked. He will remain stationed in Mumbai and be available for about 30 days a year at Infosys, staying at the company guest house in Bangalore.

In Kamath’s own words, his job will be to keep a gentle hand on the steering wheel, for at least the first four quarters. He will make every effort not to ruffle too many feathers, as Infosys makes the delicate transition from a founder-led organisation to one steered by a set of younger professionals.

There are some hidden clues to his deliberate restraint. While Kamath has earned a larger-than-life image as the transformational leader at ICICI Bank who would push his colleagues and build aggressive, young leaders, there were a handful of people who he always deferred to. Some of these special people served on the ICICI board when Chairman Narayanan Vaghul brought Kamath to head the bank. Apart from Vaghul himself, they included the late C.K. Prahalad, Ashok Ganguly and Murthy. “He believes that these people have made a special impact on his life. And so, he tends to go out of his way for them,” says a senior industry professional.

As he steps down, Murthy needs Kamath to signal the transition to a new era and satisfy the public perception that the new chairman will nurture professional leaders beyond the founders. At the same time, Murthy also doesn’t want to alienate his band of co-founders. He wants to ensure that their interests are taken care of.

So that’s the delicate balancing act which resulted in the appointment of Gopalakrishnan as the executive co-chairman and Shibulal as MD & CEO. By all indications, Murthy had used all the leverage as the towering personality on the board to strike the best compromise formula. In one masterstroke, he’s ensured there’s no loss of face for Gopalakrishnan while vacating the top job for Shibulal.

More than anyone, as Murthy’s junior at IIM-A, ‘Tall Vaman’ (as Kamath was called at the Vastrapur campus) would have been acutely aware of his friend’s predicament. It remains to be seen whether Murthy’s shadow remains on Infosys thanks to his new role as chairman emeritus — and whether Gopalakrishnan, Shibulal and the old directors continue to flock to him.

 

Illustration: Sameer Pawar

Asked by Forbes India, Kamath says it is natural for Murthy to be the best friend, philosopher and guide for him and the company. But by all indications, he will watch the space carefully, refrain from rocking the boat too much and rely on established board processes to steer the ship.

Now, for any Infosys watcher, the moot question: Does the Gopalakrishnan-Shibulal duo have a bold plan to remake Infosys and give it the shot in the arm it needs to compete with the likes of Tata Consultancy Services and Cognizant Technologies?

The Heavy Push
Think about this: Gopalakrishnan and Shibulal are the last of the seven Infosys founders to run Infosys. (K. Dinesh has quit from the board). There are constant comparisons with the dream team of Murthy and Nandan Nilekani, who led Infosys during its best years. Unfortunately, both the current leaders lack the charisma and presence of their predecessors. They have always been the back-room boys, growing up under the shadow of their gregarious, socially savvy colleagues. Now, for the past 18 months, they’ve been entrusted with the formidable challenge of reinventing a $6 billion enterprise that involves making a global team of 130,000-plus people dance to a new drum beat.

 “Traditionally we have been internally focussed when it came to strategy (building infrastructure, training, hiring people from campus etc). Now we were looking at it from [an] external view point [and] asking how do we align ourselves to our client’s goals?” Shibulal had told Forbes India in October last year. The duo’s game plan — referred to as Infosys 3.0 — is their best chance to silence the critics and leave behind a legacy when they retire in about five years from the current roles.

The plan was born in adversity. Not long after Gopalakrishnan and Shibulal took charge at Infosys in April 2007, the global recession erupted. Infosys went through a gut-wrenching experience. The year they took over, the company’s revenue grew only 3 percent. For a while, it looked like that the double-digit growth the industry was used to would not return at all. Expecting dull demand, Infosys moved to protect margins, cut costs and be choosier with investments. Gartner equity analyst Sandra Notardonato says that during the throes of recession, Infosys was the slowest growing major company.

But the fears were short-lived. Demand came back even though clients had become more demanding. Competitors like TCS and Cognizant, which had kept up the focus on growth, reaped the benefits better than Infosys.

The changed market realities forced a rethink on the part of Gopalakrishnan and Shibulal. By August 2009, they were giving shape to a new plan. In January 2010, Gopalakrishnan made a presentation to the entire board articulating his new vision to remake Infosys.

At the heart of this plan is a strategy to transform Infosys from a technology provider to a business partner for its clients. Infosys gets two-thirds of its business from outsourcing of software and business processes. Gopalakrishnan wants to cap it at 30 percent, while boosting two new lines of business — (intellectual property-led) innovations and (consulting-led) transformation.

The new strategy will change the culture at Infosys fundamentally. For instance, Infosys Consulting which has remained a separate company based in the US, will now be merged with the parent. It is no longer just about technology. It is about being intimate with the client’s business and helping in business transformation. To signal the new thought, Infosys has now dropped ‘Technologies’ from its name.

The Hard Drive
As he takes over as the new CEO, how much of a desirable newness will Shibulal bring to the table? Especially when he belongs to the same bunch of founders and been personally groomed by Murthy.

People who know Shibulal say that the biggest thing going for him is his ambition and the fact that he knows the insides of the organisation extremely well. “Shibu is one of the most determined people I have met. If he starts something, he will finish it,” says Subhash Dhar, head of sales and marketing, who will lead the Innovation service line under the new regime.

“I’ve always known him to be a tenacious rival,” says the CEO of a major rival software company in Bangalore. Shibulal is very strong on operations and was head of delivery for several years. “The big difference is that when Shibu meets a client, and promises to do something, he won’t leave it at that. He will also tell us how to do it and make sure it’s done. He will also know who is the best person inside Infosys to do that job,” says Dhar.

He is organised and uses a lot of technology and tools to keep track of his agenda. He’s also said to be very big on lists — he has a to-do-list for everything. The joke inside Infosys: If Shibulal puts something on his list, you better make sure you too put it on your list. “He will ask us a question and six months later, will call and follow up on that,” adds Dhar.

Yet all indications are that Shibulal will not stray very far from the Murthy doctrine, with its focus on predictability, sustainability, profitability and de-risking (PSPD), but he will build on the foundation laid down by his predecessors. “We are not a flamboyant company so it isn’t that a new CEO comes in and suddenly changes things here,” said Shibulal in an earlier interview.

In fact, some at Infosys believe there is no need for drastic change. They reckon that it is a well-oiled machine, with good processes for project delivery, finance, accounting and recruitment. What is missing is the market-facing piece and that is being addressed in the current re-organisation.

Shibulal enjoys another advantage: He has had a lot of say in selecting the next generation leaders. They have worked with him for quite a while now.

How the power equations change on the board will be interesting to watch. The three key roles have been clearly worked out. Kamath will manage the governance process on the board. Gopalakrishnan, who has been running the organisation and understands the industry, company and people, will act as a close advisor to Shibulal and provide the necessary air-cover. That’ll allow the CEO to settle into his role.

Shibulal’s first challenge is, of course, to firewall Infosys from the vicissitudes of the market it serves and revive the bellwether status it till recently enjoyed among investors. But he also has a bigger responsibility: to prepare the company for a life beyond its founders.

Three new executive directors from the next rung will be inducted into the board in June. They will be among the contenders for the CEO’s job when Shibulal’s term ends five years later. The new chairman, Kamath, says his big task is to work with Gopalakrishnan and Shibulal to build this leadership pipeline. Along with the rest of the board, he’ll also keep an eagle eye on the execution of the new strategy.

So, if they learn to work as a team, Infy’s new triad could become the dream team that the firm now needs.