Why did Narayana Murthy come back to Infosys?

Founders coming back to run companies is not unusual. But few of them came back with their sons or daughters

Mitu Jayashankar
Published: 01, Jun 2013

I'm a Delhi girl who managed to embrace the quirks of the South Indian way of life after moving to Bangalore. A sceptic but not a cynic, I'm lucky to have been a part of the Garden City’s journey from a sleepy paradise to a bustling high-tech metropolis. I'm interested in technology and business, education, social entrepreneurship and philanthropy. I began my journalistic career at A&M and passed through the portals of Businessworld and The Economic Times before coming to Forbes India.

(N. R. Narayana Murthy, billionaire founder of Infosys Technologies Ltd. Photo: Getty Images)
N. R. Narayana Murthy, billionaire founder of Infosys Technologies Ltd. (Photo: Getty Images)

On Saturday morning, NRN Murthy joined a long list of founders such as Michael Dell, Steve Jobs and Howard Shultz, in the entrepreneurial hall of fame. All of them like Murthy returned to the companies they had started after either retiring or being ousted from them. Founders coming back to run a company is hardly unusual. Many like Jobs have actually been far more successful in their second stint than they were in the first. So in the global scheme of things, NRN Murthy coming back as Chairman of Infosys is not such a big deal.

Especially when the company is going through a challenging time as Infosys clearly is. At such time investors often feel that there is no one better than a founder to steady the ship.

Murthy has never hidden his or his family’s attachment to Infosys. Infosys had seven founders, but it was only the Murthys who referred to Infosys as their child. A founder’s wife once told me that none of the other founders could match the intensity of how the Murthys felt for Infosys. Murthy has always maintained that if Infosys needed him, he would not hold himself back.

But Murthy’s return to Infosys is a little bit different from the other iconic founders mentioned at the beginning of the article. None of them came back to the company along with their sons or daughters. But more on this later, for now let’s look at some other important issues.

The biggest question is what happens now to the succession planning at Infosys? With the founders back in the key executive roles, what does it mean for the rest of the management team? There are at least three leaders (B G Srinivas, Ashok Vemuri and V Balakrishnan) waiting to take over from S D Shibulal when he retires as CEO in 2015. What happens to them now that Murthy is back as executive chairman? The assumption was that one of them would become the CEO and Kris (S K Gopalakrishnan) and Shibulal would be kicked upstairs as Chairman and Vice Chairman respectively.

If Murthy stays on till 2018, then it means that either (Kris) Gopalakrishan, or Shibulal might have to go. After all even Infosys cannot afford to keep three chairmen in the company.

Now let’s examine the issue of bringing in Rohan Murty into the company. Again there is nothing unusual about this scenario. After all Rishad Premji works at Wipro and Mukesh Ambani succeeded his father at Reliance. Rohan is well qualified, and by all accounts extremely righteous and intelligent. The world in which Murthy ran Infosys (between 1981-2002) has changed dramatically. He has not held an executive role at Infosys for the last 11 years. When he was the CEO, there was no iPad, Facebook, Twitter or Tumblr. At nearly 68 years of age, it is not wrong to assume that Murthy might have fallen behind on some of the big trends driving IT spending today. Rohan has a PhD in computer science from Harvard University. Imagine the scenario. Murthy is meeting the CIO of Apple and Rohan is by his side. Murthy would feel a lot more confident in that meeting and the client would be a lot more impressed.

Except for one detail.

For as far as anyone can remember, Murthy has held that no family member of a founder can ever come to work at Infosys. It is a rule he set himself and all these years he has taken great pride in living by it.

The whole magic about Infosys was that when it gave its word it knew how to keep it. If it made offers to employees and the market tanked, it honored them no matter what. If it made a promise to shareholders about meeting its revenue and profit guidance, it kept it, quarter after quarter. If it said founders would retire at 65, it made sure they were gone by that time. If it said founder’s family members would not join the company, it enforced the rule strictly. Some time back, in an interview with me, Rohan had said that what he most admired about his father was that Murthy never went back on his word. He had said that he would often ask his father jokingly whether he could join Infosys. And Murthy’s answer would always be the same. No. Once a promise has been made, it had to be honored no matter what.

For a while now, Infosys hasn't been able to keep up with its promised guidance to shareholders.

Today one more promise was broken.

In the press conference today Murthy labored on that Rohan was only coming into help him. Rohan has not been given any leadership role at Infosys and he is not even going to draw a salary. As his executive assistant, his job is merely to make Murthy work more efficiently and effectively.

The question is, could Infosys find no one of Rohan’s caliber either inside or from outside the company? Does this mean that other founders can now send their children to work at Infosys?

Murthy’s coming back will definitely make shareholders happy. It is highly likely that on Monday morning the Infosys stock price will validate the Board’s decision to bring him back.

Company officials tell me that when they would go on investor meets; they would always be greeted with this one question, why don’t you bring Nandan and Murthy back? They say that old customers would prefer to talk to Murthy even after he left the company. At the last AGM Murthy chaired in 2011, I witnessed for myself the intense emotions shareholders felt for him.

So did the company bend under shareholder pressure and ask Murthy to come back? Did Murthy fear that if things continued the way they were at Infosys, shareholders would demand for Shibulal to go? In his press conference today he said, more than once, that the other two CEOs (Nandan and Kris) had the advantage of his support and guidance, something that Shibulal did not have. Is he coming back to Infosys to protect Shibulal and Kris from further criticism? Clearly with him back in the saddle, it will be very difficult for anyone to directly take on Shibulal or Kris.

So will things change for Infosys with Murthy back at helm? My colleague Ramnath has an interesting take on that.

Murthy though has refrained from making any predictions for the future. But earlier in the day, Kiran Mazumdar Shaw, Biocon Chairperson and a close family friend provided some interesting insights. Speaking on a news channel she said that Murthy was concerned about how the strategy was being executed at Infosys. One way to interpret this could be that he won’t make too many changes to the strategy but focus on putting it to work. Infosys has gone through a very long and painful restructuring in the last two years. It would be dangerous to put the company through too much change again.

It is difficult to predict the future. Looking back at the past is so much easier. The years before Murthy gave up his executive role were some of the best years of Infosys. The pressure will be on Murthy now to deliver the same results. It will be interesting to see if Murthy still has the midas touch.

As they say in Bollywood, picture abhi baaki hai mere dost (the story is still unfolding)

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