What Ashok Vemuri's move means for iGate and Infosys

NS Ramnath
Published: 29, Aug 2013

I have been with Forbes India since August 2008. I like writing about ideas, events and people at the intersection of business, society and technology. Prior, I was with Economic Times. I am based in Bangalore. Email: ns.ramnath@gmail.com

Ashok Vemuri, global head of manufacturing and the Americas at Infosys, has resigned and will be joining iGate Corp. While iGate hasn't confirmed, Economic Times reports that Vemuri will in fact be moving to the company that hit the headlines after it fired its CEO Phaneesh Murthy in May this year. iGate has been on a hunt for a new chief since then. Its search was widely followed and passionately discussed because of the outsized image Phaneesh had in the industry. In fact, what differentiated iGate from other mid-tier companies was Phaneesh himself - with his supreme confidence and superior salesmanship - and the way he positioned the company around the (less popular) outcome based pricing model. In effect, this meant a new CEO cannot simply take over from where Phaneesh left. He will have to establish himself afresh and create a new identity for the company.

Vemuri is not Phaneesh. But he might just be the right person to head iGate. He was a contender for CEO post at Infy; he was in charge of its biggest market, and doesn't lack in ambition. On the flip side, the issues that iGate faces are very different from and more challenging than the ones that Infosys does. The broader market is not exactly conducive for mid-sized IT services companies right now, and iGate has its own internal issues including Patni integration. On balance however the consensus is that Vemuri will have a positive impact on iGate.

On the other hand, his move is mostly seen as a negative for Infosys, not just because he held a $2 billion portfolio, but also because his is the third big exit in the last two months - Sudhir Chaturvedi, Infy's US head of financial services resigned last week and Basab Pradhan, its global head of sales quit last month.

Yet, this should come as no surprise for two reasons. One, ever since Narayana Murthy took over as the IT major's executive chairman there has been a big shift in Infosys in terms of power. Insiders say while SD Shibulal, Infosys CEO, was happy to give more power to top managers (such as Vemuri and BG Srinivas), under the new chairman decision making is getting more centralized. The chairman's office never had so much influence as it does today.

Two, leadership change in any organisation results in high profile exits, and Infosys is no exception. It might even do good, as it gives more space for Murthy. (One of the management concepts that influenced Murthy's thinking as he considered returning to Infosys was 'transient advantage', proposed by Rita Gunther McGrath, a Columbia Business School professor. In an article in HBR, she wrote: "In a lot of companies, the more assets and employees you manage, the better. This system promotes hoarding, bureaucracy building, and fierce defense of the status quo; it inhibits experimentation, iterative learning, and risk taking." McGrath called this empire building trap. Interestingly, it's a term that Infy an insider used to describe the situation there while I was reporting for a story on its strategy.)

The issue that Narayana Murthy faces is something different. When he returned to Infosys, Murthy brought in his son Rohan Murty, a PhD in computer science from Harvard, as executive assistant - which went against his stated principle of not letting the children of founders work in the company. He said Rohan was around only to make him more effective as chairman. More recently, it emerged that Rohan would be designated as Vice President, a move that was not looked upon kindly even by those who were forgiving the first time. (What next?) The big risk that Murthy faces today is not that he is letting talented people go, but that he is letting his cherished principles go.

  • Jazz

    Let's hope this change is a good change. As for Phaneesh Murthy it is strongly suggested that you speak to the girls mother because she has details of the entire sexual abuse. she has information about the pillow talk and the REAL Phaneesh Murthy. She was even approached by Phaneesh Murthy to purchase stock in her name on his behalf after he sold much of his stock, he told her he knew the price would go down but it would also go back up and he would make the purchase worth her while. He even told her that a close associate sold his stocks as well and that person was going to do the same thing but in a smaller margin. Ask the mother her name is Lily Roiz. She will tell you like it is.

    on Oct 22, 2013
  • Tan

    Brilliant article NSR. Rohan will never risk becoming CEO. He is being groomed to take over NRN' Board seat and thereby protect the family wealth and name. Fundamental question which all insiders know is that NRN never really left and is as responsible for the mess today as Kris / Shibu. - so why isn't he being asked about that? He is rehabilitating discards just because they are based out of Bangalore and are yes men. People like Jith, being given expanded roles is a JOKE.

    on Sep 21, 2013
  • Milind Jadhav

    Extremely flaky to say the least. Take a step back and ask a question if Phaneesh Murthy truly achieved anything apart from swinging the Patni deal, albeit at a very high cost. Recall that he was not the only decision maker there. Most people do not know and do not ask about how much organic growth he managed at iGate. Outcome based pricing may appear to be a new game but is it really? Even if it is, how much did he manage to sell? In any case, good PR firms help build larger than life images. Therefore, the shoes are not that big to fill as you make them appear!

    on Sep 11, 2013
  • k

    All these make infosys loose it prestige that leads to loss of business. Infosys has highly talented persons and we can hope high negative growth soon.

    on Sep 8, 2013
  • Prateek

    Looks like NRN has something big in mind which will certainly be revealed as the time passes. Else, he does not seem to be man going against his own principles making the Leaders angry which ultimately is costing the company their leadership.

    on Sep 7, 2013
  • Infy Employee

    Personally I dont understand the reason behind so much the significance being given to Rohan Murthy's appointment. Clearly last few years (since Kris became CEO) have been bad for Infosys... Falling Sales, Commoditization of core business, Bad HR policies leading to depressed employee morale... it has had all issues you could think of. The company needs serious help with fresh ideas and a new perspective. If Rohan can help turn the company around, so be it. Why do we have a Govt Organization mentality that a VP needs to be someone with grey hair? He should be hired for his capabilities and his credentials are not something to be ignored. As an employee, I am more worried about NRN coming back... I am not sure with he is in line with where the market has moved in the last 4-5 years.

    on Sep 6, 2013
  • Sreekanth Yelicherla

    "The big risk that Murthy faces today is not that he is letting talented people go, but that he is letting his cherished principles go." Brilliant 'ending'!

    on Sep 2, 2013
  • Prahlad

    I so agree with Sachi Mohanty here....there is really no hero left in this country any more? How short termism is destroying our country. Forget about Rohan coming from backdoor, coming back of NRN was in itself a huge blow to belief that Infosys is well managed company.

    on Sep 1, 2013
  • iT dude

    IGATE always doles huge money to buy executives, its fundamentals are weak. RBC revenue is an issue, lawsuit from sexual affair and several outcomes, huge 1 billion loan, no organic growth. APax is trying its best to turn this around. Ashok needs CEO Job in a hurry and make quick 5 million in 2 years. This is clearly a window dressing act for a sale. What happened to that guy who came from Accenture - Sanjay Tugnate, he must be looking out for job. He can't pretend that he got some large deals like Netlife.

    on Aug 30, 2013
    • ItsAllInTheCloud

      You're from igate and obviously bitter :) Not sure what your point is. Luring key management talent with challenging career prospects, money, stock etc. has been part and parcel of Corporate strategy for ever now. Vemuri has a great opportunity to create a name for himself outside his erstwhile employer (the family / founder company). Time will tell whether he can successfully carve out his own niche away from the overbearing influence that Phaneesh has left behind. Difficult, Basab is testimony to not being able to steer Infy Sales after Phaneesh was fired in the early 2000s.

      on Sep 4, 2013
  • Prerna Motwani

    Totally agree with this article...

    on Aug 30, 2013
  • Amit Agarwal

    On Rohan Murty's entry into Infosys: I think Mr. Murthy may have learned the hard way that Indians are not culturally and professionally prepared to lead companies as non-founder/non-promoter family. Rohan might be a back-up to lead the company in case other professional managers fail - which I feel is great. Who would you choose to be a CEO: 1. An external guy who has never worked @ Infosys. 2. An internal guy who is in executive council/board 3. Rohan Murty I would choose Rohan for a simple reason that his family's almost all wealth is in Infosys shares and hence he is more likely to make decisions that are better for Infosys in long term. Others are most likely to lurch on salaries, perks and bonuses.

    on Aug 30, 2013
  • Infy well wisher

    Agree with this article 100%. Murthy had lost all his credibility. The whole game is to remove all the CEO contenders one by one so that Rohan baba will become the next CEO in 2015. You will see Balakrishnan and BG leaving some point of time with the same flimsy reason like ashok. It is high time large investors demand accountability from the most incompetent board of Infosys.

    on Aug 30, 2013
  • Sachi Mohanty

    The out of turn promotion given to Mr. Murthy's son made me think: there are no heroes left in this country any more.

    on Aug 30, 2013
  • Manasi Puntambekar

    Loved the article. It sure is a must read from HR point of view to understand leadership challenges. Mr Murthy is being lenient and its so obvious . This is unlike the grace which surrounds Infosys and Mr.Murthy.

    on Aug 29, 2013
  • gopi krishnan

    On the son's new role, a certain Mr.Orwell must be grinning in his grave reminding us of his famous quote "All animals are equal, but some animals are more equal than others". http://en.wikipedia.org/wiki/Animal_Farm. Reminded me of Pink's song Dear Mr. President which starts with "What do you feel when you look in the mirror? / Are you proud?" Is this way the cookie crumbles? A sad moment indeed.

    on Aug 29, 2013
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