High valuations of new businesses are a byproduct of the free market mechansism, says infosys co-founder NR Narayana murthy
Infosys co-founder NR Narayana Murthy says the new breed of entrepreneurs is smart and energetic
Image: Selvaprakash Lakshmanan for Forbes India
One of India’s most celebrated entrepreneurial minds, NR Narayana Murthy co-founded the $9.5 billion information technology (IT) giant Infosys in 1981. Since then, the self-made billionaire (his estimated net worth is $1.87 billion, putting him at No 62 on the 2016 Forbes India Rich List) has had an accomplished journey as a business leader. He led Infosys as its chief executive for over two decades, until 2002. Then, after relinquishing his executive role for almost a decade, Murthy returned as executive chairman of the Bengaluru-based IT major in 2013, only to step down a year later when he exited the board as well.
The company he co-founded has not only created lakhs of jobs, but also made several of its staffers millionaires through its employee stock option plan. As he once said in an address, “Wealth—financial, intellectual, or emotional—must be shared.” Apart from being chairman of Catamaran Management Services Pvt Ltd, the venture capital fund he founded in September 2009, the 70-year-old now divides his time between his engagements, including being on the boards of the Ford Foundation, the United Nations Foundation, the Rhodes Trust (University of Oxford) and chairing the Public Health Foundation of India. He is also a trustee of the board of the Infosys Science Foundation, a not-for-profit trust that aims to encourage the culture of science and research in the country.
Apart from being actively involved in these initiatives, the avid reader and lover of Western and Indian classical music is looking forward “to a peaceful, healthy and happy life”. In an interview to Forbes India, the recipient of the Padma Vibhushan spoke on a range of subjects: India’s burgeoning startup culture, the changing dynamics of the workforce in the IT industry and how the education system needs to be more receptive to newer ideas. Edited excerpts:Q. How do you perceive the current entrepreneurship scene in India? Is it in good hands and going beyond the traditional business groups?
The Indian entrepreneurship scene today is a lot better than what it was in 2000, which was better than what it was in the ’80s and ’90s. Today, there is considerable confidence among youngsters. They are coming up with new ideas. Of course, most of the ideas come from the West but, by and large, there is high enthusiasm and energy among young entrepreneurs. Also, the fact that venture capital (VC) funding is available in plenty has added to this enthusiasm. Certainly, I think the financial and retail sectors have attracted the largest chunk of VC money. There is also considerable investment in new models of health care and education. Overall, I see the entrepreneurship scene as healthy and promising in India.Q. Today, most of the successful startup ideas are inspired from the West. Why are we not seeing more of innovative startups looking to solve India’s mass problems?
I can understand that because there is not much of a market in areas where someone is addressing concerns of the poor people [a large chunk of India’s population]. They don’t have that much of disposable income to access the market, which restricts the scalability of business. That’s why not too many startup entrepreneurs want to go into areas where there is less market opportunity. They want to explore markets like electronic commerce, urban transportation services such as Uber, online health care and education services. There’s nothing wrong in that.Q. Do you feel the lack of investor backing for such ventures restricts startups?
Which investor would try to put his or her money into ventures where there is a very low probability of return? The reality of India is that there is a lot of work that we all have to do together. This involves the government, private sector and the higher education system, so that together we can create a large number of jobs that leads to higher disposable income among the lower middle-class and the poor. This, in turn, creates a large market for entrepreneurs to address the needs of the masses. Till such change happens, it will be a theoretical exercise.
Q. You co-founded Infosys in the early ’80s and helped build it from scratch. Today, Infosys is India’s second-largest software services company. How do you see the change in the way business is done today, when companies claim valuations of multibillion dollars in less than a decade?
Who am I to comment pejoratively on those issues? The beauty of a free-market mechanism is that there is a seller and a buyer. As long as those transactions are done in a fair and transparent manner, both the parties are happy. One of the laws of economics is that in any exchange, both the parties should be happy, otherwise there will be no exchange. Therefore, I’m not anybody to judge if the valuation by some venture capital firm of some startup company is high or low. If I don’t like it, I will not invest in it. The new breed of entrepreneurs is smart and has convinced investors, who have consequently invested in those companies. Q. Often, the Indian startup ecosystem is compared to Silicon Valley. Has India managed to build a startup culture like in the West or do we need to bridge the gap in certain areas?
I wouldn’t think there is anything lacking among Indian startup entrepreneurs. What is missing is the readiness of Indian corporations and markets to absorb new ideas and technologies to derive competitive advantage for growing faster and profitably. On the one hand, we have to improve the education system in the country to provide a strong foundation to youngsters, while on the other, we have to become like the US, where ideas are lapped up by large enterprises for gaining competitive advantage. That’s why Silicon Valley succeeds better than any other place in Europe, Japan and China. Q. In the last few years, the Indian IT industry has been vocal about the adoption of newer technologies (Artificial Intelligence, machine learning, automation) and how they are changing the way software-services companies work. Though large players such as TCS, Infosys and Wipro are training their employees to adapt to the change, do you feel the companies are doing enough?
I think being open to the outside world, which has made better progress than us, and learning from it is always a good idea. Therefore, I’m quite happy about the various training initiatives that companies like Infosys are taking to make their employees learn from industry experts and professors from top universities globally. This will help Infosys and the overall IT industry in general. But, the impact will be specific to a company and an industry. In order to do it on a large scale, we need to evolve our own education system and prepare youngsters for the job market.
The education system has to be revamped, starting from primary school up to the graduate level. Unfortunately, our education system, due to various reasons, is still far behind compared to the West. Therefore, you don’t see too many examples of India-originated ideas succeeding on a global scale. The global delivery (IT-service outsourcing) model that Infosys conceptualised and popularised in the West, in my opinion, is the first worthwhile idea from India. After that, maybe there have been more such ideas, but I’m not aware of it.
There is also a second model, which was what we started talking about in 2004 when Mr Manmohan Singh became prime minister. It was about opening our door to well-known foreign universities to start campuses here so that we benefit from their expertise and experience. These are the two ways in which we can scale up the absorption of leading-edge ideas by Indian youth. Q. We don’t see many examples of Indian corporates backing science and research. What initiatives should companies take to encourage this?
Every corporation must ask how they can use new ideas to make themselves the leaders in their marketplace and provide better products and services to their customers while making better margins. The moment we accept this, every employee will start asking how to reduce the cost of operation and provide better value to customers with a higher level of quality. Once each one of us starts asking these questions in everything we do, doesn’t matter whether the person is a janitor or a CEO, our mindset changes automatically and we become much more receptive to new ideas. I think that’s the way we need to work. Every organisation will have to think about how to improve productivity, get better value for time and better value to customers using science, mathematics and technology. This will automatically create that mindset. Q. Infosys Science Foundation, the not-for-profit trust, was set up to promote the culture of science and research in the country. Could you give us an idea about the kind of work the foundation does?
Our long-term vision is that the Infosys Prize will become like the Nobel Prize. This prize will incentivise our researchers to work on the problems that confront us and arrive at workable solutions. Our vision is that the various programmes the foundation has taken up will create a set of youngsters who can compete with the best in the world in the field of science, technology and mathematics. We have the best set of jury chairs for the Infosys Prize [It is a Rs 65 lakh prize across six categories for contemporary scientists and researchers, whose work is connected with or impacts India in some way].
The foundation also runs programmes to train teachers of public schools from Karnataka and other states in India. [In the pilot year (2014), the foundation trained 640 teachers from government schools across all 34 districts in Karnataka. In the current academic year, 2016-17, it plans to train about 2,400 teachers in science and mathematics.]
We are also starting a programme where we would be selecting about 50 most promising students in the field of physics from high schools and colleges in December this year. The selected students will go through an intensive two-week programme that explores fundamental concepts in physics at the undergraduate level at the Infosys Mysore campus. We are planning to start a similar programme in mathematics. There are a lot of initiatives that the foundation has taken up. But, in a large country like India, this is a drop in the ocean. It is important that many more corporations start such initiatives so that India doesn’t get left behind in science and technology. Q. What led to the creation of the Infosys Science Foundation?
When Infosys completed its 25th year in 2006, we, the founders, started discussing how do we show our gratitude to our country because our talent primarily comes from India. We wanted to support researchers to become world class. We created a prize money of $100,000 (about Rs 65 lakh) to support young and talented researchers. We created six prizes—in physical science, mathematical science, engineering, biology and medicine, agriculture, humanities and social sciences. We carefully choose the jury members, who are the best in their fields from top global universities. We also insisted that the awardee should have ideally done his or her work in India. However, he or she need not be an Indian citizen. We are very keen on protecting the qualities of the awardees. We strive hard to ensure that the award maintains its prestige, quality and reputation. Q. You had an extremely enriching career as a business leader and built one of India’s most valued companies. What are your plans now?
I turned 70 this August. So, at this point of time, I do not have any plans or projects to accomplish/complete. I keep reading books on mathematics, physics and computer science. Due to my age, I’m a little slow in understanding [things], but I still retain my interests in these subjects. I listen to music. I just come to office [Catamaran, Murthy’s family office] and sit there from morning till afternoon. If anybody wants to consult me, they are most welcome. That’s how I spend most of my time. I just look forward to a peaceful, healthy and happy life. I don’t have any grandiose plans.