Imagining Infosys

Imagining Infosys
Nandan Nilekani has confirmed that he will be re-joining Infosys in the capacity of non-executive Vice Chairman. Infosys is one of the largest IT services company in India. It was started..

Nandan Nilekani has confirmed that he will be re-joining Infosys in the capacity of non-executive Vice Chairman.

Background

Infosys is one of the largest IT services company in India. It was started in 1981 by a group of seven men including N. R. Narayana Murthy and Nandan Nilekani. A multi-national corporation, it provides a number of services including information technology, outsourcing and consulting. The market capitalization of the company as of January 2017 was $34.38 billion.

Murthy was the CEO of the company till 2002, after which he became the chairman. After resigning from that position, he was made the chairman Emeritus. On 1 June 2013, Murthy was appointed as Additional Director and Executive Chairman of the board for a period of five years.

Nilekani was the company’s CEO from March 2002 to April 2007. In the five years that he served as the CEO, Infosys' topline grew six-fold to $3 billion.

On June 2014, Vishal Sikka was appointed as the new CEO and MD of Infosys. Prior to that he had been a member of the Executive Board and the Global Managing Board of SAP AG.

In August 2017, Sikka abruptly resigned from his position. There had been rumors of a rift between Murthy and Sikka. Murthy had become increasingly critical of the management at Infosys. This led to a public war of words between the Board which backed Sikka and Murthy. The rift caused the market prices of Infosys to fall.

Analysis

Days after Sikka’s resignation, rumors began floating of a possible return of Nilekani to the company. A group of 12 major institutional investors in the company, made a formal request to bring Nilekani back in the fold. They believed this would effectively bring an end to the ongoing feud.

According to media reports, Nilekani was initially hesitant to return. He has played an active role in Indian politics after leaving Infosys in 2009. However, a week after Sikka’s departure, Nilekani confirmed that he would rejoin Infosys as its non-executive Vice Chairman. During a press conference he said, “I was invited to become the chairman and this was the unanimous decision of the board. The founders and Mr Murthy (N R Narayana Murthy) also had asked me to consider this position, along with a large number of institutional shareholders. I'm here representing 100% of shareholders and the full board, employees and other stakeholders.”

A source privy to information within Infosys told Economic Times, “The logic offered to Nandan was that he was an insider with a proven track record. That institutional investors would decisively back him if he throws his hat in and most importantly, that would have Mr Muthy’s approval.”

Nilekani has revealed that the search for a new CEO is underway saying, “We are moving quickly to put in place a new architecture of what needs to be done going forward, including getting a new CEO, which is of primary importance to us, as well as looking at the board composition and what should be the strategy going forward.”

He is expected to play the role of a “super CEO” in all matters moving forward. The team at Infosys will look to improve the way the company does business and chart a new roadmap for the company’s $500 million innovation fund.

Stock prices went up by 2% upon his return. Experts have said that they expect the stock prices to increase by 7% by August 28, 2017.

Assessment  

Our assessment is that though Nilekani will have the support of the Board and the founders, he has a tough road ahead. We believe he will have to help navigate Infosys from being a cost-effective service provider for multi-nationals to a more innovative company that has to compete in a world driven by automation and artificial intelligence. It is to his credit that Nilekani has the intrinsic capability to imagine Infosys as he so well articulated in his book ‘Imagining India’.

 

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