Infosys Clients Stay Loyal Amid Exits: Corporate India
“I’m not overly concerned as long as they do a good day-to-day job for us, which is the case,” Pierre Masai, vice president for information systems at Toyota Motor Europe, said in an e-mail. “What counts is the core business is done with excellence.”
At least 10 senior executives have left since co-founder N.R. Narayana Murthy returned as executive chairman last year to help revive sales growth that lags behind Tata Consultancy Services Ltd. (TCS) and Wipro Ltd. (WPRO) Infosys shares dropped to a 10-month low on May 29 after co-President and board member B.G. Srinivas became the latest departure from a company that has been searching for a new chief executive officer since April.
“Shareholders are not betting big on Infosys, but clients are more pragmatic,” said Pradeep Mukherji, president of Avasant, a management consultant that helps companies choose outsourcing firms. While his customers aren’t reporting any negative impact from the changes, if the executive churn isn’t managed properly, then that will pose longer term problems for Infosys and its clients, he said.
Infosys rose 1.9 percent to 3,041.15 rupees at the close in Mumbai trading. The stock has lost 13 percent this year compared with an 18 percent gain for the benchmark S&P BSE Sensex Index.
S.D. Shibulal, who has been CEO since August 2011, said in April that he plans to retire by January.
Infosys hired Egon Zehnder, an executive search firm, to help identify candidates for the role. It will likely be the first time Infosys chooses a leader who isn’t a co-founder of the company based in Bengaluru, earlier known as Bangalore.
Murthy’s efforts to boost sales come amid rising expenditure on information technology. Worldwide IT services spending is expected to increase 3.7 percent to $671 billion in 2014, accelerating from 2.8 percent growth last year, according to researcher IDC.
While Infosys has won orders from Volvo Cars and U.S. pharmacy benefits manager Prime Therapeutics LLC, its revenue growth lags behind peers.
Sales in the year ending March 31 will increase as much as 9 percent in U.S.-dollar terms, Infosys said in April. That would be the slowest growth in five years.
Tata Consultancy’s revenue will probably rise 17 percent this financial year, according to the average of 55 analyst estimates compiled by Bloomberg, while Cognizant Technology Solutions Corp. (CTSH) expects growth of at least 16.5 percent. Industrywide offshore outsourcing sales are projected to gain 13 percent to 15 percent, according to Nasscom, an industry group representing Indian software service providers.
“The new CEO at Infosys, whoever that will be, will certainly have to put sales as a leading priority,” said Rolf Jester, a Sydney-based vice president at Gartner Inc. “Another key priority for the new CEO, and for Executive Chairman Murthy, will be restoring stability, both at the executive level and in delivery staff.”
The company’s search for a new CEO is progressing at a steady pace, Sukanya Ghosh, an Infosys spokeswoman, said by e-mail. Murthy, Shibulal and Vice Chairman Kris Gopalakrishnan are continuing to steer the company, she said.
Infosys today said Prasad Thrikutam, vice president in charge of strategic sales and marketing, resigned after 19 years at the company, according to an e-mailed statement. The announcement of the latest exit was made after market close.
Infosys is also losing other workers, including the frontline staff working directly with clients. The company’s attrition rate was a record-high 18.7 percent in the quarter ended March. That compares with about 11 percent at larger Indian competitor Tata Consultancy.
“It matters more when the people on the ground leave. Employee attrition rates have been going up over the last few quarters. That’s a bigger concern,” said Anurag Rana, an analyst with Bloomberg Industries. “It’s a virtuous cycle. You want to work for a company that’s growing.”
Clients including Kamal Osman Jamjoon Group LLC, an operator of retail brands in the Middle East including The Body Shop, are sticking by Infosys for now.
This year, Infosys engineers built the company’s employee performance management system on remote servers, the so-called cloud, in record time, said Thameem Rizvon, IT director at Dubai-based Kamal Osman Jamjoon.
“The biggest challenge for the new CEO of Infosys will be how he or she is able to build trust and confidence entirely within Infosys,” said Rizvon. “If the staff of Infosys don’t believe the new CEO and the leadership team will bring continued strength, then the staff will move on, and that will make the clients move on.”
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