Fifteen years after the listing on the Nasdaq and 33 years after starting Infosys, the seven founders of the $ 8.25 billion software company got together to bid farewell to the last founder, Senapathy ‘Kris’ Gopalakrishnan, who was running the company as executive vice-chairman. Earlier this year S D Shibulal, also a founder, had stepped down from Infosys as CEO after running the company for three years. This completes the journey of a team that founded the company with a budget of $250 dollars in 1981.
The last 18 months or so have been rough for Infosys. Over six senior executives had quit the company over internal leadership tussles and these quick exits led N R Narayana Murthy, founding chairman, to rope in Dr Vishal Sikka, former board member of SAP, to lead the company in a new direction.
Infosys and TCS had pioneered the global delivery model in early 1990s. Infosys’ founding team grew the company from just a $200 million firm in 2001 to a $8.2 billion global behemoth. Its growth was also enhanced by its enterprise solutions practice and role as an integrator of Oracle and SAP licensing.
But the software company’s revenues and business models need to find their mark in an era of future technologies. Clients are asking innovations in new technologies such as cloud, big data, mobility, social and security. Currently only 7 per cent of revenues comes from these new businesses for Infosys.
Sources say this was the reason why Sikka, who is based in the US, was fast tracked to prominence as CEO. In fact, sources go on to add that the senior management met Sikka at Delhi International Airport to convince him of running the company.
However, whatever comes out of the new CEO is irrelevant for the moment. But it completes the transformation of the company, from being run by a founder-led team, to being run by a professional setup.
“It is only possible to build an extraordinary company by believing in values,” says Sikka.
A rocky ship
Kris Gopalakrishnan and team had an unique insight on science and technology and worked on new initiatives which could pave the foundation for new revenue streams. Take for example a recent P&G global project where he created a supply visibility architecture between Walmart and the FMCG company. The shared visibility architecture replenished stock in the retailers’ shelves faster and made sure P&G’s production was tuned to the sales of the retailer. This benefitted the bottom-lines of both companies.
However, when Kris Gopalakrishnan took over from Nandan Nilekani as CEO in 2007, the odds were heavily stacked against Infosys as net margins were falling below 20 per cent due to the global recession created by the collapse of the housing market in the US. However, by 2011 Kris Gopalakrishnan had managed to raise net margins to over 26 per cent, by investing in new initiatives and identifying future technology trends that could impact enterprises, before handing over the baton to Shibulal. Infosys had pioneered earnings guidance in the IT industry and it has failed to meet guidance only for five quarters over the last 14 years. But much of the fall in its revenue guidance has been in the recent past because of clients spending less on IT and asking Infosys to be a transformational partner rather than billing them on a number of people per project. Infosys currently has over 620 projects compared with only 25 in 1993. The founding team leave behind a cash war chest of $5 billion, which is what the new management can use to remain the fan favourite of investors.
“The founding team were professionals first and then entrepreneurs; these will be the values on which the company will be run,” says K V Kamath, chairman of ICICI Bank.
The seven founders have gone on to invest in several start-ups as part of their venture capital investments. Kris Gopalakrishnan is investing in start-up villages at Kochi and Vizag and is also investing in setting up a centre for brain research at the Indian Institute of Science in Bangalore.
On Wednesday, the Infosys stock closed at Rs 3650.20, down 4.7 per cent from Tuesday’s close on the BSE.