Phaneesh Murthy fiasco: What next for iGate?
iGate Corp has sacked its President and CEO Phaneesh Murthy over sexual harassment claims. The company has named Gerhard Watzinger as the interim CEO and the board will now search for an industry veteran for a permanent appointment.
Moneycontrol Bureau
Fremont, California-based software services exporter iGate shocked the street on Tuesday when it announced that Phaneesh Murthy, its President and CEO, had been sacked following an investigation over sexual harassment claims. "The Board’s decision was made as a result of an investigation by outside legal counsel, engaged by the Board, of the facts and circumstances surrounding a relationship Murthy had with a subordinate employee and a claim of sexual harassment. The investigation, which is ongoing, has reached the finding that Murthy’s failure to report this relationship violated iGATE’s policy, as well as Murthy’s employment contract," the company said in a press release. Murthy had been touted as a comeback man, when he led iGate to acquire a much bigger rival Patni Computer Systems in 2011, in a bid to quickly scale up in India, the world's largest technology outsourcer, and join the league of big IT firms. But now the dark clouds of sex, relationship and harassment have come back to haunt him again.Little known Murthy shot into prominence at Infosys, now India's second largest IT company, in the 1990s. The company's revenues jumped to over USD 700 million in over 10 years, from around USD 2 million in early 1990s, with Murthy credited to be the architect of the stellar growth. At one stage, Phaneesh Murthy was tipped to take over as the next CEO of the company. But his career came crashing down amid a sexual harassment scandal. Although Infosys settled that matter out of court, Murthy had to leave.iGate's co-founder and co-chairman Sunil Wadhwani acknowledged Murthy's "significant contributions" over last ten years in helping establish iGate as a leader in the IT industry. But, the board "deliberated extensively on this matter (Murthy's sexual relationship)," before terminating his services, he added.The company has now appointed Gerhard Watzinger as its interim chief executive with immediate effect. Watzinger, who joins from Intel chip maker McAfee, where he was Chief Strategy Officer, had worked with iGate between 1998-2003 as executive in various roles, including the CEO of iGate Solutions business.A search committee with the board of directors has also been created to oversee the process of identifying and selecting a new President and CEO. Watzinger has ruled himself out of taking the role on a permanent basis, and will only stay until another experienced industry veteran is selected for the job.Wadhwani and another co-founder and co-chairman Ashok Trivedi will work closely with Watzinger in the interim period to ensure a smooth transition. Finding a permanent replacement will be board's top agenda.iGate under Murthy had upped the ante with the acquisition of Patni in 2011 and then an advertising blitzkrieg unleashed in North American market last year, pushing its outcome-based model instead of the widely prevalent time and material (T&M) model.It beat market estimates in the first quarter (Jan-March), net profit surged 44 percent to USD 35 million. Revenue was up 4 percent to USD 274.9 million. The new CEO will have a challenged to keep that momentum going. There is no shortage of business. It had a deal pipeline of about USD 3.5 billion at the end of March, its CFO Sujit Sircar had said. It has over 28,000 employees and services over 300 customers.However, the company is sitting on a debt of over USD 1 billion, much of it related to the acquisition of Patni. That will also have to be addressed, at a time there is still some uncertainty in the global economy and client spends. iGate acquired Patni for around USD 1.22 billion and now two years later, the merger is nearing a close. With court approvals pending, it is expected to be completed sometime this year, the Hindu Business Line paper wrote in March. With Murthy gone, the new CEO will now have to guide it through the final lap.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
