mployees walk along a corridor in the Infosys campus in Bangalore (Image: Reuters)
Infosys' search for a new chief executive, apart from being a challenge for the company, will also be an attempt to shift the power centre at the company back from California to Bengaluru, where the founders are based.
Phil Fersht, chief executive at research firm HfS Research, called Friday, when Vishal Sikka resigned, a “sad day” for the Indian IT industry and Infosys.
“(NR Narayana) Murthy remarks had put Vishal in an untenable position, but this is the right time for changes at the top, as the firm's founders cannot tolerate the epicenter of power being in California,” he said.
Sikka was based in Palo Alto, California, and ran India’s second largest IT services company majorly sitting in the US.
He was Infosys' first non-founder CEO, and quit citing personal attacks by the company’s founders. The board, which has blamed co-founder NR Narayana Murthy for the CEO's resignation, has said it will find a replacement by March 31, 2018.
Fersht’s thoughts were echoed by Peter Bendor-Samuel, chief executive at consultancy Everest Group. “This cannot help Infosys positioning in the US and other export markets such as the EU,” he said.
He added that “over the last few years Sikka('s) personal brand has melded with the Infosys brand and Sikka and his vision of a digital future has defined Infosys. I do not anticipate that this will mean that clients will flee Infosys for their existing arbitrage based work, but it will in the short run affect how they think about Infosys for the vital digital work and may create headwinds and make growth harder.”
Earlier this year, speaking to Moneycontrol on condition of anonymity, a Washington-based former US lobbyist aware of the thinking of US-based companies had mentioned Infosys as doing the right thing with regard to the contentious H-1B visas and local hiring. He had also praised Sikka’s way of working with US-based clients.
There is also a sense of Sikka being a man of action among employees. “I admire him (Sikka) for his vision,” said a Chandigarh-based Infosys employee after hearing about Vishal Sikka's resignation. “Bringing change is difficult. (Narayana) Murthy ji is an old hand, but he cannot be more innovative than Sikka,” he added.
Several past and present employees that Moneycontrol spoke to described the time under Sikka’s predecessor S D Shibulal as one of the “most uninspiring” for them at the company. While attrition was at worrying levels, employee morale also took a hit because all the previous CEOs were communicative and made an effort to reach out to employees.
It is clear that Infosys has a tough task ahead of itself as it looks for a new CEO who has to be prepared to be in a position where the founders can be publicly critical. However, finding a new CEO will also most certainly mean a shift in the power centre. Sikka was calling the shots from the US while impacting the business decisions made in Bengaluru.
“In the short run this is going to be a loss for Infosys impacting negatively its stock price and short-term growth prospects. In the longer run it remains to be seen what the impact is, if Infosys is able to appoint a strong CEO who can capture and maintain the confidence of the board, employees, founders and clients then this may prove to have worked in Infosys favor as it is clear that Sikka struggled to maintain the combined confidence of all these stakeholders,” said Bendor-Samuel.
On Friday, the Infosys stock touched a 52-week closing low of Rs 923.10, falling 9.6 percent on the news of Sikka’s exit.
The company has been questioned on several senior level exits in the past few months, but does Sikka stepping down mean more are coming?
“Now I worry for the California-based executives he brought on-board - this will be a power shift back to Bangalore, and most (of) the guys Vishal brought on board will either jump ship or be pushed out very quickly,” said HfS’s Fersht.