Murthy's 'all is well' at Infosys means very little

This statement comes from the person who was making all the noise that resulted in a complete revamp of the board and an unhappy ending to the tenure of CEO Vishal Sikka, a man handpicked by Murthy himself.

Less than a month ago, Murthy was peeved because the newly installed board under Nilekani gave a clean chit to Infosys’ acquisition of Panaya, an Israel-based company at the focal point of allegations of wrongdoing by the founders.

Markets breathed a sigh of relief after Murthy’s statement, concluding that the board can concentrate on steering the company back onto the growth path with a business plan that promises better numbers ahead.

But is Murthy right in saying that ‘All is well’ at Infosys? Not really. Just because Nilekani has taken over as the chairman does not change the ground realities. Change in a big company cannot take place overnight. In fact, Infosys is in moving around in circles after Sikka quit.

A series of senior-level exits, mainly of Sikka’s international recruits, pose problems for the company. What will be left is the old team that prefers to work in its comfort zone in traditional areas. The out-of-the-box thinking that the company needs and could be provided by bringing in an outsider with international experience will be missing. Media reports say that an insider, either an ex-employee or a current one, will be made the CEO, which indicates that maintaining the status quo is the priority.

Infosys has already shifted its nerve centre from Palo Alto in the United States back to Bengaluru. An office in Silicon Valley would have allowed the company to stay abreast with the latest developments at the global IT hub.

Infosys, like other IT companies in India, has a problem staying abreast of global developments; they continue to feel the pressure in their conventional business as well. As a report by Nomura points out, growth is decelerating in Infosys’ traditional business segments like BFSI (Banking, financial services, and insurance), retail and manufacturing, apart from the problems in the United States.

Attrition level at 21.4 percent during the September 2017 quarter continues to remain high but the company’s recruitment of trainees is at a historical low. This chimes well with Infosys reducing its guidance below consensus levels.

As if these problems were not enough, Infosys has not covered itself in glory with its implementation of the prestigious GST project. The Confederation of All India Traders (CAIT) has blamed Infosys for glitches in the GST Network and said that the GST portal has brought much harassment and mental agony to traders by its rocky functioning and has proved a major roadblock in the success of a good taxation system like GST. Earlier, the GST Council headed by Bihar’s Deputy Chief Minister Sushil Modi asked Infosys to send more technically qualified people to resolve the GSTN glitches.

The chain of events points to continued trouble at Infosys. As far as the company is concerned, all is not well. Perhaps it was Murthy making peace with himself that prompted that statement. But if the board of Infosys agrees with Murthy that ‘All is well’ in the company, it’s time for the shareholders to get worried, especially those who still have shares in hand after the buyback.

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