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Infosys: Path To Recovery Will Be Nothing Short Of Transformational

|Includes: Infosys Limited, Inc. (INFY)

Infosys dream run seems to be running out of steam. The founders who made this company so loving have also brought it very close to it's growth demise, due to lack of foresight and internal power tussle (Shibulal vs Mohandas Or B G Srinivas vs Ashok V vs Subhash). Company is currently secondary to individual goals/plans and executive management personnel fear to interfere in each other territory & have little or no respect for each-others work. Infosys failed strategy, failure to acknowledge problems and plans to run IT company like a large factory have backfired big time. The average Infosys worker/investor is more confused, dejected and unhappy than ever in past.

While Infosys recent quarterly performance is reflection on it's past actions like protracted reorganization, highly disliked HR top team, degrading HR policy and founder rotation as MD, Infosys future looks bleak with competition eating it's cake or vying eagerly its client's business. Infosys Board need to act fast, go back to the basics and revive policies that made it's great in first place. A thorough analysis is needed on went wrong and how to fix issues. Nobody has magic wand to fix the problems, hence I wouldn't still start calling for heads now. But I will highlight few issues, that are glaring and need urgent management/board attention, below:

1) Infosys founders/board have failed miserably to have a definite and successful succession path at top. Infosys defining success happened when one man sat on CEO position for 25 years, after that CEOs worked within defined guidelines and company ran on autopilot mode. Wonder if Infosys needs another great CEO for next 25 year so that short term, quarter-to-quarter planning is replaced by some strategic, long term thinking. This will also help reduce lot of ambiguity in various stakeholders mind like investors, customers, employees. The competitors have CEOs in 40s.

2) Infosys board need to define a clear goals for company for next 20 years & may be detailed plan of actions for next 5 year. Infosys did get lot of help from direction of the tide in the past. However no such events are foreseen in near future. Market is already highly competitive and smart people are coming up with disruptive technologies like Cloud, Crowd that may impact how IT services business is delivered.

3) Infosys brain drain: Infosys stock option plan, in early days, helped it retain talent for longer than competition. That advantage has turned negative now. Smart People (people who pick things fast and/or people with more than 10years company's experience) who helped establish Infosys image as IT giants have either left or are leaving Infosys. Infosys HR has no mechanism/policy for retaining talent. HR rewards itself on new hiring so wonder if Infosys / its HR encourages brain drain (This is contrary to old time when founder went out of their way to retain talent). Few people leaving is OK but when lot of people leave than company image is bound to suffer.

4) Last but not the least Infosys need to seriously re-access capability of it's management team. People with integrity, selflessness and proven leadership skills need to be retained. The management should focus on fixing issues rather manage brand image by other means like clamping the dissenting voice. The percent salary bill per person of Infosys top management has increased disproportionately to overall percent salary bill per person in past few years. The executive management also seems to be placing self interest over and above company interests. The executive management lacks integrity, fails to share blame and rewards itself but cuts employee salary(does not pay hike) and/or not pay genuine employees refunds/claims in name of retrograde HR policy. The frameworks that bring such narrow thinking people and 'Yes' man to top needs to be re-evaluated.

These points have been highlighted in past also but no concrete action has been taken by Infosys management. Having said this, I think, Shibu is still Infosys best bet for near future. He knows the past glories, successful & failed strategies and have deep understanding of business & technical landscape. He with other management personnel need to define next 20 years plan for Infosys. A man needs to be identified to replace Shibu. Current crop of EC, Mohan or Board Members do NOT make the cut as they have failed miserably compared to competition and Infosys needs to identify & define new growth strategies. The new man should be able to execute, retain and grow current services business but more importantly, he should return Infosys to 30% y-o-y growth trajectory by embarking & conquering new services avenues like cloud computing, products, platforms, value accretion on patents etc. In my opinion, ideal person should be someone who has worked in leadership position in IT product space for a fortune 500 company like Microsoft, Google, SAP, NOKIA etc to make Infosys transformation to products/non linear revenue company a success.

This was my wishlist as Infosys share holder and sincere effort to highlight problems that plagues Infosys currently. I wish to retain Infosys shares and see Infosys back to its golden old days. However we all knows the path of recovery/transformation will not be easy. Infosys need some tough actions and decisions to get it's growth driver back. Hope this time management get their strategy right.

Disclosure: I am long INFY.