Infosys might need a change in the top and a new business strategy, according to management experts.
Infosys, which grew lesser than peers such as TCS and Cognizant, issued a guidance for the fiscal 2013, which was less than Nasscom's estimate. This is starting to get analysts worried about the company's growth going ahead.
Further, its leadership team and its strategy of charging premium pricing in the backdrop of growth slowdown in the US are being questioned. Infosys' current CEO Mr S.D. Shibulal who took over from Mr Kris Gopalakrishnan last year was the Chief Operating Officer (COO) before he donned the CEO mantle.
Qualities for a CEO
Management experts believe that qualities required for being a CEO is a bit different from that of a COO. Also, it is interesting that Infosys does not have a COO now.
“A COO tends to be focused on running the operations to the maximum efficiency with attributes like discipline and team work forming the core,” according to Mr Sanjoy Sen, senior director at Deloitte India. While these attributes are positive, a CEO tends to be more focused on the vision of the company, sets its risk appetite and ability to foresee the business - in the near term and in the future, he added.
On the risk appetite, Infosys has been conservative and despite having almost $3.8 billion in cash has been shy of making big acquisitions. “The industry is entering a new phase that will require directional change. Hence, the core strategic challenges are less related to management skills and more with leadership capabilities,” said Mr Peter Schumacher, CEO, Value Leadership Group.
After a reorganisation that Infosys announced in July last year after Mr Shibulal took over as CEO, analysts were expecting growth momentum to continue. “We believe it would be a long wait before the Infosys 3.0 strategy pans out and the company will have to look at acquisitions,” said Ms Priya Sunder, IT analyst, Avendus.
Premium pricing
Also, Infosys' strategy of charging a premium for its services (as compared to its peers) is putting strain on its clients who are pressured to cut costs in the backdrop of a slowdown, according to analysts.
Despite the slowdown, 18 per cent of CIOs in the US favour Indian outsourcers this year, according to a recent Barclays report.
“Companies like Infosys should permit and enable creativity, innovation and entrepreneurship and an over focusing on operational efficiency can kill the assets in the company,” said Mr Schumacher.
During the fourth quarter results, Mr Shibulal had said that Infosys has re-organised to be more industry domain focused which will accelerate innovation. The company is trying to focus on non-linear growth going ahead.