The surprise appointment of Salil Parekh as CEO and MD of Infosys signals the end of an acrimonious feud between the company’s founders and its management over leadership and governance issues. The year-long high-decibel public warfare led to the exit of Vishal Sikka as CEO and replacement of R Seshasayee by Nandan Nilekani as the IT-bellwether’s chairman. While the appointment of the Nilekani-Parekh combine puts to rest issues related to Infosys’ leadership, the duo has a challenge on their hands in addressing concerns around the company’s future, given the fast-changing technology landscape. New transformational platforms like digital, robotics, artificial intelligence and automation are enabling tectonic shifts in systems and processes that require very different capabilities compared to implementing an enterprise resource planning software. This has presented a challenge to Indian IT services companies, which have thus far relied on shipping low-cost skilled labour to countries such as the US to drive higher margins. This model has led to a situation where Indian IT firms have become the global experts in executing low-value projects, but find it difficult to switch over to newer platforms.
Infosys, under Sikka, had embarked on a journey to become a technology player. Unfortunately, the spat between the founders and the management has meant that it lost time in dealing with multiple headwinds in its core business. It was no surprise that Infosys reported a lacklustre performance for the September quarter. Growth has, in effect, slipped to pre-Sikka times. The Nilekani-Parekh combine will now be expected to steady the ship to make it more nimble in taking on players such as Accenture, Google and Amazon. There are three things which Infosys stakeholders need to do immediately if they want to compete with global tech giants. First, the board and the founders should give a free hand to the new management. This requires a cultural change within the organisation as no CEO can deliver if he has to keep looking over his shoulder. Second, Infosys must adopt business models that are in tune with the changing paradigm. This means not only innovating for technological shifts but also pushing ahead with non-linear models, given the strict immigration rules in the US and Europe. Third, the Indian IT giant should utilise its huge cash reserves to make strategic acquisitions to get faster access to cutting-edge technology.
Parekh takes over as CEO at a time when Infosys is probably facing its worst crisis in its 36-year existence. He could take inspiration from Steve Jobs who resurrected Apple from near bankruptcy, or Satya Nadella who is in the middle of transforming Microsoft with his ‘Hit Refresh’ strategy. Infosys, too, needs to hit ‘refresh’ to stay relevant.