'Infosys is way ahead of peers, but there is still a long way to go'

Q&A with NR Narayana Murthy, co-founder of the company

During an investor’s meet organised by equity research firm Barclays last week, NR Narayana Murthy answered a range of questions put by the investors including his return to Infosys, the strategy ahead and the change in company mindset.

Edited excerpts from the his Q&A with the investors:

On his return to Infosys -- Was it because of the failure of the leadership

The slowdown in growth is nothing to be proud of. However, a similar situation occurred when Mr Nandan Nilekani had become CEO of the company in 2002. There is a responsibility to keep inventors, customers and employees happy. With a sense of disappointment reigning within the company, the duty was accepted to the best of abilities with the aim to achieve a 'desirable Infosys'.

What does Murthy have that his A-Team doesn’t have

A sense of urgency to deliver the results that Infosys stands for. Furthermore, he could have better acceptance in the company due to his role as a founder and the first CEO of the company.

On the strategy to put Infosys back on the growth path

Firstly, improving sales force efficiency by improving win ratios and providing differentiation to clients. Secondly, improving delivery effectiveness by increasing employee productivity and automation and thirdly, cost rationalisation which will yield results at the earliest. Management is also tracking the new initiatives and the sense of urgency is leading to an improvement in performance on a monthly basis.

On increase in onsite costs

Costs have increased because of higher wages due to local hiring plus lower utilisation of local hires as on-site Indian deputies can be off-shored back as soon as project is completed.

On means to rationalise costs
 
Cost rationalisation will be implemented by trimming unnecessary costs, finding the best low-cost near-shore delivery location and reducing on-site effort.

On how to motivate employees to chase large deals

Change in mindset requires a concerted effort with a change in Key Performance Indicators (KPI) and reward mechanism. The change will take 1-2 years to execute. The company will tweak its go-to market strategy (how to sell, win deals and deliver projects) and try to reduce onshore effort. The company is open to hiring people from outside (more open than before) to plug some of the gaps in skill-sets.

On regaining market share

There is pricing pressure in the Business and IT Services (BITS) segment due to increasing commoditisation, which was reflected in the revenue productivity in FY13. The company is changing its strategy to win deals by targeting new clients and markets and through better execution and differentiation.

On the new Products Platforms and Solutions strategy

Currently there are seven products and seven platforms, which have been developed for specific target markets. Almost $729mn of deals have been signed, which will be implemented over a period of five years. Infosys is way ahead of peers, however there is still a long a way to go. While the PPS strategy is way ahead of time, growth has to come back through large outsourcing deals.

On providing quarterly guidance again and the dividend policy

The company is discussing internally whether to start providing quarterly revenue and EPS guidance. However, final conclusion will be known by end of FY14. Any change in dividend policy will also be communicated to investors by end of FY14.