Infosys needs to be more open to outsiders for top posts: CLSA

Analysis comes on the back of Ashok Vemuri quitting the company recently

India's second largest software services exporter Infosys, which is 'resistant' to outside talent, needs to open up to the idea of considering outsiders for top posts as it battles exit of top management executives, global brokerage firm CLSA said in a report.

"NR Narayana Murthy's return suggested that Infosys' leadership planning clearly didn't work out as expected. Ashok's exit has only exacerbated that issue.

"We believe Infosys needs to show greater openness to external candidates for senior roles, something which it has been highly resistant to," CLSA said.

Infosys declined to comment on the report.

Murthy, returned from retirement as Executive Chairman in June to steer the faltering firm he co-founded in early 1980s.

Last week, the Bangalore-based firm's head of Americas and global manufacturing, Ashok Vemuri, stepped down from his role.

Vemuri was seen as a top contender for the CEO's post (along with B G Srinivas and V Balakrishnan) after term of the incumbent and co-founder S D Shibulal ends in 2015.

Besides, after Murthy's return, Infosys has seen its sales head Basab Pradhan as well as North America chief for financial services Sudhir Chaturvedi quit the company.

The brokerage firm added that Infosys now needs a fresh approach on leadership planning from what it has adopted in the past. It needs to re-look at its succession strategy.

CLSA said the change is required not only because the next CEO will be a non-founder for the first time, but also because the current approach has not exactly worked.

Infosys hardly (or probably never outside of consulting) hires any senior manager (vice-president and above) from outside and all have been groomed internally, it said.

While insider succession may motivate senior-level executives to stay put and aspire for leadership positions, the key disadvantage of not considering an external person is that existing management could get complacent, CLSA said.

"This has worked well for Infosys in the past...An argument for considering external candidates for leadership positions at Infosys is that change could be more important than continuity especially as things have not been going that well," the report maintained.

Once considered the industry bellwether with quarterly and annual guidance, Infosys is now struggling to keep pace with the rest of the industry.

It has not only stopped the practise of issuing quarterly forecast, but, expects to grow only 8-10 per cent for 2013-14, way below 12-14 per cent growth projected by industry body Nasscom.