Is there merit in bringing back Nandan Nilekani to head Infosys?

There is more to the leadership troubles of Infosys than what meets the eye. Several newspaper reports including this newspaper (Read here) point out that several Infosys employees want Nandan Nilekani back as the new CEO. The reports, quoting sources says that lower and middle level employees have started posting on the company's bulletin board seeking Nilekani's return. Messages like "Bring Nandan back" and "We need a leader with a vision like Nandan to get us back to growth" popped up across Infosys development centres in Bangalore, Pune and Thiruvananthapuram. 

 

Such an outburst from its own employees raises a number of questions on the workings of Infosys. NR Narayana Murthy's return had seen the stock price shoot up from a low of Rs 2,350 to a high of Rs 3,835 within a year as the stock market had a lot of hope in Murthy's ability to revive the company's fortunes. However, on the fundamental level, the change has not been dramatic - for the March 2014 ending quarter the company posted an 8 per cent revenue growth, slower than 8.5 per cent posted in the previous quarter while its guidance continued to be nearly half that of what Nasscom guided for the entire industry.

First, clearly Narayana Murthy's magic seems to be on the wane in Infosys in his second innings. After the board of directors of the company decided to call back Murthy as the executive chairman of the company in June 2013, Shibulal, the current CEO of the company was more or less an acting CEO. Murthy has not been effective in turning the fortunes and who better to say this than Infosys' own employees. 

 

Infosys has seen one of the highest attrition rates among the top IT companies. Lower growth rates lead to no hikes in salaries which in turn meant employees jumping over to their competitors. It was not only the new entrants who seek monetary growth every year and compare their salaries with their batch mates in other companies who left Infosys for greener pastures, but even the middle and senior level employees left the company after Murthy took over. Bringing his son Rohan Murty along was probably the last straw for the senior management (non-founder members). 

 

The demand for Nilekani's return comes as Shibulal has announced an early retirement in January 2015 and there are talks that the board is looking at an outsider to take on the CEO post. Post Narayana Murthy, the best growth years were seen during the Nilekani's tenure. Against an average growth rate of 78.2 per cent between 1992 to 2002 for Murthy, Nilekani's tenure saw a growth of 38.4 per cent between 2002-2007 while S Gopalakrishnan in his tenure between 2007-2011 managed to grow the company at an annual rate of 18.2 per cent and Shibulal since 2011 to 2014 has helped Infosys grow at 20.5 per cent. 

 

However, both Murthy and Nilekani led the company when the industry was growing at a scorching pace. They were at the right place at the right time. Gopalakrishnan and Shibulal were heading the organisation when the sector itself was struggling post the Lehman crisis and global meltdown. 

 

Having said that Infosys, the bellwether company in the IT space was known for the speed at which it spotted opportunity and moulded itself to new opportunities. Shibulal has been blamed for not seeing the writing on the wall. Their competitors have grown at nearly twice the speed while Infosys was still trying to find its footing. 

 

It is very likely that Nilekani might also fail to identify opportunity and move the company forward in the same way as Murthy failed to do so. Both are from the old school while the IT sector has seen a complete change over the last decade. The recent annual report highlights the woes of the management. While Murthy said that the current state of the company is due to lack of focus on its bread-and-butter traditional IT services, Gopalakrishnan confessed that the company underestimated the effects of the adoption of new technologies and the change in the business model. 

 

In other words the founder members are still locked in the old way of thinking. Will Nilekani manage to change the fortunes of the company after a mixed track record as the head of the Unique Identification Authority of India is the larger question. 

 

Infosys like the Congress party seems to be dependent on one set of individuals. It is the founder members for the company while it is the Gandhi family for the latter. Both desperately need to be revived with fresh ideas and enthusiasm. While the Congress party did not seem to learn anything from its drubbing in the elections and have gone back to the family for succour, hopefully Infosys and its employees will be able to think differently.