New iGate CEO, Ashok Vemuri to face major challenges

Vemuri joins iGate at a time when the company is facing challenges at multiple fronts

Even as Ashok Vemuri, the former top executive at Infosys prepares to take the helm of Nasdaq-listed IT services company, iGate, there are multitude of issues before the company which are waiting for quick attention from the new CEO. 

 

The first and foremost problem the company was facing ever since the unceremonious exit of its then CEO Phaneesh Murthy in May this year, was having a regular CEO. However, with the certainty expected to be back with the joining of Vemuri, one of the biggest challenge before him would be to ensure the predictability of the revenues from the key banking, financial services and insurance (BFSI) vertical as the company is at the risk of losing one of its biggest clients, Royal Bank of Canada (RBC). iGate's relationship with RBC is going through a rough patch owing to protests surrounding the allegations that the company was replacing local staff with foreign workers. 

 

However, analysts agree that with Vemuri at the helm, the company will be able to address this issue or even grow other accounts in the BFSI space to compensate the losses it may expect due to loss of RCB. "One of the major issues before iGate is to ensure the continuity of its engagement with RBC. If the business from the client comes down, Vemuri is the right person to open up new avenues and relationships somewhere else, because of his deep contacts in the financial services industry in North America," said Kris Lakshmikanth, CEO & chairman at executive search firm, Headhunters India. 

According to industry experts, iGate is quite aggressive in its approach which has been proven when it decided to acquire Patni Computer Systems, a company bigger than it size, to scale up faster. In the process of acquiring Patni, iGate has taken a loan of around $770 million for five years tenure. The company requires roughly $70 million just towards the interest costs per annum. Servicing of those loans is exhausting the cash generates from operations, and this may restrict the ability of the new CEO to pursue the expansion plans he may be having.

 

Besides, Vemuri will have to take a call if he would like to pursue some of the marketing initiatives taken by the erstwhile CEO. One of the many initiatives Murthy had undertaken post Patni's merger with iGate is to promote the outcome-based business model and position the company as a pioneer of this model, creating murmurs in the industry circle. 

 

The company is understood to have spent significant amount of money towards advertising this model in its key market, North America. The success of this has so far been quite limited. The challenge before Vemuri lies to decide if the hype the company has created on this business model is worth pursuing and it can help in growing faster.

 

Since Vemuri would be heading iGate after following a bad episode surrounding the personal relationship of his predecessor Phaneesh Murthy, he will also have to face the daunting task of improving the image of the office of the CEO. However, industry observers feel that the clean and polished image Vemuri will certainly come handy in addressing that.