Infosys to leave turmoil behind as Salil Parekh takes over as CEO today

Salil S Parekh will take over as the chief executive of Infosys on Tuesday as the information technology (IT) bellwether looks to shed its past year of turmoil and forge ahead with a focus on execution and grow business by engaging clients via digital contracts.
 
For Parekh, a former Capgemini executive who rose through the ranks to be on its global board after successfully building its offshore base in India, the top job at Infosys will be his first that will put him under public scrutiny. So far, Infosys, listed on the Indian and global stock exchanges, has built its reputation on transparency and good corporate governance.

 
A lapse in disclosure by former CEO Vishal Sikka, who took charge in August 2014, about offering severance pay 10 times the standard contract to former chief financial officer Rajiv Bansal had escalated into a public spat between the board and the founders led by N R Narayana Murthy. This had resulted in the resignation of Sikka and R Seshasayee, then board chairman, last August, paving the way for co-founder Nandan Nilekani to return at the helm.
 

Nilekani realises that he has to stay longer at Infosys to ensure a smooth transition for Parekh, who will operate out of its headquarters in Bengaluru. Parekh will also need to fit in a culture of frugality that Murthy and Nilekani built over the past three decades, engage with in-house talent and ensure higher returns to stakeholders.

 
An operational man, Parekh had led the growth trajectory for Capgemini India as an offshore destination to deliver client projects and help the European firm remain competitive. During his tenure, Capgemini team grew from 800 people to over 85,000 people in India, which included leading the acquisition of iGATE Corp.
 
Analysts don’t expect Parekh to put his stamp on Infosys immediately and would wait for him to unravel his plans in April. “It is too early to speculate on what plans he may have for the company. It is also unlikely that he will lay out any long- term strategy before March 2018,” said Ravi Menon, IT analyst at brokerage Elara Capital.

 
At Capgemini, where Parekh did not have a pubic-facing P&L (profit and loss) role and most of the tenure ran a cost centre, investors would be delighted at 10 per cent operating margins. However, Infosys has consistently promised higher operating margins —  24.2 per cent in the September quarter — to retain investors and this expectation would remain. Nilekani has maintained that Infosys would continue with Sikka’s software plus services strategy and would expect Parekh to execute that vision.
 
Sikka, who struggled to run Infosys from his base in Palo Alto in Silicon Valley, had lofty ambitions of achieving $20 billion revenue with operating margins of 30 per cent by 2020. This also went against the grain of Infosys, whose founders believed in under-promise and over-delivery. When Sikka quit last year, Infosys’ revenue was half of its intended target.

 
Many believe that the Infosys board should let Parekh settle in and not expect miracles from him.
 
“It is too early to give any outlook. However, it is important to note that he comes with a large body of experience from a different organisation, so we can expect some new work models,” said an analyst with a brokerage who did not want to be named. “We can only hope that he isn’t saddled with any lofty targets like Sikka was and that Infosys sets realistic goals for him. Infosys will go back to setting targets that they can realistically achieve this time around.”