Infosys' CEO contender Balakrishnan quits

Eighth major exit since June; focus now turns to who would be next CEO

Infosys on Friday announced the resignation of Director V Balakrishnan, widely considered one among the two contenders for the chief executive officer’s chair after S D Shibulal retires in 2015.

Balakrishnan, earlier the chief financial officer at the Bangalore-based company, was also heading Infosys BPO, Finacle and the India business unit. He was the chairman of Infosys Lodestone. His resignation would be effective December 31.

This is the eighth top-level exit at India’s second largest information technology (IT) services company since the return of co-founder N R Narayana Murthy, now executive chairman, in June. Murthy, brought back to help Infosys arrest a declining market share and slowing growth, has been making several significant changes, speculated to be one reason for the exits.

A senior Infosys official, who worked closely with Balakrishnan, aka Bala, expressed shock. “I don’t know what happened,” he told Business Standard, requesting anonymity. “Till yesterday, he was involved in future plans.”

Ankur Rudra, analyst at Ambit Capital, said, “Balakrishnan’s exit clearly indicates that Infosys is still undergoing transition. It has witnessed many senior-level exits after Narayan (Murthy) joined back. This could be because not everybody in the firm agrees with the strategic direction or due to lack of clarity. This exit highlights that the company is not on the path of recovery. This departure could have a snowball effect on mid- and low-level employees and could lead to more exits. We understand with our conversations from headhunters that mid-level employees at Infosys have been leaving in the recent past. Our rating on Infosys has fallen consistently over the last two years. We remain sellers and believe the stock is likely to react negatively on this development.” (MAJOR RESIGNATIONS...)

On Friday, Infosys also announced the induction of U B Pravin Rao as a whole-time director. Rao is a senior vice-president at Infosys and the global head of retail, consumer packaged goods, logistics and life sciences. The company also announced the induction of Kiran Mazumdar-Shaw, chairman & managing director of Biocon, as an independent member of the board.

Co-founder and Executive Vice-Chairman S Gopalakrishnan would head Infosys BPO and Finacle in the interim.

The India business unit would be part of the new growth markets and report to Dheeshjith V G, senior vice-president and head of growth markets’ business unit, Infosys said. B G Srinivas, head of Europe and global head of financial services and insurance unit, would become the chairman of Infosys Lodestone, while immigration would report to Shibulal in the interim, the company added.

Sudin Apte, chief executive and research director at Offshore Insights, said: “I don’t think Infosys is thinking much on the leadership exits. The CEO succession plan is not a priority and they still have time for that. They are much more focused on fixing the problem — improving margins, getting large deals, investing in improving investor and employee confidence. They have become very pragmatic and in this process, there has been some shakeout.”

The chief executive of a rival firm said people in Infosys had recently been talking about a certain level of disillusionment. “If you look at the top few people in the company, they are reasonably wealthy and are there for a purpose, and if that gets diluted, then there is bound to be some heartburn,” the executive said, hinting at some top leaders’ ambition to become the next CEO.

On Thursday, Subrahmanyam Goparaju had resigned as senior vice-president and head of Infosys Labs. He was with Infosys for 25 years. It is rumoured that Infosys R&D unit that had 600 people was reduced to just 200. In August, Infosys had seen the exit of Ashok Vemuri, head of Americas and global head of manufacturing and engineering services. Vemuri joined competitor iGate as CEO. Vemuri, Bala and B G Srinivas were seen as the front runners for the top job at Infosys.

With two of the top three contenders out of the race, the speculation is that Infosys might broad-base its hunt for the next CEO. Speaking to a brokerage house last week, Murthy had brushed aside speculation that Infosys might bring one from outside.

The chief executive of a rival firm said Murthy’s strategy seemed to have significantly changed in the last few months when he was talking about the CEO choice being restricted to three candidates. In his most recent conversation with an analyst firm, he said though the company would choose a candidate from within, the pool has expanded to a host of people who could be excellent managers. The executive said this might have prompted Bala’s exit.  

While Srinivas was still considered a strong candidate for CEO, many observers said with Murthy’s focus on “meritocracy”, several other candidates could not be ruled out. Experts and analysts threw up the names of Chandrashekar Kakal, Prasad Thrikutam, Pravin Rao and Dheeshjith V G. All of these people hold key roles at Infosys and were inducted into the company’s executive council after Murthy’s return.

R Suresh, managing director, RGF Executive Search, said: “They do have internal candidates to fill in the CEO role. Whether they are looking to broad-base their search and look out, that call has to be taken by the board. But the fact is that times have changed. The software services industry needs different leadership skills than what we have seen so far, and which frankly several of the older leaders do not have. The older leadership will no more work now.”

While many other companies would have faced flak over exits of such senior executives, most stakeholders remain unperturbed despite the erosion of top talent at Infosys.

Most experts and observers said these exits would not make much difference to the company, which is entering a crucial phase.