Rescuing Infosys

The trouble with reappointing Mr Murthy

The dramatic return of N R Narayana Murthy to the helm of Infosys seven years after he gave up his executive position underlines shareholders' disquiet over the way the company has been falling behind. Not only has the gap between Infosys and the market leader Tata Consultancy Services increased in recent quarters, even Cognizant has overtaken Infosys. The move is likely to be greeted positively by the markets, which have been beating the stock down. The markets will expect that, as executive chairman, Mr Murthy will bring about an improvement in execution and, thus, help the company regain some of the traditional price advantage that it has lost lately. Mr Murthy has stressed the need to get more big deals, but the company also needs to improve the mix between big and small. Mr Murthy should also undo something more basic. The company has too conservative a disposition, which flows partly from him. This has rendered the firm slow in making acquisitions, which has contributed to the falling behind. Acquisitions often create more problems than value - but if the competition is able to make a good job of it, then there is a need to speed up.

Mr Murthy's return, however, is a reminder that the company has struggled to grow larger than its founders. Mr Murthy's ability to address the fundamental issues preventing Infosys' growth is what will determine the firm's performance in the next 25 years. The firm was always run in a collegial manner and Mr Murthy continued to wield considerable moral suasion long after he ceased to be the executive head. He was also party to a few key decisions during that period and continued to determine the cultural persona of the company. In other words, shareholders seem to expect that Mr Murthy will undo a part of his own legacy - not an easy assumption to make. Infosys persevered too long with a founder at the top. Mr Murthy was able to carry everyone along in a way in which his successors have not been able to. Clearly, a new non-founder leader has to be identified and groomed to eventually take over from Mr Murthy, a task that should have been done before both he and Nandan Nilekani left the scene.

However, Mr Murthy's return actually complicates leadership planning further - given the simultaneous appointment of his son, Rohan Murty, as his executive assistant. The job is supposed to be temporary, analogous to the key personal aide of a minister who comes in and goes out with him. But Rohan Murty is not like any other bright and energetic young man; he is the son of the company's founder-promoter. In a country where dynastic succession is an affliction that holds back sector after sector, everything should be done to prevent even the sense that it could happen in Infosys - a company respected for its governance standards more than its technical expertise. Its reputation for professionalism, an aspect of which is that it breaks with corporate India's family-run past, allows it to command a premium. Not even a hint of uncertainty should have been allowed to affect this perception.