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Murthy says changes in best interest of Infosys

In a letter to employees, founder warns of further leadership transition

Itika Sharma Punit  |  Bangalore 

N R Narayana Murthy

Infosys Executive Chairman N R Narayana Murthy on Friday said the departure of 10 senior executives was in the best interests of the city-based information technology company.

“As we embark on a newer and better horizon for our employees and our clients, we will see some transition in leadership,” Murthy said in an email to Infosys employees on Friday. “Please rest assured that the leadership changes take into account the best interests of the company.”

Earlier this week, Infosys had announced the resignation of president and board member BG Srinivas, widely considered a frontrunner for the post of chief executive officer (CEO) after the retirement of incumbent S D Shibulal by January 2015.

Murthy’s email followed some senior-level Infosys employees raising concern about the employee and client sentiment being negatively impacted due to Srinivas’s exit, sources said. Murthy asked unit heads at the company to prepare an action plan to overcome this issue and communicate this to clients to allay their concerns.

Some sources said Infosys might see more senior executives departing in the coming weeks. According to a the head of an executive search firm, several of Infosys’ senior managers are in talks to move out. According to a highly placed industry source, Infosys’ three top executives are likely to resign over the next few weeks, and may have conveyed their intention to the company.

An Infosys spokesperson, however, said the company had not received any resignations.

Srinivas is the 10th senior manager to quit Infosys since co-founder Murthy’s return to the company in June 2013. The company has seen the departures of board members Ashok Vemuri and V Balakrishnan, both regarded as CEO contenders. Infosys is also facing attrition at lower levels. The company’s attrition during January-March 2014 was at an all-time high of 18.1 per cent.

Srinivas’ departure has stoked worries among investors of a leadership vacuum at the Infosys. The company’s shares fell around eight per cent on Thursday. On Friday, they traded flat and ended up 0.6 per cent.

“BG’s departure raises Infosys’ risk profile even further,” said Peter Schumacher, founder of Germany-based Value Leadership Group.

"It is a big blow to Murthy's credibility. Clients are concerned. However, in information technology services relationships cannot be switched quickly. Clients are insisting on pricing discounts as a condition for renewal. This undermines Infosys' image of a premium provider," he added.

After Srinivas' exit, effective June 10, Shibulal will manage Srinivas' portfolio, Murthy said in his letter to employees.

In his role as a president at Infosys, Srinivas heads most of the client-facing business, including financial services, insurance, manufacturing, engineering services, energy and communications, strategic global sourcing, and marketing and alliances.

Murthy reassured employees the company would continue to deliver on its commitments to its clients and staff. "We will endeavour to earn the respect and retain the goodwill of our clients, employees and investors," he added.

Murthy said the selection of a CEO for Infosys was as planned and an announcement would be made once it concluded. While the search was on, Murthy said, he along with Shibulal and executive vice-chairman S Gopalakrishnan would continue to steer the company.

Last month, Infosys had set the ball rolling to find its fifth CEO, the first non-founder head. The company had said its nominations panel would evaluate internal and external candidates for the job, with help from corporate executive evaluation specialist Development Dimensions International (DDI) and executive search firm Egon Zehnder.

According to sources, the process was nearly complete but there was no a date yet for the announcement.

DDI, which assessed at least seven insiders, had suggested an unexpected name, sources said. Leading internal candidates for the job include senior vice-presidents Sandeep Dadlani (head of consumer packaged goods and logistics), Sanjay Jalona (head of manufacturing and engineering) and Mohit Joshi (head of financial services).

First Published: Sat, May 31 2014. 00:57 IST
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