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Editorial: Infy is back in business

The string of departures remains worrying though

More than its financial performance, the Street has been concerned about the string of senior-level exits from Infosys ever since NR Narayana Murthy returned for a second innings at the software major in June last year. Infosys recently promoted BG Srinivas and UB Pravin Rao as presidents while disbanding the executive council which had become superfluous; indeed the decision must have been a tough one for Murthy because the council had been set up by him. That he decided to go ahead is evidence that he?s willing to experiment with different structures in his attempt to find the right one. Too many and frequent changes though could upset the system but, as he himself said on Friday, Murthy?s a man in a hurry. Whether the realignment is the best way to ensure there?s no disruption on the off chance that the company recruits an external CEO, once Shibulal retires next year, remains to be seen?the recent departures indicate there?s a lot of ambition and aspiration that needs to be addressed. For now, Murthy seems to be on top of the situation though one is not sure whether there is something to be read into his cryptic comment that the exits were ?good for them and good for the company?.

In the meanwhile, given both Srinivas and Rao are settling in to their new jobs, he is making sure he?s accessible to the media and the analyst fraternity; the latter were clearly comforted by his presence on the Q3FY14 post-results conference call. Murthy sounded confident and the fact that Infosys delivered a reasonably good set of numbers while also upping the revenue guidance for FY14 to 11.5-12% from 9-10% earlier?12.4-12.9% in constant currency terms?definitely helped cheer the Street. However, given that IT spends are expected to remain flat in 2014, it?s not going to be easy for Infosys, even if it added 54 clients in Q3FY14?a remarkably strong tally and a sign the company is willing to trade margins for market share. Having sorted out the cost side?initiatives to cut costs helped boost operating margins which expanded 150 basis points sequentially to 25% in Q3FY14?Murthy has given himself between 9 and 12 months to rally up the sales force. Indeed, the dollar topline growth of 1.6% sequentially to $2.1 billion was a bit of a disappointment, and there are other pressure points?the high annualised quarterly attrition for one. Nevertheless, Infosys is back in business.

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First published on: 11-01-2014 at 05:59 IST
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