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 Vishal Sikka, a former member of executive board at German software
company SAP AG, has the technical savvy to herald what analysts
expect will be a strategy overhaul at Infosys, which, like its
competitors Tata Consultancy Services Ltd and Wipro Ltd, has relied
on labour-intensive, low-margin contracts from Western clients.
But it could be at least a year before Sikka is able to turn around
a company that was once a posterchild of India's $100-plus billion
IT services industry. Some investors say Infosys failed to move up
the value-chain because of its risk-averse management culture.
"Infosys needs some change and with his track-record in emerging
technology areas, high value services, Sikka will be able to bring
that change," said Juergen Maiar, a Vienna-based fund manager for
Raiffeisen Euroasien Aktien, which owns $300 million worth of Indian
shares including Infosys.
"It will take some time to turnaround the company but now I can say
that they are on the right track," he said.
Infosys on Thursday said Sikka will take over on August 1 from
current CEO S.D. Shibulal, who along with Executive Chairman N.R.
Narayana Murthy, Executive Vice Chairman S. Gopalakrishnan and four
others founded Infosys in 1981 by pooling together $250.
Sikka, 47, is considered to be an innovator in the global software
industry. A computer scientist by training, he was key in developing
and marketing SAP's flagship product, HANA, which helps firms
analyze large amounts of data quickly.
He is seen bringing into Infosys his expertise in newer technology
areas, like cloud computing which allows clients to ditch bulky and
costly servers for network-based software and storage in remote data
centers.
Sikka's biggest challenge, however, will be to fill the leadership
vacuum created by the exodus of senior executives, many of whom were
responsible for key business sectors and winning clients, analysts
said.
"The top layer of executives are all but gone. With a new CEO coming
in and from outside, there is a chance he'll hire external
candidates," said Ankita Somani, research analyst at brokerage MSFL
Research.
The annualized rate of attrition at Infosys - the number of staff
leaving or retiring - was a record 18.7 percent at end-March, 2.4
percentage points higher than a year earlier. That's close to a
fifth of its workforce of more than 160,000. The departures included
some top executives.
The exodus began shortly after Infosys brought Murthy from
retirement as its executive chairman to help the company better
compete.
Murthy's tenure, during which he also brought in his son Rohan as an
executive assistant, was marred by restructuring that triggered
uncertainty, factors that dented Infosys market share, dimmed its
status as the employer of choice for young IT workers and
intensified investor pressure for a change of guard.
Both Murthy and executive vice chairman Gopalakrishnan will step
down on Saturday, Infosys said in a stock market filing.
Some investors welcomed the change.
"The good thing is that at least the uncertainty is all over and as
an investor I can take a call on Infosys on a reasonably long term,
not going from news to news," said R.K. Gupta, a fund manager with
Taurus Asset Management, which owns Infosys shares.
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Infosys shares, the most widely held Indian stock, rose as much as
3.2 percent in early trade, but ended down 0.6 percent with some
dealers saying the new management would take time to turnaround the
company.
CHALLENGES
To turnaround Infosys, Sikka should bolster his management team and
revive sales, analysts said, adding that he could also use some of
the company's $5 billion worth of cash and cash equivalents balance
towards acquisitions to boost growth.
Sikka, the first CEO in the company's history who is not a founder,
signaled that Infosys was unlikely to see any radical change in the
near-term. "There is no change of strategy at this time," he told
reporters at Infosys' headquarters.
Sikka joined SAP in 2002 and became a member of the executive board
on February 7, 2010, leading products and innovation globally. He
also led research initiatives at the company. His successor in the
SAP board, Bernd Leukert, called him an "ingenious visionary".
Sikka quit SAP in May amid rumors that he was passed over for the
top job at the software company and was gearing up to take charge at
Infosys. Before Sikka joined the executive board at SAP, he was the
company's first chief technology officer.
Some analysts said Murthy's departure, along with that of the two
other founders, would allow Sikka to make significant changes to
revive the confidence of both clients and staff.
"Sikka is a very good thing for Infosys because he has a great
reputation in the United States. That will help them get new
business," said a manager with a mutual fund who declined to be
named as he was not authorized to speak to the media.
In its filing, Infosys said that Murthy, one of the pioneers of
India's showpiece outsourcing services sector, will be designated as
chairman emeritus from October 11.
The board also approved the dissolution of the chairman's office and
Rohan Murthy would leave on Saturday, when the company would hold
its annual shareholders meeting. President U.B. Pravin Rao, widely
seen as one of the internal candidates for the CEO role, was also
promoted to chief operating officer.
(Additional reporting by Aby Jose Koilparambil in BANGALORE, Ilona
Wissenbach and Harro Ten Wolde in FRANKFURT and Abhishek Vishnoi in
MUMBAI; Editing by Miral Fahmy)
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