(Corrects years as CEO to 21 in paragraph 9)
By Harichandan Arakali
BANGALORE, June 4 Narayana Murthy's success in
turning around Indian IT services firm Infosys hinges
on his ability to revive its sales efforts and shake up the
conservative culture he helped create.
Eleven years after Murthy stepped down as chief executive at
India's second largest computer services exporter, Infosys
unexpectedly brought back the 66-year-old as executive chairman
to reverse falling market share and end two years of
Shares rose as much as 9 percent to almost a two-month high
following the weekend announcement, outperforming the broader
market. But Murthy, a founding father of India's $108 billion IT
outsourcing sector who was the longest serving Infosys CEO,
returns to an industry buffeted by change.
Customers and rivals are pushing prices down, costs are
rising as technologies become obsolete faster than ever, and the
sector's biggest market, the United States, is considering visa
rules that will make it more costly and difficult to send
Some industry experts say Infosys's inflexibility on prices
and margins and a tradition of rotating leadership roles amongst
its founders have made it less nimble than rivals like Tata
Consultancy Services Ltd and HCL Technologies Ltd
Infosys has also been losing market share over the last two
years. From the year ended March 2011 to the year ended March
2013, Tata Consultancy's share of the overall revenues of the
Indian IT sector grew to 10.7 percent from 9.3 percent while
Infosys's share remained unchanged at 6.9 percent, according to
"They were not an easy company to work with from a
contracting and pricing perspective," said Sudin Apte, CEO of
outsourcing advisory Offshore Insights in Pune.
"Changing one person automatically doesn't solve these
issues, so really one has to see over the next two to three
Murthy was CEO for 21 years and, as the company's second
largest shareholder, has the clout to force change. He is known
in the industry as a charismatic leader, which may help retain
staff at a time when employee turnover is at its highest in two
But his return has revived investor concerns that Infosys is
overly reliant on its founders for leadership, a management
culture criticised as conservative. All four of its CEOs were
members of the group that set up the company 32 years ago and
external hires rarely occupy senior positions.
"Infosys has got a reputation for internal arrogance and you
see that in the customer base, you see that in the industry,"
said Peter Bendor-Samuel, CEO of the Everest Group, a
consultancy in Dallas, Texas.
"They're going to have to address that and to do that
they're going to have to bring talent from the outside. If
Murthy chooses to do that, he's uniquely positioned."
To bring Murthy back, the board raised the mandatory
retirement age and allowed him to bring his 29-year-old son, a
Harvard fellow with a PhD in computer science, as executive
Once the Indian IT sector trend-setter, Infosys has turned
in a string of disappointing results.
Its annual forecast for revenue growth of 6-10 percent lags
the 12-14 percent expected for the industry in financial
2013/14. Infosys is also struggling to generate revenue from its
own software platforms, developed as part of a strategic revamp
dubbed "Infosys 3.0".
It has also lagged rivals in acquisitions and in bidding for
contracts to manage big computer and storage networks.
Mohandas Pai, a Murthy ally and former Infosys chief
financial officer, said the company needed to revive its sales
efforts. "If he focuses on that, gets them going again, things
will be back to normal. After all, the biggest thing is sales,
not delivery," said Pai, now chairman of an education company.
Investors are banking on Murthy to set a clear strategy for
the company. "Now what happens is even if the ship runs into an
iceberg there is one man who's doing it," said Phani Sekhar, a
fund manager with Angel Broking in Mumbai, which owns shares in
Infosys. "At least it will not be drifting anymore."
(Editing by Tony Munroe and Miral Fahmy)