* Founder Murthy, son Rohan to step down on Saturday
* New CEO Sikka is former SAP executive board member
* At least 11 senior execs left Infosys since Murthy's
return in June
* Sikka's biggest challenge is to fill leadership vacuum -
(Recasts, adds details on Sikka, strategy)
By Nivedita Bhattacharjee and Sumeet Chatterjee
MUMBAI, June 12 Infosys Ltd, India's
second-largest IT services exporter, has for the first time
picked an outsider as chief executive officer, as it seeks to
boost sales of high-margin services like cloud computing and
stem a staff exodus.
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 analyse 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 centres.
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 annualised 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
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.
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.
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, signalled 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 rumours 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 authorised 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)