The Sikka way gains currency at Infosys
$20BILLION QUESTION The first ‘outsider’ CEO has changed much at Infosys, like focussing on new services rather than acquisitions as he pushes growth. But his revenue target for 200021 is looking more and more of an aspiration
BENGALURU: On October 14, after announcing Infosys’ results, CEO Vishal Sikka was doing fine with the questions about the poor revenue forecast. What stopped him in his tracks, and made him gulp water directly from a bottle, was the one about his salary of ₹75 crore (around $11 million) a year.
SD Shibulal, the CEO before Sikka, earned ₹16 lakh in 2013-14, and nothing for the four months of the next year he spent as CEO until Sikka took charge in August 2014. However, Shibulal is a co-founder CEO and his family holds shares in Infosys valued at more than ₹4,430 crore.
Sikka is the first “outsider” CEO at Infosys; he is not one of the co-founders. He told the company’s board and its shareholders he will more than double the revenue to $20 billion by 2020-21. He promised to increase the operating profit margin, a measure of keeping costs under control while pushing the price the company charges its customers, from 25% to 30%, and to increase revenue earned by each employee from $48,000 to $80,000.
The easier way to do all this would have been to acquire firms. But Sikka said no more than $1.5 billion in revenue will come from acquired companies, and at least $2 billion will come from new services — stuff Infosys had not done before.
The graphics that accompany this article show how far away those targets are. Nasscom, the information technology lobby, expects the industry to grow no more than 9% this year. Infosys has cut its own revenue growth forecast to 8-9%.
UB Pravin Rao, chief operating officer at Infosys, says the company can grow much faster than the industry average, and thus achieve the $20 billion target by 2020-21. “Anyway [the $20-billion target] is an aspirational thing. Mathematically, it is possible. We still have the time.”
Sikka’s two other targets, too, have started to look like something to aspire to. The operating profit margin refuses to rise beyond 26%, and the revenue per employee inched up to no more than $49,000 last financial year. That also brings Sikka’s much-talked about pay package in focus. Beginning January 2017, his annual remuneration package will include a base pay of $1 million and a variable pay of $3 million. He is eligible to receive $7 million in stock options — which includes restricted stock units as well as performance-linked equity and options. Details on how much target is to be met in a year are, however, not known.
Meanwhile, Sikka is also the first Infosys CEO to get a corporate jet.
Earlier this year when the promoters were called in to vote on extending Sikka’s tenure by two years to 2021, less than a quarter of the votes favoured the resolution, the rest abstained. NR Narayana Murthy, the leader among the founders, did not respond to an email from HT asking what he thinks of Sikka’s performance.
Senior executives who spent most of their career in Infosys see a shift in the way the com- pany is run — from a thrifty Indian business counting each penny to a more lavish one. “We flew business class only on foreign travel and that too only beyond eight hours of flying,” said one.
Ashish Chopra of Motilal Oswal Securities, who has tracked Infosys for seven years, said picking on Sikka’s salary is not the right way to look at the shift in Infosys. One needs to see what Sikka is trying to do in the larger context, which is making Infosys an innovator company. “To initiate such a move is like moving the elephant (Infosys has 200,000 employees) to the other end of the innovation spectrum,” said Chopra.
Rao, the COO, talks about programmes like Zero Distance and Zero Bench. The first tries to bring the code writers in Infosys to deliver more value to customers, and the second seeks to reduce the bench strength to zero so that every employee earns money for the company.
However, a senior executive with a rival firm says: “Sikka is a techie and all his major statements seem to be playing to the techies gallery. You don’t achieve what he hopes to achieve by doing that.”
Sikka personally tracks more than 9,000 projects, each of 10 to 20 people. In an earlier interview to HT, he said: “I have a dashboard with close to 100 factors (metrics) in it that I look at on a daily basis. It is on a huge white board in Palo Alto (United States) which kind of tells you that I am a very demanding end-user when it comes to software and systems,” he said.
It will help him if the Infosys board is more patient and less demanding, at least in the short term.