‘Infy may Take a Hit if Turmoil Grows’
Any change in management structure may affect IT major’s growth because its efforts to reposition itself as a digital-first company will get affected, creating confusion among clients, who may switch to other firms, say experts “It would be very unfortun
New Delhi: The turmoil at Infosys, India’s second-largest IT services company, could hurt growth, especially if the tussle between the founders and the management escalates, leading to a change in management structure.
So far, the company’s clients have not expressed any major concern since there are no ethical or delivery issues that could impact them immediately. But, if things turn worse, Infosys could enter a phase of instability, warned experts.
Peter Bendor-Samuel, CEO of IT consultancy firm Everest Group, said he doesn’t expect any significant customer backlash in the short run as far as issues regarding governance, board representation and share repurchase are concerned. “However, if as a result of this, the founders reassert themselves to gain control of the board and try to replace Sikka, then Infosys could change its direction from its current digital-first initiative to an arbitrage-first strategy,” he said.
This will have a customer impact as the current Infosys management’s efforts to reposition itself as a digital-first company will get affected, which will create customer confusion forcing many firms to go to other firms for their digital work.
“Given that the digital segment of the market is where the growth is, this could have an unfortunate impact on Infosys,” he said.
ET had reported last week that Infosys’ founders have been unhappy with the board over what they consider a violation of ‘core Infosys values’. Trouble has been brewing at the company for over a year now and the large severance package paid to the company’s former chief financial officer Rajiv Bansal, disclosed last year, and Sikka’s raised compensation brought matters to a head. Infosys founder NR Narayana Murthy, in an interview to ET, had even questioned the actions of Infosys chairman R Seshasayee and independent director Jeffrey Lehman. Promoters are also upset with the appointment of Punita Kumar-Sinha, an investment banker and wife of Union minister Jayant Sinha, as an independent director.
Sikka on Thursday wrote to employees, asking them not to be distracted by speculation about the company’s commitment to governance, integrity and values, and highlighted the improvements the company has made during his tenure. Sudin Apte, CEO of research and consultancy firm Offshore Insights, said that while clients didn’t show any significant concern, employee morale could get impacted in case of a protracted boardroom battle. “Since the issues raised by the board do not impact the deliveries by the company or require its clients to make disclosures to their internal ethics departments, it hadn’t rattled them much,” he said.
Apte, however, said it would be “very unfortunate” if Sikka has to make way as a result of the spat. “He has dragged Infosys out of trouble after a long time. Infosys has given decent returns to its investors and if the company were to enter another phase of instability, it would be really unfortunate,” he said, adding that hopefully the founders do not want any disruption in their business.
The Infosys board has called for a press conference in Mumbai on Monday. CEO, Offshore Insights