‘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

The Economic Times - - The Infosys Saga - Surabhi.Agar­wal @times­group.com

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

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