As new Infosys CEO, Salil Parekh has a herculian task of managing expectations of various stake holders
Two advantages for Salil Parekh are that he is from IT services sector and also he will work from India, not the US
Salil S Parekh, the former executive of Capgemini who will take over as the new chief executive officer at Infosys, has an unenviable task at hand. From addressing the stake holder concerns to managing investor expectations to taking the company through a big transformation, Parekh has a work which is truly herculian. Above all, his relationship with both the founders and the board will be closely watched.
Parekh, 53, will take charge from 2 January 2018, Infosys said in a press release over the weekend. He reportedly beat a number of internal candidates and former executives to get the top job at Infosys, the second largest software exporter in India. He comes after the exit of Vishal Sikka, who had an acrimonious war of words with the company's co-founder NR Narayana Murthy.
Analysts and sector experts say Parekh's first task will be to boost the sentiment of all the stakeholders – the board, employees and the market. “That will be the defining role of his job and that should be his focus,” suggests Sanchit Vir Gogia, chief analyst, founder and CEO of Greyhound Research. That is the first of the 'mool' mantras that Parekh will have to chant.
He says that unless Parekh gets this one right, the others like ensuring market performance by aiming for growth or building future leadership to ensure stability won't fall in place. “The crux for Parekh is to manage stakeholders sentiment and that has to be done overnight,” says Gogia.
Concurring with his view, Manoj Kumar, visiting fellow at the Observer Research Foundation (ORF), says that Parekh’s challenge will be to put a ‘transparent structure’ in place and also have set a norm to avoid a repeat of the past discords. One of the ways to do that would be to have a strong rung of leadership in the firm, he feels.
The mails in the public space, the war of words between Murthy and Sikka and a few members of the board have all led to an erosion of the image of Infosys. Parekh now has the tall order of building on what Nandan Nilekani, the co-founder who was brought back as non-executive chairman to set the house in order, has done so far since Sikka quit. However, he has to be careful to not change the status quo too much.
“Sikka, a Punjabi, was perceived as aggressive, while Parekh is not viewed as aggressive. He should be able to carry on the board and stakeholders, besides employees with him,” said an analyst, requesting anonymity, hastening to add that the changes Sikka proposed were good. The analyst, however, feels it was a case of too-much-too-soon for the tradition-bound company which is loathe to make quick reflexes.
Another advantage seen for Parekh is that he won’t be operating from the US like Sikka, another grouse against the latter's style of functioning. “Unlike Sikka, Parekh has a pulse on the Indian IT services context. He is definitely a kingmaker, for sure. He was pivotal in making Capgemini what it is today,” said Gogia
The IT industry is undergoing a technological transformation locally and globally. Artificial intelligence, cloud computing, robotics and automation are taking the sector by storm. The change is impacting the Indian IT sector. Unlike its earlier strength in the 1990s in outsourcing, Infosys and its peers now have to look at other facets to build their portfolio.
“When you look at new IT firms, they do multiple things together to make money. There are technologies that they focus on like cloud, or lead on Big Data, and voice-assisted services like Google’s Siri or Amazon’s Alexa and none of them are offering platforms but they are all making money,” said Arvind Singhal, chairman and managing director of Technopak Advisors.
Transitions can cost a lot, which the tradition-bound Infosys may be loathe to take. Singhal suggests that since Infosys is rich in market cap and has had good results, it can now look at acquisitions. He reasons that it has to realise that though it cannot develop everything in-house, it needs to have a really strong presence in the Silicon Valley not in terms of customer services but new age technology beyond being just a software tech firm.
Parekh will have to morph Infosys’ culture gradually. “The new CEO will have to gradually take the company away from traditional services and make it more professional,” says Gogia. Many sector specialists say that itself is going to be a major hurdle for Parekh.
Sikka had come with ideas which were considered drastic by many, said an analyst. “Unless the company comes out with new ideas which are drastic, it cannot go to the next level. However, the system could not accept Sikka’s ideas as it was not only different but was also risky. Doing anything different comes with risk, be it financial or failure,” says Singhal.
Sikka's Vision 2020 envisaged a $20-billion revenue target by 2020. It will now be Parekh's turn to figure out how to shape that vision and grow, says Harish HV, partner, India Leadership Team, Grant Thornton India LLP. “Nandan Nilekani has done his review and Parekh will have to leverage on what he has done,” he said. If Infosys has to grow, and grow rapidly, Parekh will have to get the confidence of senior management and the top team, besides the co-founders who will be watching every move of his. “He will also have to ensure that there is no major exit after he takes over,” said Harish.
The expectations from shareholders will be very high in view of the loss of market cap following the events leading to exit of Sikka, said Kumar of ORF.
The Murthy factor
The big question for many is what will Murthy do now? Many have blamed Murthy's outbursts on Infosys’ functioning for Sikka's exit. They even feel Murthy was unnecessarily meddling in the company though he is not an office-bearer now. Gogia says that Parekh has come on board with Nandan as its non-executive chief. “Parekh will have Nandan to take care of that,” says Gogia. Another industry expert said that till date he has been unable to understand what was Murthy’s problem with Sikka. "What was the issue?" he asks. However, many feel the biggest burden for Parekh will be this legacy of the company.
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The Infosys brand has taken a hit and clients and investors are looking for more clarity.
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Pai, who served as a board member of Infosys from 2000 to 2011, also said it was a "mistake" on the part of N R Narayana Murthy to "focus on only founders becoming leaders (CEOs)" which led many people to quit the company.