Kamath will tinker with, not reengineer, Infosys

Will K V Kamath shake things up at Infosys ? He certainly has the potential, but it’s early days yet. For now, most observersbelieve the change of guard is more about continuity and not about rocking the boat. Kamath, a highly-respected banker, takes over as chairman of Infosys today from N R Narayan Murthy , who served as the founder chief executive for 21 years.

[caption id=“attachment_65741” align=“alignleft” width=“380” caption=“Kamath has said that any change introduced would be in consonance with the ideals of the company’s founder, Narayana Murthy. Reuters”]  [/caption]

However, there are some expectations that Kamath, credited with transforming a lumbering industrial lender into India’s largest private-sector bank, ICICI, could very likely nudge India’s second-largest software exporter towards becoming a little more aggressive on the acquisitions front.

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Indeed, in his interviews to various newspapers over the weekend, Kamath, the first non-founder chairman of Infosys, hinted as much. “We understand what the challenges are and our response is ready,” he told The Economic Times newspaper, suggesting that the company would become more open to making acquisitions in future.

However, he added that any change introduced would be in consonance with the ideals of the company’s founder, Narayan Murthy. “I would think, given the current situation, that (acquisitions) could have more focus. Certainly, the changes that are happening will throw more on your table. There could be very interesting options as we go along.”

He also dismissed claims that Infosys was not aggressive, arguing that a company that boasted the growth rates of Infosys clearly had “aggressive growth genes”. Along with Kamath, SD Sibulal will take over as the new chief executive officer and managing director while S Gopalakrishnan will become executive co-chairman of Infosys. Kris Gopalakrishnan, the current CEO of Infosys, who is also a co-founder, has been elevated to the post of executive co-chairman.

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WhileMurthy’s exit as chairman marks the end of his formal association with the company, he will continue to guide the organisation in the capacity of chairman emeritus. Murthy co-founded Infosys in 1981 in Pune with six other engineers and created thousands of millionaires, courtesy its stock option schemes. Infosys started its operations in a 1010 room with a capital investment of just Rs 10,000, which was borrowed from Murthy’s wife, Sudha Murthy. Now, its revenues have grown to Rs 27,000 crore.

Murthy served as the founder CEO of Infosys for 21 years and was succeeded by co-founder Nandan Nilekani in March 2002. Kamath joins the company with his own star credentials. A mechanical engineer with a management degree from the Indian Institute of Management - Ahmedabad, Kamath began his career at ICICI in 1971, and worked there for 17 years before joining the Asian Development Bank. In 1996, he returned to ICICI as its managing director and CEO, drafting a strategy that led to the bank becoming a pioneer in embracing technology and a leader in retail lending.

The change of guard at Infosys comes at a time when the company is perceived to be lagging rivals in its drive to capture new markets and clients, even as Cognizant seems to be snapping at its heels in terms of revenue growth. In fact, the US-based Cognizant recently toppled Wipro as India’s third-biggest software exporter by revenues, and the expectation is that it could dethrone Infosys before March 2012.

Kamath is likely to introduce some changes to enable Infosys to adapt to evolving market conditions, but don’t expect any dramatic changes to Infosys’ mode of operations immediately. “My own view is that in my two-year association with Infosys (as a member of the board), I don’t think there is anything to tear apart and put together again,” he told Mint newspaper. “Strategy is not about knee-jerk reactions. What was strategically important has already been rolled out. It is only the events of the last two months that we need to look at for course correction and see opportunities.”

The changes are likely to involve a shift in the company’s long-cherished focus on margins. Kamath admitted that with growth in the US and Europe in decline, margins are likely to be affected. “You could see a situation where people will ask for margin adjustments… that will happen,” he said. “So, you will see a response of squeezing operating expenditure. But the major response has to come through innovation and productivity gain, not just operating expenditure slashing, and also look at those businesses, verticals, where we are not doing as much.” New geographies will also be explored, Kamath said. “The role of the board will be to see that these constraints become opportunities.”

He also said the pressure on margins could be offset by productivity increases and innovation. According to the Business Standard newspaper, Kamath will also be expected to mentor the next generation of leaders at Infosys.

(With inputs from Agencies)