The End of an Era...

March 31, 2002, in many ways and for many people, is the end of an era and

the beginning of a new one. On that day, Narayana NR Murthy, who has guided one

of India’s best-known software companies through its birth, adolescence and

maturity, stepped aside and Nandan Nilekani took over as chief executive officer

of Infosys Technologies, a company he co-founded as a youngster in 1981.

"I have not moved out," Murthy said three months ago, when he made

clear his decision to step down at the end of the financial year. "I have

just moved aside for younger people to take over when they still have the energy

and the ambition left in them." Murthy now becomes ‘Chief Mentor’ of

the company, much in the style of Bill Gates at Microsoft, and hopes to play a

similar ambassadorial role. Nilekani, meanwhile, moves up from the position of

chief operating officer, to CEO.

PASSING THE BATON: Murthy moves on to his new role as ‘Chief Mentor’

It has been an amazing relationship. It began in 1978 when a young Nilekani

passed out of IIT, Bombay with a degree in electrical engineering and joined

Patni Computer Systems. Narayana Murthy was the head of the company’s software

group at that time. Within three years, the two left Patni, and along with five

others, set up a small company of their own in July, 1981. Their seed capital–a

princely Rs 10,000. "We realized very quickly," says Nilekani,

"that there was a need for a very high-quality software company that was

very employee-focussed." And Infosys was born…

Today, almost 21 years later, that relationship has held firm and strong, and

the company has grown from its seven promoters in 1981 to 10,663 people and Rs

2,300 crore in turnover. But notwithstanding Nilekani’s matter of fact

rendering of this history, it hasn’t been an easy journey.

The early days



When Nilekani passed out of IIT Bombay, IBM had just left the country,

though a whole crop of new companies were making their first foray into India–including

the likes of DEC (Digital Equipment Corporation as it was then known) and

Datageneral. There were few domestic software companies, and the few that were

there, weren’t the behemoths they we know of today.

It was a different age. Liberalization hadn’t yet happened; India’s soul

was still socialist; technology hadn’t come to be so pervasive; and money

making was yet to become a virtue. "The only companies of significance at

the time," says Nilekani, "were either MNCs, large family-run

businesses or public sector units. When we set up Infosys, entrepreneurship was

not very hot. And there weren’t very many role models. In fact, the concept of

first-generation entrepreneurs did not exist." For the first few years,

says Nilekani, "All of us were abroad. Only Murthy was here." They had

bagged an order from Databasics Coporation and Nilekani and others were on the

clients’ site. Databasics had a solution for the apparel industry and Infy’s

first project involved the development, implementation and maintenance of that

solution.

Nilekani came back to India in 1987 and the company slowly branched off with

orders from General Electric and Reebok. In the late eighties, when the Indian

software exports industry was still very small, Jack Welch and team had come to

India to identify a few Indian software companies to work with. They looked at

TCS, Wipro, Patni, and finally settled on Infosys. This was a big win for the

company and the relationship lasted for a long time–GE remained one of Infosys’

top clients for years after that.

For a brief while, Infosys also entered into a joint venture with management

consultancy firm Kurt Salmon Associates and formed KSA-Infosys. That didn’t

last long though, as Infy realized that what it needed was a strong marketing

and brand-building thrust of its own.

The big leap



By the time Dr Manmohan Singh presented his landmark budget in 1991, Infosys

had grown to 162 people, but was still not growing the way the promoters had

hoped. Things weren’t bad, but they weren’t exactly booming either. This was

the time of the company’s first major introspection at a cusp in the Indian

economy. "That was when we realized that we had to do things

differently," says Nilekani. "Liberalization was happening, large MNCs

were coming into the software development sector and, suddenly, recruiting was

becoming more difficult–with all IT companies fighting for the same talent

pool."

So far, Infosys had survived by ploughing its profits back into the company.

"But we knew then," says Nilekani, "that our bootstrapping days

were over. We needed a certain physical infrastructure and a new way of doing

business." Recruiting wasn’t the only problem. The promoters realized

that unless they built a top-tier brand name, they wouldn’t be able to compete

with their bigger competitors in the market. And compete they would have to,

they knew. The days of demanding protection from the government were over.

"Besides," says Nilekani, "in the software sector, we always

believed in competition. We believed it was good for us."

To meet this new threat and tap the new market, the company went public in

1993. The rest, as they say, is history.

The challenges ahead



For Nilekani, the challenges ahead are significant (see interview). While

Narayana NR Murthy guided the company through its difficult formative years,

there’s a completely different challenge in keeping a behemoth going,

especially so in a sector littered with the remains of upstarts who made it big

really quickly, shined bright for a few years and then simply fizzled out.

Managing growth, however, is not the big issue for either Nilekani or Infosys.

Continuing to grow in a completely changed business environment, at a time when

the ‘sunrise’ years of Indian software are well nigh over, is. However, the

company has grown to where it is today precisely because it has always had a

finger on the pulse of the market. For instance, long before the slowdown was

being considered a threat, Nilekani had spoken to Dataquest about how 2001 would

be more about volumes than value, of how billing and margin pressures would

become more and more important. It is with this foresight and legacy of turning

a dream into a dream company that Nilekani has entered the CEO’s chamber.

Sarita Rani in Bangalore

"It’s a Big Challenge, and Very Exciting…"

 Is

this a big moment for you?



Clearly, this is a very big challenge, and a very exciting moment, for me–both
in terms of taking over this position and the time at which this is happening.

We had a couple of years of really tumultuous growth in 1999-2000. The last one

year, on the other hand, has been a new paradigm. The environment has been much

more competitive, and we’ve had to work hard for every order. These are

exciting times.

What do you see as your key challenges as the new CEO?



I see six basic challenges. First would be spending a lot of time in the

market with customers, understanding their needs, the services they require, and

tailoring our solutions to meet those needs. Second, in the last one year, we’ve

internally done a lot of work on reducing costs and streamlining our activities.

The challenge is to continue that process and align each and every one to it.

The third challenge is in creating a performance work ethic, setting and

identifying high performance standards and making sure that these are adhered

to. More importantly, we have to make sure that those who perform well are

rewarded. Fourth, working on things that are required for building and cementing

our brand as well as client relationships. I see that becoming increasingly

important as we compete with global players in the global market. The strength

of our client relationships and brand enhancement–both in breadth and depth–will

be a key priority. Fifth, the importance of making Infosys more multi-cultural.

We already have people from 26 different nationalities–I myself was surprised

when I learnt that. But as we go into the next phase of our evolution, we need

to do this even more. The challenge will be in getting the organization geared

up to this. It is already happening, mind you. We only need to accelerate the

process. And finally, getting everybody to be more customer focussed. That is

already there, but re-emphasizing that will be important.

What do you see as your mandate–a mandate for change, continuity, growth…?



We have a long-term strategy, a direction of the company that the entire

senior management team has already bought into over the years. In that sense,

that part of it is certainly a mandate for continuity. There, however, are

things I can do to help the company achieve the goals that it has set for

itself.

Do you and Narayana NR Murthy have significantly different management

styles? Would one expect to see a change on that front?



You should ask an outsider that. But yes, everybody’s styles are very

different. Whatever be the management, however, being effective, leading the

change and demanding performance, all the outputs remain the same, no matter how

different the styles.

Would one see you performing a lot more customer-contact functions than

you have in the past few years?



Yes. External interaction–with customers, investors… the content part of

it should go up. It is already happening, of course, but it will probably go up

further.

Against the background of the slowdown, are there any directional or

strategy changes in your first two years as CEO? Do you think the economic

environment will bounce back and, if not, are there new areas that Infosys would

be focussing on?



The environment continues to be challenging. Clearly, the set of conditions

that existed in 1999-2000 are not going to be repeated. At the time, there was a

coalition of things that happened–the Internet boom, the technology boom, the

VC boom–all these happened together. To that extent, the environment is very

different today. Mind you, it is not that corporations don’t want to spend on

technology anymore. Its just that they want more bang for their buck. They want

more value for the money they’re spending. As for Infosys, we’ll be doing

something more in the areas of business process outsourcing and focussing on

systems integration and IT outsourcing.

That is in the immediate term. In the medium term–five years or so–what

will the company’s vision be?



We have defined our agenda, and that is to assist our customers in

transforming their businesses through technology. Our clients’ business models

are changing, however, and they are looking for better and more efficient

spending on technology. Obviously, we want to be one of the premier

organizations in that area. Our focus too has shifted to ‘Excellence in

Execution’. To that extent, the current changes in the market, with greater

emphasis on value for money and excellence in execution, works towards people

like us. But going forward, I think you are going to see us becoming more

multicultural. In a lot of ways, we are already very globalized, specially in

terms of customers and investors. We have 300 clients around the world and

30-35% of our holdings are by foreign investors. Most of our employees still

come from India (except 150 or so). That needs to be globalized. We’ve been

consistently rated the ‘Best Employer’ in India, by Dataquest and other

publications, and we need to find out how to take this forward globally. We

already have some development centers overseas, like the one in Canada, but we

need to build more capabilities close to the customer. We also need to enlarge

the range of our services and put this entire range together to create an

end-to-end solution. Finally, we need to build a deeper and broader client

relationship.

Does this mean that Infosys will remain largely export-oriented in the

years to come… that you have no plans at looking at the domestic market in any

significant way?



We will be where the opportunity is. In the domestic banking sector, where

we’ve chosen to be, we’re clearly the market leader. We certainly plan to

enter different segments, but only as and when the market opportunity arises.

This might be a little premature, but at the end of the day, what is it

that you want to do that’ll make you say–"This was work well done…"?



You should ask me this question five years from now. But there’s an

opportunity here to make a difference. If some of the things I spoke about

earlier are done and when they are executed, we would have made a difference.

SARITA RANI