Over the past two years, Infosys has been consistently outstripped by peers, and has underperformed its own expectations. Photo: Bloomberg Bangalore: Customers and investors at Infosys Ltd are concerned about the ongoing management churn that has seen several top executives leave the firm and say it could affect the company’s ability to win large contracts and retain clients. Over the last two months, a string of top-level exits at India’s second largest software exporter, including those of board member and Americas head Ashok Vemuri and global sales head Basab Pradhan, have raised concerns over its turnaround strategy under founder and chairman N.R. Narayana Murthy, who came back from retirement in June. “Amid the overall optimism on Infosys’s near- term business prospects, the key worry remains the churn and frequent portfolio re-allocations in the top management cadre,” CLSA analyst Nimish Joshi wrote in a note dated 19 September. “Infosys’s top management cadre has been an uneasy lot ever since the 2011 re-organization as pockets of angst continued well past the re-org.” “Too many changes in account management teams and at the top can affect relationships. We are hoping Murthy is able to retain key people; we always worked with Vemuri who has quit,” said an executive at a financial services firm that outsources projects to Infosys. He requested anonymity. Infosys offered no comment for this story. To be sure, existing customers of Infosys have not cancelled or terminated contracts. Still, a number of clients are now considering whether to extend existing contracts that are coming up for renewal. “Clients are not cancelling relationships or orders yet—we are not seeing that yet. But they are getting concerned. They are expressing concerns about the company’s operations, lack of growth, confusion, frequent management changes, etc.,” said Sudin Apte, chief executive and research director of Offshore Insights, an outsourcing adviser. “As a result, these clients are not essentially growing their relationship with Infosys.” “More than half of their clients, who still like the company, are pained to see the turmoil that it is going through now,” said Apte. In June, after being recalled as chairman, Murthy told shareholders at the company’s annual general meeting (AGM) that the task of rebuilding a “desirable Infosys” will take at least three years. “During the last two years, our focus on the third stream (traditional outsourcing projects) was blurred,” Murthy conceded during the AGM. “We have to re-focus on this (our bread and butter business) in the short-term…the entire company is committed to re-focusing on the third stream to enhance our win ratio in large outsourcing deals.” Earlier this month, at an investor conference, Murthy had said that Infosys would renew its focus back on traditional outsourcing contracts, as “growth comes from large outsourcing projects which form the bread and butter business for us. We have let ourselves down by not focusing on the bread and butter business”. “While some change at the top was expected as Murthy cracks the whip, the high-profile exits of Ashok Vemuri (member of board and head of Americas and global head of manufacturing) and Sudhir Chaturvedi (head of banking, insurance and financial services in the US) have rocked the boat somewhat,” Joshi of CLSA said. “We remain worried by the likely cascading impact of some of these changes/exits which could potentially impair Infosys’ ability to match peer growth in the future.” Over the past two years, Infosys has been consistently outstripped by Tata Consultancy Services Ltd ( TCS ) and Cognizant Technology Solutions Corp. and has underperformed its own expectations. Last year, it missed its revenue guidance at least twice and stopped providing quarterly forecasts. The company’s Infosys 3.0 strategy, which aims to drive more non-linear growth, under chief executive S.D. Shibulal has also repeatedly come under fire from investors who felt that it distracted Infosys from its traditional outsourcing business.
Posted on: Fri, 20 Sep 2013 04:17:52 +0000
Trending Topics
Recently Viewed Topics
© 2015