Outsider drafted for Infosys turnaround

Infosys, India's second-largest IT services exporter, has for the first time picked an outsider as chief executive officer, as it seeks to boost sales of high-margin services like cloud computing and stem a staff exodus.

Vishal Sikka, a former member of executive board at SAP, has the technical savvy to herald what analysts expect will be a strategy overhaul at Infosys, which, like its competitors Tata Consultancy Services and Wipro, has relied on labour-intensive, low-margin contracts from Western clients.

But it could be at least a year before Sikka is able to turn around a company that was once a posterchild of India's $100-plus billion IT services industry. Some investors say Infosys failed to move up the value-chain because of its risk-averse management culture.

"Infosys needs some change and with his track-record in emerging technology areas, high-value services, Sikka will be able to bring that change," said Juergen Maiar, a Vienna-based fund manager for Raiffeisen Euroasien Aktien, which owns $300 million worth of Indian shares including Infosys.

"It will take some time to turnaround the company but now I can say that they are on the right track," he said.

Infosys on Thursday said Sikka will take over on 1 August from current chief executive SD Shibulal, who along with executive chairman NR Narayana Murthy, Executive vice chairman S Gopalakrishnan and four others founded Infosys in 1981 by pooling together $250.

Sikka, 47, is considered to be an innovator in the global software industry. A computer scientist by training, he was key in developing and marketing SAP's flagship product, HANA, which helps firms analyse large amounts of data quickly.

He is seen bringing into Infosys his expertise in newer technology areas, like cloud computing which allows clients to ditch bulky and costly servers for network-based software and storage in remote data centres.

Sikka's biggest challenge, however, will be to fill the leadership vacuum created by the exodus of senior executives, many of whom were responsible for key business sectors and winning clients, analysts said.

"The top layer of executives are all but gone. With a new CEO coming in and from outside, there is a chance he'll hire external candidates," said Ankita Somani, research analyst at brokerage MSFL Research.

The annualised rate of attrition at Infosys – the number of staff leaving or retiring – was a record 18.7 percent at end-March, 2.4 percentage points higher than a year earlier. That's close to a fifth of its workforce of more than 160,000. The departures included some top executives.

The exodus began shortly after Infosys brought Murthy from retirement as its executive chairman to help the company better compete.

Murthy's tenure, during which he also brought in his son Rohan as an executive assistant, was marred by restructuring that triggered uncertainty, factors that dented Infosys market share, dimmed its status as the employer of choice for young IT workers and intensified investor pressure for a change of guard.

Both Murthy and executive vice chairman Gopalakrishnan will step down on Saturday, Infosys said in a stock market filing.

Some investors welcomed the change.

"The good thing is that at least the uncertainty is all over and as an investor I can take a call on Infosys on a reasonably long term, not going from news to news," said RK Gupta, a fund manager with Taurus Asset Management, which owns Infosys shares.

Infosys shares, the most widely held Indian stock, rose as much as 3.2 percent in early trade, but ended down 0.6 percent with some dealers saying the new management would take time to turnaround the company.

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