Infosys Has Positives to Overcome Its Adversity

Narayana Murthy laid a strong foundation for Infosys

Narayana Murthy laid a strong foundation for Infosys
Narayana Murthy laid a strong foundation for Infosys | Source

Infosys Has Many Positives Still

Infosys Drifting Away From Main Course?

Infosys has been listed on NYSE Euronext. It is partnering India Post for development of a service delivery platform. It will allow more than 1.3 lakh rural post offices to provide online services. As Infosys earns only 1% of its revenue from India, this is an important deal. After Narayana Murthy’s exit and Kamath’s incoming, Infosys is doubly active. But inspite of all these things, there is a feeling of loneliness in the Infosys campus after the exit of Narayana Murthy. Infosys is in danger of aimlessly drifting away from the main course through which it was meticulously steered by its founder Narayana Murthy. But at the same time Narayana Murthy was very conservative in his approach and he precluded many things that would have taken his company to still greater heights. Kamath has no such inhibitions while managing the affairs of the company. Therein lays the difference.

Rivals Are Overtaking Infosys

Narayana Murthy took Infosys’s income from Rs.14.33 crore in 1993 to Rs.2604 crore in 2002. Profit after tax shot up from Rs.3.51 crore to Rs.807.96 crore during the same period. Infosys is India’s largest IT outsourcing vendor. From seven employees in 1981, Infosys has grown today to a fleet of more than 1.5 lakh employees. It is a $7 billion enterprise now. But Tata Consultancy has widened the revenue gap with Infosys by $3 billion. Infosys is finding it difficult to catch up with its rivals. Customers feel being let down or not cared by the company. Employees are also not that happy as they used to be before. Even Cognizant has overtaken Infosys now. Infosys was the first Indian company to be listed in NASDAQ in 1993 but lost that charm since then.

Following the Footsteps of Indian Bank?

Salary is paid to the employees but work is not provided. This causes frustration among the well trained employees. Remember the former Indian Bank General Manager T Valliappan who gave despatch work to the well trained EDP Officers in Zonal Office Chennai. They were asked to write addresses on the envelopes and affix stamps. But Infosys is not Indian Bank and one expects a better culture here. Infosys also does not put right people in the right place because its executive Purohit without any sales experience has been catapulted to his present position in view of his close proximity with Shibulal, the CEO. Again Infosys is following the footsteps of Indian Bank which appointed T Valliappan as the head of CPPD without any computer knowledge.

Clients Drifting Away From Infosys?

The result of all these is there for all to see. Infosys lost $85 million from WellPoint of USA. Cognizant is grabbing Infosys’s share in its dealings with Aetna of USA. Adidas is now relying more on MindTree than on Infosys. So also British Telecom. Many stalwart employees have quit the company. Some of them are Mohandas Pai, Subhash Dhar, S Vaitheeswaran, Ritesh Idnani, Shaji Farooq and Nandan Nilekani. Infosys’s rivals have competent sales executives like Vineet Nayar of HCl Tech, Francisco D’Souza of Cognizant and N Chandrasekaran at TCS. Infosys sources 63% of its business from USA which is shifting from its outsourcing policy to re-shoring as Obama has coined it. This makes it imperative for Infosys to tap other available markets through competent sales pitching. Shibulal is quite incapable of doing it.

Swiss Acquisition

Last year Infosys acquired the Swiss consultancy company Lodestone for Rs.2000 crore. Acquiring a company is not difficult for Infosys as it has cash reserves of around $4.3 billion. This is the strategy of Kamath as against Narayana Murthy. Kamath brought ICICI Bank to the top among the private sector banks through acquisition strategy. But Narayana Murthy insisted on self growth as acquisitions could change the culture of the organization.

Third Quarter Results Good

But Infosys surprised financial analysts by posting a better than expected show in the third quarter. It posted a consolidated income of Rs.10024 crore – 12% increase over the corresponding period of the previous year Lodestone contributed Rs.214 crore towards it. Infosys expects revenue for the full year at $ 7.45 billion. That will translate into a revenue growth of five percent for the entire year. But net profit was down marginally at Rs.2369 crore. During the period, Infosys secured 53 new customers. 13 of them came from European Union. After the result was announced, the price of Infosys shot up in stock markets. It is now quoting in the range of Rs.2700 to Rs.3000. Its market capitalization is Rs.1.6 lakh crore.

Infosys Has Many Positives Still

Chinese government has named Infosys as the only Indian company among 100 key outsourcing companies in China. But Infosys BPO has witnessed number of key exits in its outsourcing division. There is a general dissatisfaction among the employees as a salary increment was not given to them this year. 95% of Infosys’s revenue comes from repeat business. It should strive to attract new clients to cut the competitors’ edge. As Infosys has settled a visa fraud lawsuit in USA, it should look forward to increasing its business there. Infosys has shifted from NASDAQ to NYSE for better contacts with European Union. Last year the company was on a big austerity drive. It froze business class travel and deferred admitting freshers into its campus. FIIs hold around 40% in the company. Investors can buy the company’s shares for medium and long term holding. Notwithstanding adverse reports against the company, one should look for positives in the company and gain by item.

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