For starters, I do see a lot of similarity between Congress party and Infosys. Since both of them are prevalent in Indian minds for a long, long time, a general sense of arrogance has cropped into their veins. Now that I have compared Infosys with Congress party, I must explain how. To start with, surprisingly though, I see the reasons for declining reputation of these two organizations are more-or-less similar in nature. Well, you can strike out corruption from the list of comparable. First example of taking things for granted (typical Congress attitude) and that false sense of numero-uno on the part of Infosys comes as a case study of clear blindness on how their competitors are doing. Nonetheless one can argue if CTS is an Indian company or not but they certainly had taken over Infosys’s position as the number-2 in India a long time back. While CTS going ahead to topple Infosys from that position never came as a surprise to me, I was surprised how the so called visionaries of Infosys couldn’t see this coming. That too a challenge so prudent from a company established much, much later than Infosys. However we should give credit where it is due, but CTS’s phenomenal rise is more because of Infosys’s self-screwing up than CTS’s own growth. When I say this, I say it with conviction as I have few clear bullet points laid out before me to suggest, whatever Infosys is going through now is a homegrown affair and at best a self-inflicted disease. Let’s go through them one by one.
This is where I see arrogance and only arrogance on the part of Infosys’s top brass. I attribute this communication or lack of it as the reason number-1 for a lot of people, who have some stake in the company to get annoyed. And those stake holders start with the investors and culminate at the employee who was just recently been hired from some engineering college after fed with lot of carrots. Earlier Infosys used to have quarterly presentations for their investors to show how the business is going. To round up the year, along with quarterly meets Infosys used to have a year ending chit-chat with its investors to go through the balance sheet and numbers. These meets were more than handy for both parties since it not only brought about that much needed transparency but also was acting a good confidence booster. Even, employees up to certain level were kept abreast with all such investor meets to remain in line with company’s progress/decline.
But God only knows why Infosys’s board decided to do away with this very habit once Sibulal came to the helm. If I am not mistaken, they in fact stopped interacting with their investors during the last phase of Krish Gopalkrishnan as CEO. While the less critical ones see strategy in any of such moves, I see a Congress like arrogance. Just because Infosys managed to deliver on promise to its shareholders for decade’s altogether, the board of Infosys thought themselves to be a bunch of highly invincible entities. They believed the investors will continue to wag their tails in and around Sibulal and drool around during the quarterly financial announcements for their booty. How similar the attitude is with respect to Congress and the general voters. No? But thankfully, the investors are little smarter than the average Indian voter. In a matter of 7 quarters many loyal tail wagers have left the Infosys ship for greener pastures and if the inside traders are to be believed, a major chunk of the drawn out investment from Infosys were injected in to either HCL, Wipro or CTS. This is where Infosys started to lose the plot. Close to 2.1 billion USD has been drawn out of Infosys tank in last year and half alone. The diminishing investment has affected the annual compensation graph the wrong way. It is no secret that in an IT company, it is the investor’s money that goes for the payouts of its employees while the generated money goes for growth, paying dividends and accumulating liquid asset. A query about the annual appraisal and the subsequent constipated look on every employee of Infosys would give a good idea of dissatisfaction level.
Proper Cash Management:
4 billion is the liquid asset that Infosys is told to have in their bank accounts. Even though the amount looks big, for a company having 1.5 lakhs of direct employees, the amount looks paltry. The amount even looks more horrible when compared with Infosys’s so called rivals. In a quest to hire fresher in order to keep the share price at the premium level, the think tank of Infosys got engaged in mindless infrastructure development. Honestly, Infosys or for that matter any IT company seldom requires the truck load of sheeps they hire from third graded engineering colleges every year. While for the competitors the new hire system looks somewhat logical, for Infosys it looks more like a chronic disease. No wonder why the employee payouts increased by 27 basis points for Infosys while in the same period it decreased by 65 basis points for TCS. The once carrot infatuated blokes of the engineering colleges now have become a big pain in the back of Infosys. A conservative estimate would put the number of fresher in Infy payroll, anywhere around 30%. These are the cost centers for Infosys without generating any money for self-sustenance. Now that Narayana Murthy is dragged into the mess to do the much needed clean up job, the poor souls who roam around the Bangalore streets putting Infosys T-Shirts on weekends are for sure in for a surprising jolt.
A high cost in retaining nonproductive assets does have reparations on the investor satisfaction index. And in case of Infosys a high number of nonproductive employees has resulted in the declined dividends amounts that Infosys pays out to its investors. For the last four quarters the dividends that are been paid out are anything but dismal. There is a sharp decline of 9% in the average dividend payout money over a year and half. No surprise that in the same period there are a lot of loyal investors those have slammed their doors on Infosys board of directors. Rakesh Jhunjhunwala is one such entity, I am told.
With 4 billion in the booty, I don’t see much growth prospect for Infosys. Not at least, if they don’t decide to shed away with their nonproductive baggage in a hurry. The growth of Infosys internally looks nothing less than a miracle to me. Only way that I see Infy can aspire to grow is by some aggressive takeover policies. But looking at the cash in hand in comparison to the useless block of employees they have to cater every month, it looks highly unlikely if Infosys is in a position now to even takeover a two room based startup. I am sure, there won’t be many in their regular investor’s list those who would fancy the idea of Infosys’s big takeover strategies. Looking at the return the investors have got from Infosys in last couple of years, I am sure there would be more apprehensive chaps at the other side of the fence than confident ones. Even the prevailing volatile situation of our economy isn’t helping Infosys’s cause either. There immediate dissatisfaction on the appointment of a garbage as the new IT minister of Karnataka is a good enough indicator, how Infosys as a whole is desperate for some positive changes to come. But alas!! Changes come when there is an effort inside-out. Hope the big mouths; the presidential aspirants in the company understand this basic idiom of functional management.
Not sure how they are going to achieve it. Only way that I see this happening is through massive layoffs across board. If the plans of cost cutting only focus on employee expenditures then I am afraid, they might have to chop a good third of their total strength. This for me looks highly unfeasible as it will further diminish the minimal confidence that the investors are having on Infosys. Another way that I see is tremendously reducing their onsite strength. For this to happen, first a substantial effort should go in convincing the clients of this new offshore-onsite delivery model where one would see a handful mules operating from onsite, instead of the earlier truck loads. And I am sure, that would be one heck of a task in itself. For sure, a cunning man like Narayana Murthy must be pondering about this option. Along with the useless fresher lot, the jackasses who believe they are sent to USA by their company to update their facebook profile with pathetic images of them in front of Niagara fall in different angles; are in for a shocking surprise as well. On a lighter note, those bloody Desi-Firangis need such brutal treatment anyway.
All in all, Infosys is in an unenviable spot. And blame should go straight to the numero-uno thought process these so called founders always showcased. Starting from Narayana Murthy and down, except Nandan, all are big mouths of best grade. A certain Mohandas Pie and his daily blabbers on TV for anything is a great indicator of what I am precisely pointing at. I had expected this arrogance would one day land up Infosys in a more precarious position than that of Sreesanth. Not to mention, I tried to highlight this arrogance among Infosys top brass in an open letter to Mr. Narayana Murthy. The letter never reached his desks it seems.