Yet another top manager at Infosys, V Balakrishnan, has decided to quit. His exit brings the total number of such departures in the last six months to eight. A board member and former chief financial officer, Mr Balakrishnan was in fact seen as one of the three contenders for the position of the company's next CEO. Now, two of the three are out. A key task for which N R Narayana Murthy returned to the company he founded, other than restoring it to its earlier status of being a top performer, was to help identify the next leader. It is common in corporations for a management team to exit along with an outgoing leader, together with those aspiring to lead, but who have realised that they are out of the running. Infosys folklore also holds that, as it has deep management strengths, the departure of a few top managers does not affect it in any way. These perceptions, plus the improvement in quarterly results since Mr Murthy's return, have prompted the markets to give the firm a thumbs-up and a three-year high valuation.
However, this perception requires several qualifications. One, the developed economies are recovering and so is the demand for information technology services. So the sector as a whole is also recovering from the post-2008 lows and Infosys' improved performance is part of this overall trend. The right way to take a view on Infosys is to place it against the current front runner, Tata Consultancy Services. Seen in this light, Infosys is yet to become the lead performer that it earlier was. Besides, the improvement in numbers is the result of adopting a new strategy. The attempt to get out of the time and material commoditised end of the business has been given up, along with the position of price leadership. This will undoubtedly bring short-term results, but its long-term prospects are more dubious.
The long term is the problem. These departures suggest that identification of the next CEO is still very much a work in progress. The long-term outlook needs a new leader and his team to arrive and settle down. Since Infosys is a professionally run company with a wide shareholding and without a promoter family, it is logical for it to look for a CEO not just within the firm but elsewhere too. On this front, there have been contrary signals. Earlier, the buzz was that Mr Murthy personally would like the next leader to come from within the company. But now, with two of the three front runners for the post opting out, no one is willing to bet on an internal candidate. Restricting the choice to an internal candidate would indicate a preference for the status quo, the same mindset that prompted the company to continue with founders as leaders for too long. The best future for Infosys lies in becoming a global company, in body and spirit.
