Issues before Infosys

In less than a year, software leader Infosys Technologies has seen two major changes at the top. S Gopalakrishnan has just stepped into the shoes of Nandan Nilekani as CEO. Mr Nilekani had last August become the top man in the organisation with the retirement of N R Narayana Murthy, who served as CEO for 20 years. It is widely expected that in the not-too-distant future, another of the founding members of the firm will serve his turn as CEO before Infosys gets to be led by someone other than a founding member. That will mark a watershed, signalling the end of the beginning of this remarkable company started by professionals-turned-entrepreneurs. These somewhat rapid changes at the top are unlikely to change how the company is run. Infosys has always been run in a collegial manner and more so since Mr Murthy began to pass on day-to-day tasks of running the company to Mr Nilekani. With Mr Gopalakrishnan now taking over those functions, Mr Nilekani as vice-chairman will continue to sit at the head of the collegial table (his is, after all, the senior-most) while concentrating on strategy and looking after relations with Infosys' top customers.

These recent changes and those likely to follow sequentially have two implications. One, it has been said that Infosys, though professionally run, has its own glass ceiling""that formed by the founders. A sunset to that is now clearly visible. Plus, with the founders gone in the near future, it will be up to the undifferentiated shareholders to decide who will run the company and how. Over time this is likely to have a significant impact on the look and feel of Infosys. Non-Indians (FIIs and ADS holders) already own over half (52.6 per cent) the company. Qualitative changes are already taking place in the company as it becomes more global and multi-cultural. But things will go further. Mr Murthy has himself clarified that it did not matter whether Infosys remained Indian or not because there was a higher aim"""to create the first truly multinational company from India. We are of Indian origin but we are a global company."

There are two challenges facing those who now sit at the top table of Infosys. One is the appreciation of the Indian rupee against the US dollar. If this abates, then well and good. But it may not, and in that case it will be impossible for Infosys to maintain the kind of top margins that it has been enjoying. A little further down the road, the firm may face another challenge. The offshoring of skilled services jobs is already an issue in the US presidential election with Hillary Clinton being on the defensive over her links with top US technology firms that lead in offshoring as also her closeness to India. It is quite possible there will be a temporary setback to offshoring as a new US president takes over in early 2009. That will challenge the evolution of the distributed development model, which is the cornerstone of Indian success in software. To address these two issues, in the near and medium terms, Infosys may have to radically re-examine its model to keep doing as well as it has. Thus, the Infosys team has a lot on its hands.