A tale of two Murthys

A fortnight is a lifetime in the world of technology. But the abrupt sacking of Phaneesh Murthy at iGATE Corporation and the unanticipated homecoming of N R Narayan Murthy (NRN) to Infosys, with his son Rohan as executive assistant, happened in such quick succession that it proves the adage that truth is stranger than fiction. The harassment case involving Phaneesh Murthy was a bit shocking. For somebody who has already undergone two highly publicised cases of sexual harassment accusations at workplace, the recent reckless behaviour is difficult to understand. In 2002, when Phaneesh was a rising star at Infosys and seemed destined for bigger things, his executive secretary filed a sexual harassment case.

Initially NRN and Infosys supported Phaneesh, but as details emerged Infosys settled for a US $ 3 million out-of-court settlement with the accuser and Phaneesh had to move out. The separation was bitter because of Phaneesh's feeling of ingratitude on the part of Infosys. His tenure had resulted in an increase of business from US $ 50 million to US $ 700 million and had put it on a path to success. Sometime later, another case of harassment during his time at Infosys emerged. Reports suggest that a settlement of US $ 800,000, this time borne by Phaneesh, was reached.

In his next avatar, Phaneesh became the CEO of iGATE. It looked like redemption was in order. His drive and ambition pushed iGATE to acquire Patni Computer Systems, which was twice its size. The combined revenue of the new entity crossed US $ 1 billion and it looked like the company would break into the league of Infosys.At the same time, Infosys lost its golden touch as TCS (Tata Consultancy Services), the leader among Indian IT services companies, increased its lead and followers like Cognizant Technology Solutions bridged the gap. Once NRN stepped down as executive chairman in 2006 on retirement and Nandan Nilekani moved on to head the Aadhaar project, the leadership passed on to two of the other co-founders, S. Gopalakrishnan and S D Shibulal. Their combined time in leadership position has seen the decline of the company. It became defensive and tentative.

When problems in US market started in 2008, Infosys turned conservative. While other companies like Cognizant and HCL Technologies invested in augmenting sales efforts and acquiring companies, Infosys did not do any of these. It also stuck to maintaining its profit margins which are the highest in industry. Infosys has a parallel in Sony, the Japanese electronics giant. For almost two decades, Sony commanded a premium for its brand and technology over its competitors. But when electronic items became commoditized, beginning in early 2000, Sony lost its advantage and nimbler Korean rivals like Samsung and more innovative firms like Apple stole a march. Sony is still struggling to turn around.

Infosys has inherent strengths: A cash pile of US$ 4 Billion (Rs 22,000 crores), huge physical infrastructure and global brand recall. For many years, Infosys bulldozed over its targets but over the last two years it has trailed and finally decided to abstain from giving sales and profit guidance, blaming a difficult and unpredictable business environment. General opinion is that the Infosys founders came to an agreement to pass on the baton of succession among them.

Somewhere between the time of S Gopalakrishan and the incumbent CEO Shibulal, Infosys seems to have lost strategic focus and did not adapt to the changing business landscape.

The appointment of former ICICI Bank Chairman K V Kamath as chairman was expected to lift Infosys to the next level but did not make much of a difference. For a company that prided itself on its depth of leadership, the decision to get NRN back in Infosys seems like a desperate measure to improve results. But more surprising has been his agreement to return. For somebody who has never overstayed in a position beyond the stipulated tenure, the decision to return indicates that there must be some facts on the current state of Infosys, not available in public domain, which must have prompted his decision.

It could be the disquiet in the second line of leadership or maybe some deeper business-specific problems in the company. The return of NRN appears like a throw of dice but on a good bet. As for the naysayers who are critical of his return, NRN can always turn to aphorisms that he is fond of quoting. John Maynard Keynes was once criticized for changing his mind and he is reported to have said: "When facts change, I change my mind. What do you do, Sir?"