Rebuilding Infosys will take 3 years: Narayana Murthy

Infosys co-founder N. R. Narayana Murthy, whose executive chairmanship was ratified by the shareholders on Saturday, promised to “rebuild a desirable Infosys” in 36 months. Addressing the company’s annual general meeting (AGM), Mr. Murthy hinted that the company might move away from its traditional emphasis on high-margin and adopt a more “flexible” approach to cope with competition from rivals in the IT outsourcing business.

“We will adopt a flexible pricing policy, where absolutely necessary, to enhance our growth rate,” Mr. Murthy said. Citing Winston Churchill, he said, the company’s “quest for perfection requires us to change as often as necessary.” “Executing this strategy may require me to change some of my long-held beliefs,” he noted.

Again hinting at the failure of the Infosys 3.0 strategy, which emphasised the role of consulting and the development of intellectual property-based solutions in the company’s business mix, Mr. Murthy said the excessive focus in these areas had resulted in the company missing several large outsourcing deals that had been treated as “commoditised” by the company. The company, he said, would focus again on its “bread and butter business”

Promising to build a more efficient sales force, Mr. Murthy said, “The entire company is committed to refocusing on the third stream (application development and BPO), to enhance our win ratio in large outsourcing deals.” He said the “extra focus” on the commoditised lines of business had the “potential to accelerate our revenue growth while reducing our margins.” “I want you all to be aware of the downside,” Mr. Murthy said.

Mr. Murthy also promised a return to more predictable earnings, an oblique reference to the fact that the company had stopped issuing quarterly earnings guidance.

Shareholders were divided in their approach to Mr. Murthy’s appointment. One wanted to know what had been the contribution of the independent directors. Another, referring to the spike in the company’s share on the eve of the announcement of Mr. Murthy’s comeback, sought details about the allegations of insider trading. However, many shareholders said they were happy at Mr. Murthy’s return at the helm.

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