Birth of a new Infosys

June 12, 2014. This morning, Infosys announced Vishal Sikka as its new Chief Executive Officer. This change of guard marks the end of the innings for the promoter group and the arrival of the first external professional CEO to take over the reins of Infosys. While the market reaction today has been muted, the importance of this move cannot be understated. Vishal Sikka, comes with an impressive and successful trackrecord as Board Member and CTO of SAP. His role in SAP's legendary battle with Larry Ellison's Oracle has been well documented. As a technologist, he will undoubtedly steer Infosys to the opportunities of the future. However, the challenge before him is daunting. He needs to first stop any further senior-level exits, revive the sagging sales shoulders and win the trust of employees, clients & key stakeholders of Infosys. Most importantly Vishal's first test would be to imbibe the culture of Infosys and go with the flow at the earliest.

Chairman Emeritus Murthy

The arrival of Vishal Sikka also marks the exit of NR Narayana Murthy and Kris Gopalakrishnan from their executive positions. Mr Murthy gets back as Chairman Emeritus. In a move that reinforces the exalting standards of corporate governance that Infosys has always stood for, Mr Murthy has dissolved the Executive Chairman's office and his son, Rohan Murty will leave the company. Infosys has been under intense media scrutiny for the past year since Mr Murthy came back. Particularly, the perceived 'back-door' entry of Rohan Murty has been questioned. In one fell swoop, Mr Murthy has shut all critics; reinforced his commitment to the principle of meritocracy and has reinstated Infosys as the most democratic corporate organisation in India. This deserves to be applauded.

Exit Shibulal

SD Shibulal, the current CEO, will relinquish his post and resign from the board from the end of this month. History will judge Shibulal poorly as he led Infosys during its worst phase ever. Investors and media have been particularly hard on the man. Here is one data point before you judge: Since August 2011 to June 2014, Infosys stock was up 43%. Compare this to TCS' 140% and BSE IT Index 83% during the same period.

Road Ahead

Infy's possesses world-class execution capabilities. Its biggest problem has been with sales and some would argue even with strategy. It remains to be seen how Vishal Sikka will effect change in a company that has not embraced change well, atleast not so far. Lastly, to combat bad press reportage on the recent exit of its senior executives, Infosys shot off legal notices against leading media outlets alleging defamation. This unusual move conveyed a sense of desperation that Infosys is not known for. For an organisation that has always believed in transparency, shooting the messenger was poor form. In Murthy's own words, "there should be no information assymetry internally and externally about Infosys". With this as a guiding principle, it would serve well if Vishal Sikka drops the cases at the earliest. That would be a positive start for Infosys to regain perception.