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Infosys and the

challenges faced by
their new CEO Vishal
Sikka
Prepared & Presented by,
Isabat Rizvi,
Shakeel Qureshi,
Shamail Ahmad
Infosys
Infosys was co-founded in 1981 by N. R. Narayana Murthy,
Nandan Nilekani, N. S. Raghavan, S. Gopalakrishnan,
S. D. Shibulal.

Its an Indian multinational that provides business consulting,
information technology, software engineering and
outsourcing services.

It is headquartered in Bengaluru, Karnataka.

Infosys is the third-largest India-based IT services company by 2014
revenues, and the fifth largest employer of H-1B visa professionals in the
United States in FY 2013.

On 31 March 2014, its market capitalisation was INR 188,510 crores
($31.11 billion), making it India's fifth largest publicly traded company
List of CEOs
Name Period
N. R. Narayana Murthy 1981 to March 2002
Nandan Nilekani March 2002 to April 2007
S Gopalakrishnan April 2007 to August 2011
S D Shibulal August 2011 till July 2014
Vishal Sikka August 2014 (designate)
Why was there a need to introduce a
new CEO
Mr Murthy had returned from retirement in June last year to lead the company.
His return, with his son Rohan as his executive assistant, triggered uncertainty at
the top and dimmed the company's status.

Infosys has been losing market shares to its rivals Tata Consultancy Services and
Cognizant Technology Solutions over the past few years. Infosys was once a star
performer in India's more than $100 billion outsourcing sector, but the
uncertainty at the top and its shrinking market share dimmed its status as the
employer of choice for young IT workers, with staff leaving at an unprecedented
pace.

Analysts had said the company would benefit from swiftly appointing a new CEO.

Why Vishal Sikka was the best bet for
Infosys
Infosys has brought in an outsider and a non-founder to lead the company.

He is one of the world's most respected technology practitioners.

By appointing Vishal Sikka,analysts believe the Bangalore-based company is
signalling that it wants to be at the high table of high technology.

Sikka,emphasised several times that he is 'looking forward to learning', setting the
tone for his interactions with the company's more than 1.5 lakh staff, particularly
the senior management where there have been several high-profile exits in the
last year.
Vishal Sikka,the new CEO of Infosys

We take a look at Vishal Sikka's journey, his educational background and years at SAP.

The son of an Indian Railways officer, Vishal Sikka completed his schooling at the
Rosary High School in Vadodara, Sikka earned a BS in Computer Science from the
Syracuse University in New York and completed his doctoral programme at Stanford in
1996.

After Stanford, Sikka launched a technology firm, iBrain, along with his brother, and
later founded Bodha, a company that helps e-commerce systems connect with other
applications.

He has worked with German business software maker SAP in developing its flagship
product, Hana,short for "High-Performance Analytic Appliance
which helps firms analyze large amounts of data quickly and bring it to market.

SAP "System Application & Products" is a German multinational software corporation
that makes enterprise software to manage business operations and customer
relations.
SAP is one of the largest software companies in the world.

He quit SAP AG in May this year.

Vishal Sikka Faces Many Challenges as
New Infosys CEO
As Infosys has faced uncertainty previously in its revenue growth, the company now
expects Vishal Sikka to recover losses.
In order to recover Infosys losses, the key areas that Vishal Sikka might focus on, are as
follows:

Improvisation of work environment and Employee morale
Infosys employs around 1.5 lakh employees. But in spite of a huge work force, the
company faced uncertainty. Later, Attrition at Infosys rose to 18.7 per cent in the March
quarter from 16.3 per cent in the December quarter.
Over the last 12 months, Infosys has lost several board members and some client-facing
managers. The company's global sales head, head of US sales, BPO sales head, India head
as well as one of the two presidents have quit Infosys over the last 12 months.


Attrition: (refer to the gradual reduction of the size of
a workforce )


A look at the graphic will help open gauge the gravity of
the problem. In 2009-10, the companys attrition rate
was just 13 per cent. Five years later, it stands at 18.7
per cent. Meanwhile, for its peer TCS the rate has
remained more or less stable over the same period
11.8 per cent to 11.3 per cent. It also should be noted
that the higher attrition at Infosys during the last
financial year was despite the fact that the company
hiked employees' salaries twice.

Taking into consideration the employee morale, Vishal
Sikka might be expected to introduce more schemes for
employees, better employee engagement towards
Infosys profits in future.


Attrition rates for Infosys and
TCS
Need to improve revenue growth:
According to its official reports, Infosys margins grew up by 200 basis points,
as it started winning large outsourcing deals. But, the revenue growth of
Infosys still lags behind. Infosys expects to grow at 9 per cent in this fiscal
year.

"While deal wins improved year-on-year, the run-rate still lags that of HCL
Tech, which won over $4 billion worth of large deal wins in the past four
quarters versus $2.25 billion at Infosys,"
In 2013, Narayana Murthy had outlined his three-year strategy of turning
Infosys into the most desirable company but unfortunately couldnt fulfil the
all around targets of the company. As Vishal Sikka is a well known name in
SAP, he might nail it down by using his contacts for Infosys advantage.

Besides, Infosys is over-dependent on North America for revenues, below-par
presence and acceptance in key growth market of continental Europe will be
a major challenge for Dr Sikka.


Revenue growth: A sticky area for Infosys.
The following graphic shows how the
companys revenue growth has been
compared with its peers. In the post results
statement, while Infosys was cautious
about revenue growth outlook for the next
year, TCS looked more confident.
Infosys Management opined that the
global economic environment has improved
but due to few project ramp downs as well
as pressure in discretionary spending, the
company expects overall client budgets to
be flat from last year and hence expects a
slow start in FY15, MSFL said in a research
note recently.
Sikka, for sure, has no magic wand, but
he will definitely have to pull up his
socks.

Margins: As the graphic shows, this has been a big
worry for the company. According to HDFC
Securities, Infosys EBITDA margin, a key
profitability metrics, stood at 33.7 percent in
third quarter of 2012-13, which fell to a low of
26.1 percent in the second quarter of 2013-14,
before improving to 28.3 percent in January-
March. The moderate improvement has come
during the second stint of NR Narayana Murthy.

However, growth trajectory remained volatile
with company slipping behind peers in 4Q FY14,
the brokerage has noted. As per the data
provided by the brokerage, the companys EBIT
margin has contracted over the last three years
from 29 percent to 24.5 percent in FY14.
In its bid to improve the margin, the company is
now focussing on application development and
maintenance, infrastructure management
services (IMS) and pricing.

Vishal Sikka will need to invest smartly for Infosys 'cloud ready' technology
Even though Vishal Sikka led all products business at SAP, Infosys can be a
challenge for him as it is predominantly a services company. In an investor
conference, Vishal Sikka claimed that, that the distinction between products
and services has become blurred. Large machines are delivered as services
nowadays.To me, the distinction between software-led services and product is
not that much, he said.
Investing smartly and bringing in new innovative technology to an IT
development company might increase the expectation for Infosys success in
future.


Dr Sikka's background may be a handicap: At SAP, Dr Sikka led all products
business, but Infosys is predominantly a services company. Deutsche Bank says
it is concerned about Dr Sikka's ability to run a services company. "This could
also have implications on his view of costs and hence margins," the investment
bank said.
However, Dr Sikka maintained that the distinction between products and
services has become blurred. "Large machines are delivered as services
nowadays... To me, the distinction between software-led services and product
is not that much," he said.

Conclusions !
Analysts and company observers are still cautious for various reasons. For one,
Sikka comes from a products background, while Infosys is a services company.
Given the fact that his experience was with a global major, he will have to adjust
to the work culture of an Indian company.

Sikkas appointment is unlikely to set things right. Analysts are, however,
predicting more exits.


Thank You !!!

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