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Infosys results: What are Vishal Sikka's twin challenges as CEO?

Friday, 11 July 2014 - 5:30pm IST | Place: Mumbai | Agency: dna webdesk

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Infosys, the second largest software services exporter in India showed 21.6% profit growth for the April-June quarter over the same quarter last year, it said in the results declared today. The sales figures for the same period went up by 13.3%. The good news is the company as maintained its guidance for dollar revenue at 7-9%. But compared to the last quarter its net profit went down 3.5% while its revenue went down 0.81%.

But what came as a positive surprise was improvement in net profit margin. It added 61 clients in the quarter. It improved its performance sectorally in retail, and in terms of geography it improved in North America.

A few days back the present managing director of Infosys, Sibulal had said that Infosys was finding it difficult to expand its base in India aworking with public sector units. The company was trying to refocus and improve the pace of growth in India. But in the meanwhile it must keep its eye fixed on abroad from where bulk of its growth comes.

However, the biggest challenge to the company comes from its attrition which stands at a record high of 19.5%. This essentially means for every 100 people in the company, 20 are actually leaving.

Infosys right now is in a mode of transition with the company choosing its next CEO in Vishal Sikka, some one who not from within the company but an external CEO. After Infosys foudner Narayan Murthy had retired, SD Shibulal had taken up the position of the CEO and managing director. But Murthy came back soon in 2013 in a company whose growth was clearly dwindling, and brought his son Rohan Murthy along with him. At that time, there were concerns if Murthy would be able to turn around the company, prepare a new CEO to replace Shibulal and what the fate of Rohan would be in the company. 

Matters turned worse for the company when several top officials resigned one after the another, including the global head of sales and marketing Prasad Thrikutam, president BG Srinivas, board members  Ashok Vemuri, V Balakrishnan, and other senior leaders such as Basab Pradhan, Chandrasekhar Kakal and Stephen Pratt. Suddenly the line of executives heading the company was on its way out.

Murthy has done his top job, to turn around the company and bring it back on growth track. Despite losing his top men, he has also brought in a new CEO from outside. And he, along with his son, have stepped out too.

Now, Infosys's biggest challenge would not be its numbers now but maintaining its people, both the top level that mostly has been newly formed after recent exits, and two the general employees. The attrition rate shows there is something going awry for which so many people are leaving the company. Sikka has two major tasks in front of him now. One is to figure out despite being one of the largest IT companies in India, it is finding it difficult to retain people. And two is to build a team of his top men who can take over the top job when he is on his way out, something that Murthy had clearly not done very well the first time he stepped out.

The market has given thumbs up to the numbers today. The stock was 1% up today. However what Sikka now will need is thumbs up from his own employees. 

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