Twitter
Advertisement

Six steps outlined for Narayana Murthy

Improving employee morale the foremost step suggested by JP Morgan.

Latest News
article-main
FacebookTwitterWhatsappLinkedin

N R Narayana Murthy’s efforts to turn around Infosys would take more than just a change of current strategy, considering the gloomy global environment, say analysts.

Under a six-point restorative agenda suggested to the company for the next quarter, Viju K George and Amit Sharma of JP Morgan said communication – first with employees, and then with clients – is of utmost importance.

“Flagging morale invariably leads to less-than-optimal client engagement, resulting in waning client satisfaction and market-share loss. It is perhaps not coincidental that companies that execute consistently well (TCS/Cognizant) also enjoy consistently lowest employee attrition,” said the analysts.

High attrition, low utilisation levels and frequent management changes have led to internal upheaval, affecting productivity at Infosys.

Engaging better with new clients, as well as clients with whom Infy has lost market share will be helpful, they said.

An analyst with another brokerage requesting anonymity said, “Leadership and communication is of utmost importance. In a difficult demand environment, it is only the solid leadership of NRN that can bring a possible turnaround, by renewing client confidence and thereby more deal wins.”

The third suggested change relates to cost optimisation and a re-look at inefficient investments in consulting, products and platforms, bloated onsite compensation structure and a high bench.

In a bid to grow in several directions (PPS, consulting, bread-and-butter), Infosys has invested in these non-linear business where returns are uncertain. JP Morgan estimates that over the next 9-12 months Infosys should be able to save up to 200 bps of annual costs on such investments without impacting revenue growth.

Daljeet Kohli, head – research, IndiaNivesh Securities, said, “Infy needs to compromise on its high margins focus by lowering prices and reduce dependency on discretionary business – two areas where it is losing out to its peers. It also needs to focus more on new innovations and transformational deals, which provide cost-saving to clients but entail a longer turnaround.”

For such deals, clients have to be convinced of the benefits, and NRN is best placed for it, he said, adding Infy like its peers also needs to invest more in domestic business, which has proven profitability.

It should also undergo a GAP analysis to check a need to re-align it 3.0 strategy, based on gaps in operational efficiencies, which include “common issues and objectives of Infosys’s clients, its resource allocation over the near-to-medium term”, the JP Morgan analysts said.

This will help the company decide whether it should pursue ‘scale’ or ‘differentiation’ of offerings, or a hybrid model.

In the final step, NRN would need to improve communication with investors on Infy’s strategy ahead based on the changes to its model, while a change in guidance can wait till the operations have stabilised and leakages have been stemmed, they said.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement