All eyes now on Infy choice of COO

“Infosys has always been paranoid about change.”  That, somewhat ironically, came from S D Shibulal, the 57-year-old chief executive designate of Infosys Ltd, the country’s second-largest software service firm, which on Saturday opted to go for the tried and tested strategy of graduating co-founders through C-suite.

What Shibulal meant to say was that Infosys constantly looks for innovative ways to change. But he said it on an occasion that disappointed at least some company watchers who were looking for some real change in terms of the company’s management structure.

As co-founder N R Narayana Murthy retires in August at the age of 65, Infosys has announced that co-founder S Gopalakrishnan, the current chief executive, will take over as executive co-chairman, while the current chief operating officer S D Shibulal, also a co-founder, will take over as the chief executive, as it always have been at 30-year-old Infosys.
“They have just postponed the inevitable,” said a Mumbai-based market analyst with a domestic brokerage who tracks the shares of Infosys and issues investor recommendations on the stock. He was referring to the transition from co-founders leading the company to professionals taking over.

“What was announced is along expected lines. What we feel would be critical is who would become the chief operating officer (COO), the post that becomes vacant as Shibulal takes over as CEO,” another market analyst said. Both analysts did not want to be identified as they are not authorised to speak to the media.

The choice of COO, analysts say, may be a necessary signal to investors that Infosys recognises that the dynamics is fast changing and that to remain competitive now, the company might need a different management style from the one epitomised by its co-founders who has helped Infosys get to where it is now.
Worry stems from the fact that Infosys failed to meet analyst estimates in the earnings for the last three quarters. More importantly, its peers such as Tata Consultancy Services, Cognizant and HCL Technologies have all been growing at a faster clip and gaining market share.

However, some analysts believe there is nothing fundamentally wrong with Infosys at this point and that the focus on the company’s management succession announcement is more media hype than real cause for investor concern.
“The management structure is robust as the growth so far has shown and slight slippage in a quarter should be seen more as a one-off than a fundamental flaw requiring radical change,” said an analyst with a foreign brokerage.