Throwing stones from glasshouses at Infosys...

It is becoming increasingly evident that the Infosys spat was regrettable. All it has done so far is erode shareholder value, despite continued good earnings performances.

Reuters reported that today, 24th October 2017, Infosys Ltd announced a surprise 3.3% rise in second-quarter profit, beating analysts’ estimates. Profit rose to Rs3,726 crore ($573.03 million) in the three months that ended 30 September, from Rs3,606 crore a year earlier. According to Thomson Reuters data, analysts on average had expected a net profit of Rs3,523 crore. Revenue from operations rose 1.5% to Rs17,567 crore.

These results are the first since Vishal Sikka quit Infosys as CEO in August after a lengthy and ugly public feud between the board and the company founders that also led to a reorganisation of the board. Nandan Nilekani, a co-founder and a former CEO, was named chairman with the company continuing to search for a new CEO.

Okay so far, I guess. But the real bombshell today was that the largely new board has also declared that there is no merit to allegations of wrongdoing in the Panaya acquisition and reaffirming previous findings of external investigations that the erstwhile board had commissioned.

What was that again?

During the ugly spat between Mr. N R Narayana Murthy and the erstwhile board, most of which took place in public, first at Murthy’s own choice, and then at the board’s, the board members went on record to place the blame for Sikka’s exit squarely on Murthy. Most of the spat was based on two factors -- one, Murthy’s view that the senior executives at the firm were being unfairly compensated and two, that there was skullduggery afoot with the Panaya acquisition which Infosys had made in 2015. One of the erstwhile board’s members also clearly stated that “it had reached an untenable situation” and that “at this point the Board has no intention of inviting Narayana Murthy to be a part of the formal governance of the company.”

The board went further to highlight the company’s performance over the last three years, which cover Sikka’s tenure. Here’s some of the actual text: “The Company grew its $100M+ clients from 12 in Q1FY15, to 18 this past Q1, and increased its large deal wins from ~$1.9B in FY15 to ~$3.5B this past year. This has all been done while improving overall utilization (excluding trainees), to a 15-yr high this past quarter, and an all-time high including trainees, while improving our cash reserves, rewarding Infoscions with a new equity plan, and returning Rs. 19,000 Crores as dividend (including dividend distribution tax) over the last three years. This has all been done while improving standing with clients, to the highest ever in the 12 years with a jump of 22 points in CXO satisfaction.”

One can’t help but ask whether Infosys had already been put on this growth trajectory by Sikka before he felt compelled to bow out. Was all this fuss really necessary? The Indian Information Technology (IT) services industry is under tremendous pressure as its fundamental business model, which Infosys and other firms are very heavily invested in, begins to fray under the twin onslaught of increased nationalistic protectionism and the automation of many IT services functions. We could have been spared this charade, the ensuing loss of confidence in the industry overall, and Infosys’s investors would have been richer as a result of this quarter’s good news, rather than the 10% poorer they are now than they were on 17th August, the day before Sikka quit.

I think Nilekani is a stellar choice as Chairman, and will doubtless do a great job, just as he did when first at the helm of the bellwether firm. But with respect to strategy, I hope Nilekani pays heed to what Lou Gerstner had to say when he first started at a flailing IBM that had just fired its CEO. Gerstner is supposed to have famously said: “The last thing IBM needs now is a vision”. It is time to bury the past and for Nilekani and his executive team to stick to the basics - keeping customers content, employees satisfied, keep making bold acquisitions where necessary, and as a result, hope to win back investor confidence.

Siddharth Pai is a technology consultant who has led over $20 billion in complex, first-of-a-kind outsourcing transactions. He now works as an advisor to Boards, CEOs, and investors to help them strengthen and execute their global technology strategies in an increasingly uncertain and volatile world.