The reality is that the world has accepted quarterly earnings, so we all have to play the game, says Murthy. Photo: Bloomberg
Live Mint :Pankaj Mishra:Wed, May 08 2013. 11 22 AM IST
Some people want Murthy to come back and do what Steve Jobs did at Apple by engineering its turnaround
Bangalore: As Infosys Ltd, India’s second largest information technology company, attempts to weather the toughest period since its inception in 1981, some company insiders and investors want co-founderN.R. Narayana Murthy to make a comeback and do what Steve Jobs did at Apple Inc. by engineering its turnaround. Murthy, 66, who served as chief executive officer from 1981 to 2002 and as chairman from 2002 to 2011, said in an interview that he has no immediate plans to do so. But he added that it’s “difficult to predict what will happen tomorrow”. Edited excerpts:
You built Infosys on the promise of predictability and the company’s forecasts were taken seriously by investors and experts until two years ago. Infosys seems to have faltered on that.
You know, it is not fair on my part to sit in an Infosys office and pass comments on others. All that I can say is, I came up with a concept called PSPD (predictability, sustainability, profitability and de-risking) when I was the CEO, pretty early. The first P stands for predictability.
I said we need to create systems, processes, tools and technologies to ensure that we get proper data from trenches on the forecasting of sales, that is the predictability for next quarter, six months and year.
The second is sustainability. I said, it is the job of a CEO to make sure that those predictions are actually converted into firm sales. that some of those sales have annuities so that revenue will automatically come. It is very important for a CEO to make sure that whatever has been sold is executed, delivered with requisite quality, on time and within the budget, invoices raised in time and money collected so that sustainability is ensured.
The third is profitability. I said there is no point in running an enterprise unless you can make enough profits to give good salaries, to invest adequately in technology, to create good infrastructure, to invest in new projects. And finally, the de-risking, to ensure that the risk to the health of the corporation is mitigated; it does not depend on one geography, one individual, one vendor. Infosys has about 120 parameters that measures every week, month, quarter. The job of a CEO is following a good PSPD model. Predictability of revenue, sustainability of revenue, profitability of revenue and de-risking of revenue. A CEO must spend adequate time on these.
How has the current management fared on these? Are you happy, satisfied?
You know I am not aware of the details because my non-disclosure agreement ended on 21 August 2011 and I am not privy to the classified information about the company. Therefore, I cannot really comment.
Iconic founders such as Steve Jobs of Apple Inc. had to come back and rescued the company. Will you make a comeback in any form at Infosys?
At this stage, looking at the data that I have, I wouldn’t say that. So, who knows what happens in the future, I am not gone, cannot say what I will do tomorrow, I may not be there tomorrow morning. So, it is not possible for me to predict what will happen tomorrow.
Has the board or anybody at Infosys discussed any comeback for you?
I think as I said, sitting where I am, looking at the data, I don’t see that happening. I think it’s all speculation.
The transformation being led by current CEO S.D. Shibulal at Infosys appears painful from outside. Is that transformation being communicated well?
The reality is that the world has accepted quarterly earnings. So we all have to play the game. If we can’t stand the heat in the kitchen, we cannot be cooks. I think it’s very important for us to give very clear statements on what investments are needed, what impact it will have on earnings, so that you will have a stronger company in the long run. I think investors will accept it because a lot of them are here for 3, 5 years. It’s very important for any entrepreneur to clearly communicate that in the short term, investments are needed.
Infosys says it will grow at 6% when Nasscom is forecasting double that for the industry.
It’s 6-10% (the Infosys forecast). As I have mentioned, I am not an officer of the company, so, therefore, I am not the right person to answer.
Firms such as Dell have realized that transformations are better done by going private. Is that an option?
The reality is simply this—there are situations where, like Dell, a group of people could take the company private, there are other situations where it is not possible, there is no one individual who can do that. And that is not the real issue. Even if a company is taken private, at some stage people want to make it public. The question is can we communicate very effectively to investors that management is honest, hard-working, and in order to enhance shareholder value in medium term they have to take the organization through a tough period in short term. Just by taking private you are not solving the problem.
So, is this the tough period that Infosys has to steer through?
I am not an insider, my non-disclosure agreement came to an end in August 2011, therefore I am not the best person to answer those questions. You should talk to the chairman and the executive management, I am not the right person.
What entrepreneurial lessons have you learnt in building Infosys?
I realize that you have to have an idea whose value to the consumer, the market, you are able to express in a simple sentence; not a complex sentence. Unless you have a very clear differentiation in the marketplace, it won’t work. Also, strategy is all about creating sustained differentiation for better pricing, better margin.
For example, I started a company called Softronics in India and I realized pretty early that there was no market opportunity in the country. I quickly closed it down, entered the corporate world and then I said the right place to compete is in the global market. The market must be ready for the idea. Even though our idea was good, India was not ready for software in 1976; very few corporates used computers, very few understood use of technology in gaining competitive advantage.
Entrepreneurship is all about deferred gratification. Therefore, it is about hard work, sacrifice, pain, commitment today in the hope that tomorrow will bring a fortune. Now, that requires good character, that requires determination, that requires a good value system.
What have you learnt from your failures?
When I closed down Softronics, I did not feel that it was any failure on my part because I made a cold, clinical analysis on why Softronics could not work. The reality was that the market was not there. So I closed it pretty quickly, in one-and-a-half years. And then I said ‘look, I fell down, therefore I dusted my knee, got up and then I said look I learnt this lesson from this failure and I will go, take up a corporate job, understand what the global markets are and start my own venture.’
It’s very important to learn quick lessons from your failures, very important to recognize symptoms of failure pretty early and it is very, very important to not to be attached too much to the idea, you have to know when to give up an idea. I know entrepreneurs who have gone on for five, eight years, even when the rest of the world knows it’s not going to take off. It’s like their babies, it’s their idea and they don’t want to abandon it. I think one has to learn to abandon an idea after, of course, ascertaining if that idea has any future or not.
What makes a successful entrepreneur?
Often times I have been asked about the attributes for success and I have said, that you need two attributes for succeeding as an entrepreneur—one courage, second luck. Courage, to give up a lucrative job, courage to say I will take a bus instead of a car, courage to say that I will convince my spouse and children to lead a spartan life, courage to walk an untrodden path because you don't know whether your idea will succeed. But as importantly, you need luck.
It’s very difficult for me to say who will succeed. There were lots of my classmates who were much smarter than me. It so happened that I was lucky. Of course, I worked hard but I know many others who also did. Between 1979 and 1982, there were 13 groups that set up technology businesses like us, only one came this far, which is Infosys.
If I look at individuals who participated in those 13 groups, some of them were outstanding technologists, outstanding sales and marketing people, but somehow God did not smile at them.
What do global business leaders tell you about doing business in India, especially with so many scams coming out?
India has obviously lost the sheen that it had in early 2000.
The GDP (gross domestic product) growth has come down, current account deficit has ballooned, our fiscal deficit has ballooned. So therefore, I think India is now at a stage where we have to think very seriously on how to get back that sheen.
