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Rediff.com  » Business » Can Murthy's magic make Infosys a star once again?

Can Murthy's magic make Infosys a star once again?

July 16, 2013 09:26 IST

Can Murthy's magic make Infosys a star once again?

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While having Murthy around will certainly help bolster employee morale, Infosys will have to go in for more process innovation and automation.

Infosys Technologies’ first-quarter results for 2013-14 have been widely welcomed by the market, with the share’s price going up by nearly 11 per cent.

However, the numbers do not appear to be exceptional at all when compared to what the company has achieved in the last several quarters -- but then, the results received an equally clear thumbs down.

The year-on-year top-line growth of 17.2 per cent has been the lowest in the last eight quarters.

The bottom line has performed similarly, so that net margin at 21.1 per cent has been the lowest in the last several years.

After touching a high of 27.3 per cent in 2009-10, it has been steadily declining.

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Image: A file photo of N R Narayana Murthy.
Photographs: Vivek Prakash/Reuters

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Can Murthy's magic make Infosys a star once again?

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If despite this the market has found reason to cheer, then it can mean only one thing: it is registering a strong vote of confidence in favour of N R Narayana Murthy’s return and taking a wager that he will be able to steer the firm back on the path of better performance.

This almost religious faith in an individual’s abilities in a professionally run company that works on a collegial basis at the top may not be as irrational as it may look at first. What went haywire in Infosys was not in what it set out to do recently; it was the leadership’s inability to get all hands on deck.

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Photographs: Pawel Kopczynski/Reuters

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Can Murthy's magic make Infosys a star once again?

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If Mr Murthy does no more than ensure that the laid-down strategy is followed with alacrity and internal channels of communication are clear and unimpeded once again, then he will have delivered. Managing Director and CEO S D Shibulal has spelt out how the different parts of the Infosys 3.0 strategy have performed.

Consulting and systems integration, which have to account for a third of revenue, are on course.

This segment takes the company out of the low-margin commodity end of the business.

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Photographs: Rediff Archives

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The latter is taken care of by the traditional applications and maintenance part of the business, whose share in revenue is a little under two-thirds.

Faltering on this front lately has led to a fall in the rate of top-line growth within large fluctuations.

A renewed emphasis on this bread-and-butter part of the business, so as to appease the markets, will clearly not take the company forward as a high-margin technology-based business that does not have to rely on onshore delivery.

But relying on cheap imported labour at customer locations may have to be given up if the new US immigration Bill in its present form comes through.

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Image: NR Narayana Murthy, Founder and Chairman, Infosys, during an interview with Reuters at the company's office in Bengaluru.
Photographs: Vivek Prakash/Reuters
Tags: US , Murthy

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The hard-core intellectual property-led part of the strategy -- products and platforms -- is still in its early days.

In journeying through the transition and getting better margins from even the commodity part of the business, Infosys will have to go in for more process innovation and automation.

A slowing rate of net hiring and right skilling, which will mean asking a lot of people to go, will pose a challenge.

In the reporting quarter, though 10,138 people joined, as many as 9,563 left. Having Mr Murthy around will certainly help bolster employee morale.


Image: Employees walk in front of a pyramid-shaped building at the Infosys campus in the Electronic City area of Bengaluru.
Photographs: Vivek Prakash/Reuters

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