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Dressed in regulation light-blue shirt, navy pants, striped tie, Parekh sat down for an hour-long chat with TOI, his first exclusive interaction with media, and spoke on the past, present and future of the much-in-news company. Flashes of a wry sense of humour (asked if he had met all the co-founders, he said “Except Ashok,” referring to the one who left the company three decades ago) were in evidence as was a firm understanding of the Indian tech services space and where Infosys was headed.Excerpts:
What made you come here and take this job despite all the noise in the past year? What’s your vision for Infosys?
For me, Infosys has always been the pride of the Indian IT sector. When I had the opportunity to look at this, frankly to me it was a delight and a real honour to even be in the consideration. As for the vision, what we have at Infosys today is tremendous loyalty from our clients. In the last few months, I have met with over 48 of them, have heard how they look at Infosys. We have a huge understanding of their technology foundation and they are now embarking on the digital journey. They are really looking to us to say, `If you could help us that would be the ideal scenario’. To give you one example — I met with a CFO of a US Fortune 50 company a few weeks ago and they were just hugely appreciative of the work that we have done over the last 15 years, and now they are doing different things on their digital journey. They are doing something on data and analytics, something with the cloud and something in the IoT (internet-of-things) space. In all of those, we are helping them in small ways. And the message back for me was: How can we be a part of this journey to take them to the next wherever they are going? This is where our ‘Navigate your Next’ strategy comes from.
And internally that would require significant changes…
To drive that strategy, we need to have a massive reskilling programme for our employees. We also need to localize (be closer to client locations). The localization is not something that all of our competitors are looking at.
Don’t you think localization is policy driven, there’s no choice…
There are two drivers for it — there is clearly the regulatory requirement (US visa issues, etc), there is also this driver built on proximity. We are creating something called agile digital capability in India, but we also want to build proximity in those markets because some of this digital work needs us to be closer to clients.
Could you explain agile digital?
There are five components of this — the first is around how you experience digital on your mobile or how the user interface looks; second is around using AI and big data to provide insights; third is around building innovation; fourth is around acceleration, things like legacy modernization, movement to the cloud and looking at real hard digital tech activity; and the fifth is around assurance, about cyber security or changing the way testing is done. If you put these five together, it’s a framework that’s part of our strategy which we are launching with our clients.
So how is Salil’s Infosys different from your predecessor’s in terms of accelerating into some newer areas, revising some strategies, like you did by deciding to sell Panaya and Skava?
There will be a focus on internal talent, that’s a different approach from what we have had in the past. Second, real investment in agile digital which is in the services space. We are still committed to scaling products like Finacle (core banking system), we have huge investments in the platforms NIA (automation platform) and Edge (cloud platforms). There is a huge market in the digital services space where we can do more. Our agile digital business is $2.79 billion and that business is already growing rapidly and if we now invest, that could be a massive growth area. The addressable market for that is in the range of $160-$200 billion today. Third is, ensure that what our clients are saying are recognized in the company. I’m trying to build an Infosys that has relevance for clients in the future.
Why did Panaya and Skava not fit into your strategy?
We looked at our overall portfolio, not just Panaya and Skava, and looked at what our clients need today. We looked at criteria like what is the tech space – in Panaya, at the very start there was a huge emphasis on looking at how SAP upgrades are driven; but today, there is a different focus in business and the market itself has transformed. Then we looked at other criteria like where do we put the most effort to get most benefits in the next 3-5 years. In the case of Panaya and Skava, some of the criteria were not met. But I’m committed to making sure we will continue to work with those two companies no matter where the ownership lies.
The biggest issue for your company has been the decimation of talent at the top. So what would your strategy be?
What I have done in the past three months is very quickly elevate a few individuals. We have got now essentially all of our go-to-market for sectors driven by people from within. And my experience is we have the talent we need in terms of driving the company forward. To be clear, we are going to bring in talent from the outside because I want to expand what we are doing on the sales side. It’s not to replace, but to augment. And part of what we have done with the guidance is take some of our operating margin and invest it into building our future. I think that demonstrates we are building relevance for our clients. The two parts of the investment as it relates to the market is one on sales, and the second on our digital capabilities.
How distracting is it to have these whistleblower complaints coming in? They are after some of your board members, and until they exit, they may not stop.
The points we discussed earlier (about strategy and execution), that take up literally all my time. I don’t see that (whistleblower complaints) as a huge distraction. Some people have tried to make a big deal of it, but from what I see, it’s not such a big issue. What I saw over the weekend was that there was a lot more focus on our Q4 results and our strategic direction.
You said there is tremendous customer loyalty. Has all the noise in the last two years made them a little cautious?
Surprisingly, when I met them, they had a huge connect with Infosys. They had some need to understand how the future was evolving. I think with the speed at which changes were made especially with Nandan (Nilekani) coming in and the quick appointment of the CEO, I think their perception was that the core of the business was in good shape.
Have you met all the co-founders of Infosys?
I have met everyone except Ashok (Ashok Arora). My meetings with everybody have been very pleasant. When I got the opportunity to lead this company, I reached out to them, and they were very welcoming. Have met most of them personally.
How was your meeting with Narayana Murthy?
I met him a couple of times. He has been very gracious and was kind enough to offer me dinner once, with Mrs Murty and son Rohan.
What’s the difference between a Capgemini and an Infosys?
To me, this is a company that has been built with so much love and care, and affection, has so much respect, it’s truly a thing of beauty. If you had a chance to walk through the campus here, you meet the people, it’s truly a place with very special people. We have the ability now to build client relevance for the future. That to me is the real excitement of this digital journey that we are on.
How would you describe your leadership style?
I have not thought a lot about it, but what I do is get very involved with the individual, work with each of them. In taking decisions, I take a lot of inputs and then decide on my own relatively quickly.
You have the $500-million innovation fund. Is that for moonshot projects, or will you bring it under the M&A strategy?
Just a few weeks ago we did an expansion of one of our investments, Waterline. So it is ongoing. The approach is very much aligned to what innovation can help support where our clients are going. So that lens will be slightly different from the lens we had before. But the approach of investing for innovation continues. And we are actively working with the companies we have invested in. I spent time with the Waterline people a few weeks ago. There’s a pipeline of other investments that is being looked at.
As part of our three-year transformation plan, we have put together a dedicated effort on acquisitions. We have started to build with the help of our M&A team a shortlist of companies to look at more actively. Acquisitions by design are binary. You look for them, sometimes they happen, sometimes they don’t.
We will look in areas around the five components of digital I described. We will acquire within that map, or that pentagon, if you like. Every now and then there will be opportunities outside that pentagon, and we may look at them.
You are hiring more in the US. How does that impact your profit margins?
The way we are building our business, we are doing a lot of college graduate hiring, and that cost is relatively low. But the five components of digital that I speak about, it is very digital tech heavy – to do that you need to use a methodology approach that in the tech world is called agile. We have now mastered doing agile in a distributed way, that is doing it from offshore. We are doing it for clients in the US, in Europe, in Australia, and we have multiple examples across all of our delivery centres – it is in my mind a real breakthrough. Once you start to do that, you can do a lot of digital work also from an offshore setup. We will build a future model which takes into account how our margins will evolve.
Are you saying that when the protectionist sentiments ease (in the US), you could potentially do most of the work out of here?
We are absolutely hiring people there, building a localized capability. Also what I’m saying is we have an approach where we can do a lot of digital tech offshore. So we are progressing on both fronts.
Do you think Infosys is ahead of others in being able to do this digital work offshore?
My sense is what we have built in terms of doing agile in this distributed way is leading in the industry.
We hear there are concerns among young employees about what has happened in Infosys over the past two years and you are struggling to get people….
We have had no concerns about recruiting from campus. All our campus recruiting is working very well.
And employee morale within the company?
Our attrition rates have been within the industry bands. The high performance attrition rate has come down by almost a percentage point in Q4. I’m spending time with employees, delivery centres, my sense is employees are all charged up. And with the reskilling agenda we have put here, and the growth opportunities we have, there’s a very positive outlook.
Most of the big MNCs are setting up their own engineering and technology centres in India, most say they are working on precisely the areas of digital that you have been talking about. It is impacting Indian outsourcers. How do you see this?
These things go through cycles. As many are setting up centres in India, we are working with clients both in the western geography, but also with the executives and management at these centres to help them with their needs here. Equally, we are seeing in our acquisition portfolio, opportunities where companies want to sell their captive centres. My experience of the past 10-15 years is it goes through a cycle. Especially when there is a change in the technology landscape there is a greater scale up, and as the technology landscape stabilizes, people either want to exit it, or go back to external providers.
In consulting, what are the real challenges? Indian IT services companies appear not to have mastered that. Why is it hard to borrow from the Accenture playbook? Would you also repurpose talent from Lodestone that’s under-leveraged?
Consulting is critical as we build our agile digital future. As you know, what consulting gives to a company like us is the ability to connect with a broader buyer population and to provide a point of view which is much earlier in the cycle for a large tech programme. For me, there is no doubt that we are going to scale up our consulting business. What we are going through today with respect to consulting is making sure that the focus of what we are doing is relevant to where our clients are moving. I think we have already done that and our US consulting business is starting to show that impact. We now need to put the focus in and get the European consulting business to scale up as well.
Is there a mindset thing globally that Indian firms can’t do consulting well?
If you look at the pieces of consulting work, I don’t see that as a distinction with clients. In fact, what I’m finding more and more today is that if clients are looking for someone who can give you the concept and make it real, they are looking for someone like us who can do the full spectrum (consulting and technology). If clients are looking for “give us some good ideas,” you may not be the first choice and they have many other options. But for us, the whole spectrum starts to resonate with the clients.
Narayana Murthy strongly felt that Infosys should maintain its industry-leading margins. Murthy used to say that high margins were necessary to be respected and to be long-term sustainable. Cognizant is working towards improving its margins and you’re trying to bring it down.
We all start from different starting points. We are on our transformation journey and part of our strategy is the way we will now execute. It is a three-year transformation journey that I have shared with the board and which they have supported. We are now working with our management team and the way I see this playing out is, we need to look at who we are competing with and what the clients are doing. If we look at who we are competing with, Western players or Indian ones, if we did not invest in building sales or digital capabilities and in the reskilling programme or the US localization programme, we would not have an opportunity to build client relevance at the speed we need to build it out. With that in mind, we took a conscious decision to guide lower for the margin for the next year. This is what is allowing us to fund to build client relevance for the future. What that translates over time to is potentially a faster growth and once you get to that faster growth, then you start to build you earnings momentum, and then you see where your margin should be.