Recently, Infosys appointed Salil S. Parekh, formerly a Group Executive Board member at Capgemini, as CEO and MD of Infosys. His selection was a surprising choice. He lacks the industry profile of Infosys’ prior CEOs and has no prior experience as a CEO. But I believe he is a talented executive who is well positioned to continue the existing Infosys strategy and is committed to building the next generation of Indian services. He understands all that an Indian talent base can offer while also understanding the need to broaden the global talent base and lead Infosys into a becoming a digital transformation leader. I believe the following perspectives are critical when evaluating the impact of this new leader at Infosys.
The Advantages He Brings to Infosys
As I blogged in August 2017 when Vishal Sikka resigned as CEO, the new Infosys CEO will need to make bold, decisive moves to position the company for the future. Specifically, I think he brings the following advantages to Infosys:
- Strong credentials and deep practical knowledge in using a consulting-led approach to build a global transformation services business. Under his leadership, I expect Infosys to strengthen its consulting capabilities and use them to position the firm as a first-choice digital transformation company. Prior to joining Capgemini, he was senior partner at E&Y and used that financial services consulting team experience to help Capgemini into one of the fastest-growing financial services practices in the services industry. He understands how to blend consulting and delivery in a fast-changing industry will be powerful for Infosys, which must master a more consultative transformation approach if the firm is to emerge as a leader in digital services. Sikka had deemphasized the consulting practice at Infosys.
- Successful track record in business turnarounds and managing acquisitions (including Capgemini’s acquisition of iGate). In October 2017, I blogged about Infy needing to aggressively acquire digital companies is a key component of its digital transformation strategy. His influence in leading Capgemini’s charge to acquire iGate indicates he understands the necessity of a strong Indian delivery component in the future mix of services.
- Deep experience in the financial services market, which is Infosys’ largest and most lucrative market segment.
- Notable experience in working in a global context outside of an Indian firm. Salil’s outstanding leadership capabilities were notable at Capgemini.
- Deep understanding of the Indian/Bangalore culture along with demonstrated outsourcing industry experience. He will fit well into the Infosys culture and, thus, is a safe choice as CEO.
I think Infosys chose an external candidate to lead the firm to avoid some of the friction and issues lingering from the friction among the board, management and founders. Infosys now needs a steady hand, a more low-profile approach to building its future. Although Sikka raised the firm’s profile in the digital transformation space, he didn’t manage to bring the founders and the rank-and-file employees along. Parekh has the skills to focus on executing on the digital strategy. He will bring a fresh perspective on how to continue Infosys’ drive to remake the firm into the next-generation of services companies based on digital technologies and business models. I also expect he will be instrumental in changing the board composition over the next 18 months to ensure he has a unified board and can heal any ongoing rifts with the firm’s founders.
The fact that Parekh will be based in Bangalore is significant, as it will better position him for deeper understanding of the Infosys culture and enable him to build internal support for the difficult journey ahead in a challenging and changing marketplace.
In Salil, Infosys has found a capable executive that fits the Indian culture, yet brings the consulting and global perspective the firm needs. Thus, he should be able to build alliances in and outside the firm without creating the pushback that Sikka experienced.
What about Other Changes in Senior Leadership at Infosys?
The industry and media are abuzz with speculation on the amount of executive turnover as a result of Parekh’s selection. Every new CEO brings in new executives, and he won’t be an exception to this rule. It’s important to realize that Infosys has plenty of room to remove executives without removing existing talent. Some in the senior ranks had stayed to create stability after Sikka’s departure, but they will now be free to move on. Other senior talent had stepped up on a temporary basis and can now move back to a more sustainable role. That said, I don’t expect a wholesale removal of the firm’s senior leadership. It will be a case of streamlining the leadership team and restructuring some layers.
Should the Infosys Strategy Change?
Together, Parekh’s experience and the Infosys board’s forward-looking statements indicate that the existing digital direction and strategy that Sikka was driving will continue. I believe the firm is well positioned to participate in the consolidation of the legacy, high-margin labor arbitrage-based business. This is already taking place in the services industry, and I expect Infosys will capture a significant share of this work. However, I believe the primary goal is still to continue the digital transformation journey.
In the effort rebuild Infosys to lead in the digital marketplace, I suggest Infosys take the following five steps:
- Build strong support from the board/founders and internal organization, A house divided will fall, and we have already seen what this will do to the organization. As I mentioned above, this will probably require changes to the board and some changes in senior leaders as well as taking a more low-key approach (at least at the outset).
- Reset investor expectation on margins. The previous strategy’s fatal flaw was maintaining the expectation of industry-leading margins. To become the leader in the digital space, Infosys needs margin flexibility to experiment with new models and capture growth at the all-important start of the cycle.
- Focus on understanding and building a new digital delivery model that is different from the factory arbitrage model. It’s important to recognize that this new model has yet to fully emerge in the services industry; therefore, if Infosys can be the first major firm to build such a model, it will become the industry leader.
- Keep the commitment to aggressive pricing established under Sikka. The market will not tolerate a premium pricing position at this time.
- Focus on its clients instead of the firm. Infosys has traditionally been introspective. Parekh looks to be capable of changing this characteristic and influencing the firm to look outside to its customers and their needs. Now, much of Infosys’ messaging is on how Infosys is changing. This needs to change to focus on how its clients are changing.
For all the above reasons, I believe Parekh is notably able to grow Infosys’ business. I don’t think he will bring clients with him, but I don’t think this is necessary. Infosys has all the clients it needs. The challenge for Infosys today is to become the digital transformation partner of choice for the clients it already has. If he can help achieve this objective, I believe Infosys will become a clear leader in the new emerging services market.