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Infosys should open up to the idea of outsider as CEO: CLSA

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Infosys has come under the scanner of analysts and brokerages for the spate of senior-level exits since co-founder NR Narayana Murthy took charge of the struggling software giant. The criticism follows the resignation of Ashok Vemuri, Infosys' highest paid Indian executive earlier this week.

"NR Narayana Murthy's return suggested that Infosys' leadership planning clearly didn't work out as expected. Ashok's exit has only exacerbated that issue," Asia-Pacific focussed brokerage CLSA said in a report.

Mr Vemuri was widely considered to be a contender for the top job at Infosys when current chief executive S.D. Shibulal's term ends in 2015. His resignation comes days after Infosys vice president and financial services head for the Americas, Sudhir Chaturvedi, put in his papers. Earlier in July, Basab Pradhan had announced his decision to resign as global sales head of Infosys.

Infosys is "resistant" to outside talent and needs to open up to the idea of considering outsiders for top posts as it battles exit of top management executives, CLSA said. The brokerage said change is required not only because the next CEO will be a non-founder for the first time, but also because the current approach has not exactly worked.

Infosys has seen high profile exits earlier too. Last year, Shaji Farooq, in charge of consulting and systems integration at Infosys and Balaji Yellavalli, head of client services, US financial services and insurance, quit.

But, the current shake up at Infosys comes at a time when there's speculation that Mr Murthy's son Rohan Murty, who joined Infosys as an executive assistant, has reportedly been elevated as the vice-president of the company.

Domestic brokerage Nirmal Bang earlier this week downgraded Infosys to "sell" saying "senior-level management exits clearly suggest that stability at the top has not yet been achieved."

Infosys hardly (or probably never outside of consulting) hires any senior manager (vice-president and above) from outside and all have been groomed internally, CLSA said.

While insider succession may motivate senior-level executives to stay put and aspire for leadership positions, the key disadvantage of not considering an external person is that existing management could get complacent, the brokerage said.

"This has worked well for Infosys in the past...An argument for considering external candidates for leadership positions at Infosys is that change could be more important than continuity especially as things have not been going that well," the report said.

Once considered the industry bellwether, Infosys is now struggling to keep pace with the rest of the industry. It has also stopped the practise of issuing quarterly forecast and expects to grow slower than the IT Industry.

(With inputs from PTI)

Story first published on: September 01, 2013 14:56 (IST)

Tags: Infosys, Ashok Vemuri, Narayana Murthy, Rohan Murty, Infosys resignations

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