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Vishal Sikka resigns, spotlight on Narayana Murthy’s role: No one wins in the Infosys saga
Updated:Aug 20, 2017
 
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By  R Sukumar
 
On August 18, Infosys Ltd CEO Vishal Sikka abruptly resigned. The board of Infosys released a letter blaming founder and former chairman NR Narayana Murthy for Sikka’s exit. Sikka himself, in his letter to the board, spoke of personal attacks and allegations that were “amplified by the very people from whom we all expected the most steadfast support in this great transformation.” Soon after, Murthy released a message saying he was anguished by the board’s comments.
 
On the morning of Sikka’s resignation — a few hours before it was announced — Mint carried an article on an e-mail from Murthy to a few of his advisers, claiming that three members of Infosys’s board, including co-chairman Ravi Venkatesan, had told him that Sikka was more chief technology officer (CTO) material than chief executive officer (CEO) material. That mail, dated August 9, also repeated earlier issues Murthy had raised about the board’s functioning and corporate governance. The letter may have been the proverbial straw that broke the camel’s back.
 
As I write this article, the Infosys stock has crashed 10%; public sympathy is with Sikka; and Murthy is facing the opprobrium generated by his actions. But who’s to blame?
 
By 2014, when Infosys hired Sikka, the company was in desperate need of a CEO who could help it transform. For long, IT services companies such as Infosys had made their money with legions of coders to build and maintain applications for large Western firms, but that model had exceeded its best-by date. Some of their customers were being disrupted by digital upstarts. Some were keen to retake control of their IT function because it was becoming the key to their success. And some were looking for cool digital solutions. Meanwhile, artificial intelligence and automation were eating into the traditional business of IT services companies.
 
Since 2007, Infosys hadn’t had a CEO who had either the big-picture technology vision of Nandan Nilekani (CEO between 2002 and 2007) or the vision and attention to detail of Murthy (1981-2002). Circa 2014, it needed someone who had both. Vishal Sikka was the person the board identified.
 
From the beginning it was clear that Sikka (he had been a wunderkind at SAP AG) had the technology vision and the appetite for bold decisions regarding acquisitions (although he may have not had enough of a focus on operations). He insisted on working out of Palo Alto, which was a mistake because it didn’t allow him to get to know the operations of the company as well as he should have. Perhaps the board could have insisted he move to India. I’m sure he would have.
 
One of the acquisitions Infosys made in this period was of a company called Panaya in 2015. It emerged later that Infosys’s chief financial officer (CFO) Rajiv Bansal wasn’t in favour of the deal and had walked out of a meeting of the company’s board on the acquisition. In October that year, he quit and the company agreed to pay him a generous severance which wasn’t part of his original contract. The Panaya acquisition and the payout to Bansal (part of which was scrapped after Murthy made a fuss about it) prompted at least two whistle-blower e-mails. These alleged that some of Infosys’ key managers involved in the deal had made some money off it, and that Bansal had been paid hush money to keep his peace. The company had the allegations investigated – by reputed firms that found no wrongdoing – but it stopped short of releasing the complete reports as demanded by Murthy.
 
Apart from never properly explaining its about-turn on Bansal, the board also never got around to clearly and explicitly defining its terms of engagement with Murthy. This may seem like a minor omission but it was, in my opinion, the biggest mistake the board made — a man like Murthy will never get off unless he is told where he gets off. Worse, some of the directors may have pandered to Murthy by actually complaining about Sikka to him.
 
As for Murthy, he simply refused to let go. Infosys was the best thing he’d done in his life. He only wanted the best for it but he seemed to be unable to move beyond it.
 
Friday’s events have left Infosys without a CEO, irretrievably damaged Murthy’s reputation, and highlighted the dysfunctionality of the board.
 
 
 
 
 
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