Does Sikka’s Resignation Mark An End To Infosys Turnaround Story?

With Vishal Sikka’s resignation as the MD & CEO, the hope of a turnaround at Infosys seems to have come to an abrupt end. The turnaround was necessary for the IT services major and that was the very mandate Sikka was driving. He was undeniably the best man fit for the job. After all, the IT industry has undergone a phenomenal transformation since the years N.R. Narayana Murthy started Infosys with six others in 1981.

Since Sikka joined Infosys in August 2014, Infosys was on a new high. It was slowly shedding off its old school ideas to embrace new ideas relevant in today’s world. We started hearing a lot about artificial intelligence (AI), automation, machine learning, augmented reality, virtual reality – technologies that are indispensable in solving today’s problems. Suddenly, Infosys started breathing ‘digital’. The fear now is, Infosys may take a step back when it desperately needed to leap forward.

Sikka admitted in his resignation letter, “I came here to help navigate the company through what I saw as a massive transformation opportunity, to transform our company and restore strong profitable growth, as well as help transform the business of our customers. I came to do this with the power of technology, given my experiences with similar transformations, my background in AI, and the structural changes that I saw happening in the IT services industry. This needed new skills, new thinking, new initiatives, and a transformation in the culture, from a cost-oriented value delivery to entrepreneurship oriented value delivery.”

But, something seemed to have gone wrong somewhere. While Murthy himself had handpicked Sikka for the top job, things started taking a U-turn in the last one-and-a-half years. Differences between Sikka and the founders mounted and became public.

Murthy had raised concerns over the severance package of former CFO Rajiv Bansal and the compensation of Sikka. In February this year, an anonymous whistleblower also accused the management of wrongdoings in the $200 million acquisition of Panaya.  Investigations done by independent firms have however given a clean chit to Infosys.  

Industry observers find Vishal Sikka’s resignation unfortunate but not unexpected. “In the past three years, Infosys under Sikka has shown healthy growth in revenues and earnings. It is interesting to note that Sikka has not been questioned on the performance but has been questioned on his salary and severance package paid to the CFO Rajiv Bansal. One should note that the founders had a large ownership in the company and earned handsome dividends which allowed them to take smaller pay packages. In the case of Sikka, in absence of dividends, his expectation of higher pay package is justifiable,” says Aditya Jadhav, Associate Professor at T.A. Pai Management Institute.

Infosys is today faced with the hard question whether it will be able to successfully turn around into a digital-first company, which is the need of the hour. After all, Sikka had led some transformational initiatives including (i) the Zero Distance program which intended to drive grassroots innovation at a massive scale, through every employee, (ii) Design Thinking training, the largest program of its kind to drive creative confidence and problem-finding in every Infoscion, and (iii) Zero Bench, a bold notion of leveraging the bench as a means to drive additional value for clients. Under his leadership, Infosys developed and launched its AI platform Nia, deployed with more than 70 clients. Infosys has also ventured into new horizons both with design-thinking with clients and its startup investment fund.

Sikka has been appointed the Executive Vice Chairman effective today and will hold office until the new permanent CEO & MD takes charge, which should be no later than March 31, 2018, as per the company. This means the board is trying hard to ensure a smooth transition. But, it will not be easy. Infosys has perhaps lost the man it needed the most in times when technology is changing at such a rapid pace.