Salil S Parekh’s appointment as the new chief executive officer and managing director of the IT major Infosys has put an end to all the speculations and uncertainties over leadership in the company. Nevertheless, the road ahead for Salil S Parekh will be tough and test his leadership capabilities to the core, especially in a scenario when the company is battling internal-feud and global slowdown. Infosys is struggling to move beyond its traditional low-margin outsourcing business into more profitable markets such as digital services. He now faces a challenging task in getting the iconic Indian outsourcing company back on track. Salil S Parekh comes up with a reputation of a go-getter considering his past record at Capgemini and therefore, the global brokerage houses and industry veterans have reposed full faith in his appointment. CLSA believes, “Parekh’s appointment is a promising choice as he brings tenured experience in running a large IT services business.” Bullish on Salil S Parekh’s appointment, other global financial services firm JPMorgan said, “it might surprise the street that an outsider was eventually picked as CEO. Appointment of Parekh would seem to be in-line with the expected script. Investors believe chances of immediate internal attrition are slimmer.”
“Salil brings hugely relevant experience to Infosys,” Nandan Nilekani, another founder who returned as chairman when Sikka left in August, said in an interview. “He will fit into our culture and, at the same time, bring about the required transformation.” Reacting to this appointment, Kiran Mazumdar-Shaw, Chairperson of the Nomination & Remuneration Committee said, that Parekh was selected after a comprehensive global search effort. She added that Sali Parekh was the top choice from a pool of highly qualified candidates. “With his strong track record and extensive experience, we believe, we have the right person to lead Infosys,” she said.
These things will be on top of Infosys new CEO Salil Parekh’s agenda:
1)Growth slowdown: Infosys cut its annual revenue forecast to 6.5 percent to 7.5 percent growth for the year ending March 2018 in US dollar terms, versus the 7.6 percent rise analysts were anticipating. Before the internal upheaval involving co-founder Narayana Murthy’s letter addressing governance issues in the organisation, Infosys had forecast a 7.1 percent to 9.1 percent climb in revenue for the year ending March 2018 on a US dollar basis. Salil S Parekh needs to bring the company back on the growth trajectory.
2)Beefing up outsourcing business: The traditional outsourcing business in general faces a margin squeeze and newer ventures have yet to make money. So, the work environment in the IT world is still very challenging. The expected work visa changes (H1B) in the United States, the biggest market for Indian IT firms, has become a headache for the company.
3) Carry forward Sikka’s automation strategy: Parekh needs to carry forward former CEO Vishal Sikka’s automation strategy with an increased vigor. He needs to push it further to adopt automation and venture into transformational high-margin areas like big data, cloud and analytics. Being an outsider, this will require considerable effort and initiation.
4) Retaining talent: The priority is to retain the talent and slow down attrition at the high-level. Sikka’s departure rattled the rank-and-file and senior level executives critical to rolling out its strategy and retaining clients. It will be required of Salil S Parekh to ensure the smooth transition of the organization.
Salil s Parekh is taking over a company in tumult. His predecessor, Vishal Sikka, quit after he came under intense fire from the company’s founders who objected to his strategy and compensation. Parekh will have to balance maintaining a genial relationship with strong-willed founders such as N R Narayana Murthy with taking bold steps to revive growth and restore employee confidence.
Infosys shares jumped 3 percent in the early trade today. CLSA has given a ‘buy’ call on Infosys stock with a target price of Rs 1140 per share, implying an upside of nearly 19 percent from the current market price of Rs 960. The IT stock has plunged by nearly 5 percent up till now this year