Sunday, 14 April 2013

"Lala" Infosys

Infosys was , is , and will be a great company. Unarguably. But even great organisations suffer from malaise. Surprisingly, Infosys suffers from the malaise that you would not normally attribute to it - the Lala problem. Yes, I know, I am throwing mud at a great company, but you have to expect it if you lose 20% of your market value in one day.

Wait a minute. Isn't Infosys one of the most professional of companies ? A company that sets the standard for corporate governance. The company that raised the bar on ethical business. The company with the middle class values ? All true. But Infosys suffers from the same problem that family run companies have - the company is handed down from one  "family" man to another.

Only in Infosys' case, the "family" is not blood related, but the group of founders who set up Infosys. The peerless Narayana Murthy established it. The relentless Nandan Nilekani drove it to the status of a world leader. Kris Gopalakrishnan then took up the baton and reaped the boom years. And then , just like in a family,  the company was handed over from brother to brother, to Shibulal, the last of the founders. And as we all know, second and third generation families are never the same as the first generation.

In all this, quite a few senior managers stepped away, knowing they had reached the end of the road - not just that they could never lead the company, but that in the set way of things, they had done all that they could.

Infosys is not known in the market as a great company to work for. This, despite its undoubted brilliance, its strong values, its untarnished reputation and its incredibly strong balance sheet.  It simply does not attract the best quality talent that a leader in the industry should. And it loses talent far faster.

Calling it a "Lala company" is an insult to a great institution. But a staunch admirer of the company, and its founders that I am , I am usurping the right to be unfair.  A classic response of an organisation that is in the situation that Infosys is in now, would be to make an acquisition - especially since there is a mountain of cash burning a hole in its pocket. If its does that, it surely is then a Lala company. For that's what Lalas do.

Infosys will bounce back. It is suffering from the middle age blues - as all of us in our personal lives do too. It has reached middle age perhaps a little earlier than its peers - even in that it is a trail blazer. But its bounce will be faster if the founders leave. Lock their doors and go.

Its time for Infosys Gen 2 to emerge. One where there are no more "Lalas". 

An unfair post this one. For sure.  But you are only unfair to somebody you admire.

24 comments:

gils said...

infy n cts dnt givr respect to non engg grads..or pg from distance learning programs...so as per "che chee intha pazham pulikkum" theorem of axiom 1 and corollary 1.12 I hate both of them

Asha said...

a middle class man's dream co. which was inspiring to many and made many youngsters into karodpatis in the early 2k and late 90's. Economic times has predicted that it can't go back to its halycon days.SAD.


Reminds me of Ratan Tata's "Ups and Down in life are very important to keep us going because a straight line in an ECG means we are not alive"

BTW what is lala company?

Asha said...

@ Gils - they are many distance learning Pgrads in infosys who are working and reaping benefits. What made you say this?

gils said...

sontha kathai nontha kathai:)

Ramesh said...

@ Gils - As in every facet of life there are "Brahmins" and Shudras" - figuratively, not literally. In the world of Infosys et al, engineers are Brahmins and science graduates are Shudras !!

@Asha - Its is still a fine company. By itself its performance isn't bad. Its just that it is falling behind competition.
A Lala company is one where the promoter holds sway, all decisions are his, he is the maalik and the company is passed on from family member to family member. So called, because Lala is a subcaste in northern India from where many early promoters in Indian business came.

Sandhya Sriram said...

How true Ramesh. Infy is normally used by grads as launch pad. To build a capable team is one.to retain is another. When atleast one out every hundred new joinee dreams to become the chairman one day, you have built commitment. Else you have bought a SAS(software as a service). Another I think is conventional businesses don't take risks but very safe as well. I would still not write down Infosys and would believe they would learn the hard way and find the way. Shares may not appreciate immediately but frankly they don't need investors who upgrade and downgrade on short term performance.

Ramesh said...

@sandhya - Agreed the hand wavers who take the price up and down in a day are not worthy of any attention. But the problem with Infosys is that its relatively poor performance as compared to its peers is now for some 2 years running. Doesn't it feel like the HLL of the late 90s, early 2000s ??

Shachi said...

Ramesh, I highly recommend Infy to recruit you in their board of directors (or as gen2 group of founders) :)!

Like Sandhya said, a lot of my friends have used Infy as their launch pad, and then have left. Retaining talent is a tough thing for companies in Bangalore (much like Silicon valley) where options are plenty. They will bounce back....stock might take a hit short-term but I still have hopes that long term they will become a leader again.

Deepa said...

I got the opportunity to see IT companies closely through my roomie in blore who was in Infy and then my hubby who was in CTS, and it was so surprising that they took so much of an effort to pick only the best (your acads have to be impeccable), but do so little to retain them. Although Infy did do a lot to keep the herd happy, however the ones who had higher goals did move out. It is high time they come out of the body shopping mode and try something new. Not just Infy but others too. It's a huge industry with disgruntled employees, who see big bucks, overseas opportunities but I am yet to meet some one who aims to be a part of the upper management. There doesnt even seem to be any grooming towards that goal. It was so surprising for me being from an industry which is for all practical purposes similar to the consulting industry. I can name mid size CA firms in Pune who do lot more for grooming and training potential future leaders than these big giants. The difference could be seen in my attitude towards my work and these IT guys' towards theirs.

The Million Miler said...

Every company has had its share of 'nepotism' if I might use this word. As an engineer in the 80s/90s, L&T was the holy grail. A complete meritocracy and a true professional organisation. Remember the drama in the 80s(?) when Reliance wanted to take over L&T. Leadership was grown within with no 'affiliattions' marking you out for leadership. However even the great L&T stumbled during the mid 80s when there was a perception of favouritism if you were either a Sindhi or a Tamil. So much so, the campus joke used to be L&T stood for Larsani and Tubromaniam

Anonymous said...

World gets smaller with big organization, as the opportunities keep growing small business men emerge to share the opportunity. One big company cannot hold all the opportunity shares in his own hand. to hold the big place any company has to explore new opportunities. that's where success sustains. Not only Infy many IT firms in India still doing old age consultancy business. there is definite need for new way of business & thoughts.

Ramesh said...

@Shachi - Great to see you back here - obviously you are back home after a long sojourn. Much tickled by your "recommendation" :)

Of course Infosys will bounce back. They are a very good organisation and all organisations go through ups and downs. In fact most companies would be envious of what their "down" is if this represents their nadir.

@Deepa - Your first hand experience is very interesting. As long as you are an Employee number and not a person, there is no hope of leadership development. In IT companies you are a number, not a name.

The gold standard for grooming people, was, and still is, our old parent company.

@Kiwi - My sides are aching (maybe I have to go to the doc), on reading "Larsani and Tubromaniam".

@Anon - True. Actually some of Infosys's problems are due to precisely due to them trying to go for new business models and not succeeding. Some of their competitors, notably TCS , are sticking with time tested code T&M and succeeding.

Ravi Rajagopalan said...

@Ramesh: I think the reckoning is around the corner for Wipro, TCS and CTS. All of them are ultimately T&M providers, and all that has changed in the 25 years since I left TCS are - nice titles, no bond when overseas, more professional selling, more localisation in-country. Other than that, things are the same. I must emphasize the selling. Ian (our old buddy) has spent time in CTS and HCL and from all he tells me, I am hugely impressed with how they engage with customers.

All that has happened in the last ten years is that we have created home-grown variants of LogicaCMG/Cap Gemini/Atos and the low-end part of IBM Global Services. The former are not stock market stars - in their countries they are seen as dull utility type businesses that provide specialised resources to solve IT or process problems.

It is time the analysts stopped regarding these companies as rocket scientists and more as manpower providers. The big defining market penetrations have been made. There is nothing really wrong with Infosys, other than the fact that time has caught up with it. And that poor Shibulal is not a charismatic fellow. Sure, he can be ejected and some 40 year old hot shot brought in - but the fundamentals are not going to change.

Sriram Khé said...

When I read the title, I was immediately reminded of the "lala kadai mittaai" from the travels to grandmas' homes .... if there is any reader here with Tirunelveli roots, you know what I am referring to ;)

Anyway, back on track ... Here is a contrast with Carl's Jr .... yes, that fast food chain. Bear with me ...

I got to this country just when the chain was expanding like crazy after going public in the early 1980s ... and then when the company's growth wasn't up to expectations, the founder Carl was kicked out of the very company that he had founded! Of course, by then he was at retirement age anyway .... but my point is that he was removed from the very company that he and his wife had started in a very, very small way ...

It was wonderful education for the FOB that I was. No, I was never a business/management student, but I just happen to be curious about a whole lot of things! I thought that something like Carl getting kicked out would never happen in Indian firms. I couldn't imagine a Birla or Tata booted out ....

I wonder if that kind of irreverence exists in India, in the Infosys context you write about. If the company is not doing well, will something like Carl's ejection even be remotely considered? More so when I read Ravi's comment that "poor Shibulal is not a charismatic fellow. Sure, he can be ejected and some 40 year old hot shot brought in" ...

Anonymous said...

I think we all should think how much we deserve to comment about a founder member of great company build it when it was nothing. some share market position & few problems cannot judge a great leadership. problems are the sign to success. wait for the future rather than expecting immediate reap.

Ravi Rajagopalan said...

@Anonymous: "He who casts the first stone..." as our Lord Jesus Christ once said. Point taken. I founded a start up and I will gladly take 1/10000th of the success Infosys has had. These guys are inspirational. But then life is unforgiving and sometimes you need a different set of leaders for growth and different set for consolidation. That is the point I think is being made.

Namesake said...

Since January this year Infy has taken over the management of mca.gov.in, Minisrty of Corporate Affairs efiling site, from TCS.

What a unholy mess the whole thing is, and infosys has no clue from fron end to back end of the processes. One gets to hear that TCS dumped without a proper handover.

Professionals, primarily CA'a and CS's have recently written to the Honourable Chief Justice of India, to intervene suomoto, and institute a PIL.

The Ministry being fully aware of the mounting problem is silent.

Meanwhile over tha last three months compliances, formation of companies,e-filings etc. et all is pretty screwed up.

Anonymous said...
This comment has been removed by a blog administrator.
Ramesh said...

@Ravi - That's harsh. They have come a long way from pure body shopping. Any day, I would take one o0f them for an IT project than one of those who also profess to bringing "consulting" expertise !

@sriram - Oh yes, it can well happen. These days there are many institutional shareholders including foreign funds. They are increasingly professional and vociferous. So no CEO can perform abysmally and hope to continue. Shareholders may not be as activist as in the US, but they are increasingly not anonymous in India anymore

@Anon - You exactly underscore my point. Lalas are not to be sneered at - the original founder is usually a great visionary and businessman. Think of Lala Shri Ram. The issue is always with succeeding generations. We shouldn't rest on past laurels. No doubt the founders were great pioneers and deserve every applause. Equally, it is not unfair to criticise when they stumble. Public spotlight is rarely forgiving !

@Ramesh - Is that so ? I didn't know. The less said about the Ramamritham's in the MCA, the better. I am in a running battle with that specimen because my grandfather's name is spelt differently in my PAN as against the DIN (I am not joking)

Ravi Rajagopalan said...

@Ramesh - Guilty as charged. I guess what I wanted to say was - we should not regard these companies as belwether stocks or as being indicative of the (non-existent) spirit of innovation in the formal economy. They supply IT manpower and do this bloody well. Nothing wrong with it.

Reflections said...

Enjoyed the post and the discussion in the comments section Ramesh:-).

Ramesh said...

Reflections - I am so humbled hat you come to this space and read these posts. Yours' a cheery, fun blog - mine's drab business stuff. And yet you come. Much thankful.

Sriram Khé said...

hey, "ta ta" to the lala, eh!

http://www.reuters.com/article/2013/06/01/us-infosys-chairman-idUSBRE95004I20130601

wait, wait, wait!!!
you are in bangalore.
you have not commented at my blog for more than 24 hours.
then this news item

hmmm .... are you murthy's secret guru? ;)

Ramesh said...

@sriram - I couldn't believe the headlines when I opened the papers today. Awful. I'll probably write a post on this.

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