Has Vishal Sikka's Leadership Transformed Infy's Fate?

Apr 18, 2016

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The result season kicked off on Friday as India's second largest software firm Infosys announced its March quarter and full year results. Investors have cheered the results...the company has surpassed the financial year 2015-16 growth guidance. What more, the company's latest guidance for 2016-17 beats Nasscom's industry growth forecast! So, it's not surprising that the stock price of Infosys was up 6.5% at the time of writing.

After going through some testing times some years ago, Infosys appears to be back in top gear.

• Has Infy's fate gone through a transformation after Vishal Sikka took over as CEO and Managing Director in August 2014? Do you think the stock's re-rating is justified?

I posed these questions to our IT analyst, and here is the response:

• Yes, the re-rating is justified. When Sikka took over on 1st August 2014, there was a lot of uncertainty around the business. Many people in senior management roles did not know what the long-term strategy was. Many project managers felt stuck in their jobs. The company had lost the vibrant culture of its past. This was reflected in the deal momentum to an extent. There was a very real concern that Infosys was not able to communicate the value that it could deliver to its clients.

• Things have changed significantly since then. The company has a clear (but ambitious) plan for 2020. The rough targets are: Revenues of US$ 20 billion, operating (i.e. EBIT) margin of 30% and revenue/employee of US$ 80,000.

• To make this a reality, Sikka has appointed the right people in the right positions. He himself decided to reside in Palo Alto instead of Bengaluru, to be closer to Silicon Valley clients. He also decided to be personally involved in all deals of value US$ 50 million and above, as well as in all acquisitions.

• These decisions have proved crucial. The deal momentum and deal sizes have picked up, as have repeat orders from the company's top clients. The recent acquisitions (Panaya and Skava) have helped Infosys differentiate its services from competitors.

• Also, the major long-term drivers of profitability, i.e. automation and innovation, are slowly taking root in the company's culture. These are early days...the targets seem far away and are difficult to achieve. But there is no doubt that Infosys under Vishal Sikka, is slowly but surely moving in the right direction.

That's indeed insightful. In fact, we have put up our latest analysis and view on Infosys that answers questions like...

• How did Infosys perform during the March quarter and the full year?
• How did it do in terms of business verticals, service lines, and geographies?
• How does the global IT scenario appear?
• Which business strategies have been rewarding for Infosys?
• What is the company doing to boost employee morale and innovation?
• Finally, is this a good time to invest in Infosys? What should you do?

Do you think Vishal Sikka's leadership has put Infosys back to industry-leading growth?

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