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Infosys, Parekh Come Together

Jones,Stanton
by Stanton Jones
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Over the weekend, Infosys announced it had found its new leader: Salil Parekh. Parekh hails from Capgemini, where he was CEO and executive chairman of India operations, among other executive roles. The announcement ends an uncertain few months after the abrupt and messy departure of former CEO Vishal Sikka. Parekh will take over as CEO and Managing Director on January 2, while interim CEO Pravin Rao will move back into the COO role.

Parekh is a seasoned outsourcing executive, having spent over two decades at Capgemini. Prior to this role, he was a partner with Ernst & Young. Parekh is based in Mumbai, but he will relocate to Bangalore, where Infosys has its headquarters.

Other than his compelling pedigree – including a Computer Science and Mechanical Engineering degree from Cornell University – Parekh brings with him the experience of a global operator. It’s no secret that Capgemini was late in leveraging India as a low-cost, high-skill location, a delay that at times hamstrung its ability to compete. Parekh is broadly credited with solving that problem by building Capgemini India and taking advantage of the $4 billion acquisition of iGate in 2015 to create a foothold in the U.S. and a relevant delivery center in India. As of its 2016 annual report, Capgemini reported over 100,000 employees in India, which, according to Capgemini CEO Paul Hermelin, “has become one of the main assets of the group’s competitiveness.”

Given his impressive resume and track record, Parekh appears to check off all the critical boxes on Infosys’ wish list. What’s interesting in this case is how different that list is from the company’s last CEO search. At a time when the digital transformation wave was just starting to build, former CEO Vishal Sikka seemed like the perfect fit: an accomplished Silicon Valley software executive with an Indian heritage, a leader who could bridge the original vision of Infosys’ founders and the new world of non-linear revenue models made possible with software.

As I wrote in August, the eventual reality of the situation proved to be a disappointment. Sikka’s Silicon Valley style, his intense focus on transforming Infosys’ delivery model from people to software using Mana (now Nia), and the fact that he continued to live in the U.S. while running a 200,000-person company proved to be too much change, too soon, for the conservative founders of Infosys.

Fast forward to today. From all accounts, it appears the new CEO-in-waiting has the early support of Infosys co-founder Narayan Murthy, something Sikka was never able to accomplish. That said, the Infosys board appears to view this appointment as a turnaround with Nandan Nilekani, Chairman of the Infosys board, saying this over the weekend about Parekh, "He has a strong track record of executing business turnarounds and managing very successful acquisitions."

When a co-founder and current chairman says “turnaround” in a press release, it’s safe to infer that he feels Infosys is underperforming and wants serious and significant change. Here’s hoping that the change Nilekani and other board members envision is not a return to the good old days. Those days are long gone – for Infosys and every other IT service provider.

The appointment of Parekh is a solid and pragmatic choice who will help stabilize the firm internally and boost morale. Of course, he will face the same pressures Sikka did: powerful founders who will operate both above and below him, outsized expectations for growth and profit margins from investors and intense scrutiny from the always-vocal Indian media.

So what’s the near-term impact for existing Infosys clients and potential prospects? It’s the same as when Sikka left: very little. Great brands outlast their leaders, and that will hold true here. We have not seen any degradation in Infosys’ ability to deliver or to partner with prospects – and we have no reason to expect that will change.

What we hope does not change is Sikka’s original vision. The business model that built Infosys into a $10 billion IT services powerhouse is rapidly commoditizing. That model, in which people follow a process supported by technology is quickly changing into one that Sikka was very good at articulating – one in which technology follows a process supported by people. At it most basic level, machines are increasingly doing the work that humans used to do today, and are starting to learn how to do the work that humans will do tomorrow. This epic shift requires a rethinking of almost everything: who you hire, what technology partnerships you create, what algorithms to build and invest in, and how much revenue you cannibalize, at what rate.

To prepare Infosys for the transition, Sikka bet the farm on the company’s AI-based platform, Nia. Time will tell if his build-a-platform strategy was the right one, or if a best-of-breed partnership model will win out. This decision is one of the most important near-term decisions Parekh will need to make as it will likely define Infosys for the next decade.

The good news is that Parekh will be bringing two important areas of expertise to the table: consulting chops and technology expertise. Selling IT services today requires a deep understanding of a client’s needs, its industry and its ability to articulate a transformational vision enabled by a technology platform. Meanwhile, understanding technology at a fundamental level is critical, too, because it helps set expectations both internally and with customers about what is possible in the near, mid and long term. CEOs who fail to fundamentally understand technology are often guilty of overselling benefits externally and underfunding R&D internally.

Having a leader who can articulate the opportunity of a technology-led future and bring along a couple hundred thousand employees, powerful founders and a very vocal Indian media is the key for not just Infosys, but every other Indian Heritage firm. That said, Infosys’ second outsider CEO hire faces some serious challenges.  Parekh will prove himself to be the right man for the job if he honors Infosys’ past while charting its digital future, all while instilling the operational rigor he’s known for.

Associated Insights

Infosys, Sikka Part Ways

Briefing Notes – Infosys Mana Shifts to Brains from Muscle

Briefing Notes - Infosys Bets on Closing Gaps and Building Software   

About the author

Stanton Jones helps clients maximize the value of their emerging technology investments. His current research focuses on the application of Intelligent Automation to enterprise operations, helping clients navigate the fast-moving ecosystem of technology vendors and service providers. Stanton is a recognized expert, and has been quoted in CIO, Forbes and The Times of London.

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