Vishal Sikka, out as CEO and MD Infosys – ‘sickening’ distractions

SUMMARY:

Vishal Sikka has stepped down as CEO and MD of Infosys. It has been a very difficult time for him as he faced an ongoing stream of fire fights coming from one of the co-founders.

sikka
Vishal Sikka – in happier times

Vishal Sikka’s resignation as CEO and MD Infosys was no surprise to me. In a cherry picked letter published on Indian Express, Sikka reflected upon three difficult years. He talked up the achievements made in AI and other technology areas, but then launched into a blistering attack on the founders one of whom, even a day ago, was quoted in Mint saying that three board members including co-chairman Ravi Venkatesan were ‘complaining’ about Sikka and those people were making the case that Sikka was not CEO material.

Co-founder N.R.N. Murthy, who was often quoted as unhappy with governance at Infosys, reiterated those complaints adding:

This is the view of at least three members of the board, and not my view since I have not seen him operate from the vantage point of an Infosys board member

adding

I have nothing against Dr Vishal Sikka. I enjoy spending time with him. I have never commented about his strategy or its execution

That had to be the final straw that broke the proverbial camel’s back.

This is what Sikka had to say in his letter (my emphasis added)

…the distractions that we have seen, the constant drumbeat of the same issues over and over again, while ignoring and undermining the good work that has been done, take the excitement and passion out of this amazing journey. Over the last many months and quarters, we have all been besieged by false, baseless, malicious and increasingly personal attacks. Allegations that have been repeatedly proven false and baseless by multiple, independent investigations. But despite this, the attacks continue, and worse still, amplified by the very people from whom we all expected the most steadfast support in this great transformation. This continuous drumbeat of distractions and negativity over the last several months/quarters, inhibits our ability to make positive change and stay focused on value creation. Addressing the noise by itself is damaging; hundreds of hours of my own time has gone into this recently. But the structural challenges this engenders within the organization, has a very damaging effect on our ability to carry out any kind of a transformation, especially one that is as fundamental as transforming from a cost-oriented to an innovation oriented value delivery to clients.

Therefore, I have come to this moment and the end of this journey.

Sikka’s much fuller explanation, posted to his personal site heaped praise on many of the people who have worked on the transformation. Here is the link. In that letter, you can easily see the passion burning for a company he now leaves behind:

As I completed my three years recently, many people asked me if I have any regrets.  This question is more apt today and the answer is a clear NO. Not for a second.  However difficult the noise of the last several months has been, I wouldn’t trade our time together for anything. I would not give up the experience of seeing the gleam in your eyes as you described a new idea, invention, or contribution.

What went wrong?

Making the necessary changes to transform business of any size is a tough ask.

It is made all the more so when a company has been largely successful over a long period of time and has a culture built upon loyalty to the founders. To its credit, Infosys co-founders thought they had found someone in Sikka who, while coming from the outside, could provide a fresh perspective. Unfortunately, and in common with many other similar situations, change is something that gets interpreted and while they liked his thinking about moving away from a services centric organization to one that embraced products, there was no impending catastrophic event behind which Sikka could make a rallying cry. Decisions that went against the way the company’s management were used to thinking were extraordinarily difficult to implement.

Paradoxically, the early part of his tenure saw Infosys doing remarkably well in terms of driving additional revenue, which at the time was almost 100% based upon services. But as the transformation Sikka wanted to bring started to take shape and as he brought in former colleagues, all from his former employer SAP, problems started to surface.

It was, for example, difficult early on for Sikka to find a core group of allies in India, upon whom he could rely for support. This would be a requirement for any incoming CEO but more so in this case because from the outset, Sikka had made it a condition of taking the job, that he spend at least two weeks per month in the U.S. The argument went that innovation is centered in Silicon Valley and that Infosys needed to build a hothouse for ideation and development kick off that attracted the kind of people required for what was, in effect, a startup inside Infosys. IOt also matters that 65% of Infosys business is in the U.S. with many companies with which Sikka is familiar.

In doing so, Sikka set himself up for an ongoing and grueling travel schedule. On the occasions when we met, and despite at times being obviously tired, he never lost enthusiasm for his vision of ‘new and renew’ or the technologies that the team were developing, initially in the U.S. but with much of the hard graft being pushed out to India. And it was producing results per the last earnings call. 

One key person upon whom I know Sikka felt he could rely, and who had extremely deep knowledge of the internal systems in use at Infosys, which themselves needed rework, died suddenly at home. It represented an important loss that was hard to replace.

Sikka managed to get the company to set aside $500 million for investment and acquired Panaya, a testing solution for SAP and Oracle environments that can slash the amount of rework needed in upgrade cycles – the renew part of the strategy Sikka introduced. The price, at $200 million was subsequently questioned as were the payoffs to the departing CFO and general counsel. In recent times, attention had turned to Sikka’s own expenditures, which came on top of complaints about Sikka’s salary increment in 2016.

It all added up to a situation where some of the founders felt Infosys had moved away from its mantra of ‘compassionate capitalism’ as a core value. My view is that if you bring in a radical visionary, be prepared for all that means.

As I have said before, the near continual drip feed of allegations to a headline hungry media was at best questionable. Like all its counterparts in the Indian heritage outsourcing market, Infosys faced headwinds. In his letter, Sikka said:

No one anticipated the additional headwinds like the geo-political disruptions (Brexit, Trump, visa etc.) that made this transformation even more challenging, but also rewarding.

Naysayers, emboldened by the distractions, saw an opportunity to twist the knife that by this stage was well and truly in Sikka’s back. Check the comments thread on my last story for a taste of what was being said.

Is it all one sided?

Every story has three sides – the two sides as seen by the protagonists and one that parses in  between.

In this case, it was always a fact that as someone coming from a product background, that Sikka would have difficulty with the services world.

As someone who was brought up in services but has plenty of product exposure, I can see how that might have been troubling, but I disagreed with that assessment because when you look back over the various earnings calls, Sikka proved himself to be a fast learning student.

Did he under estimate the depth of cultural resistance? Probably.

Did he lose too many of the people he brought over and others? Yes, but for a variety of reasons.

Should he have brought in people directly from the services world rather than relying almost exclusively on people he knew from SAP? Yes, but then how do you attract the very best from the Accenture’s of this world when your company has the reputation of being a plumbing outfit?

Should he have brought in a team in India that could radically transform? Probably, but then he wanted to find people internally that could fit the bill rather than wreck the management structure.

My take

Prior to him taking the job, Sikka and I had a very long conversation about the challenges. It always seemed to me that getting a solid team in place in India was going to be a pre-requisite for a job that had huge challenges for anyone. At the time, I thought it was a very brave move on his part to go to a company where he thought he would have all the support he needed. That turned out not to be the case.

The last few days I keep hearing about how Sikka didn’t fully grasp the Infosys culture in India and yes, I get that. But when you are not only facing macro-industry problems but a ‘constant drumbeat’ of things that take you away from running the business, there comes a point where you have to look in the mirror and acknowledge that it just isn’t working and may never work.

For its part, Infosys has put COO Pravin Rao into the hot seat on an interim basis. It also issued a press release, saying:

The Board understands and acknowledges Dr. Sikka’s reasons for resignation, and regrets his decision. In particular, the Board is profoundly distressed by the unfounded personal attacks on the members of our management team that were made in the anonymous letters and have surfaced in recent months. As the Board has previously stated, a series of careful investigations found no merit to the unsubstantiated and anonymous allegations that had been asserted. The Board denounces the critics who have amplified and sought to further promote demonstrably false allegations which have harmed employee morale and contributed to the loss of the Company’s valued CEO.

Too little and far too late.

My fear for Infosys is that as it takes the next step, the vacuum left by Sikka will be filled by the legacy from which the company was trying to move away. In the meantime, Sikka has committed to helping the transition up to March 2018.

PS – in a conference call with the Board, Sikka described recents events as ‘sickening.’

Story updated for additional information and principally for the letter sent to the company and which was posted in full on Sikka’s personal blog.

Image credit - via infosys

    Comments are closed.

    1. That the Indian outsources need to transition from on-premises services to online products predictably means CEOs will also transition and may the firms will need 7-10 years of incubation by private equity to complete the shift. 3-4 years is just to short a time period to transition a public company even for magical CEOs.

      With very few exceptions all the ERP companies who have transitioned business models from on-premises products to an on-line services have also transitioned CEOs. Even Yahoo succumbed to a similar, big box retail is joining the party.

    2. Pramod S says:

      1. NRN’s previous letter to the board which has been finally made public yesterday raises extremely important points that relate to effective corporate governance and oversight in this company. It is unacceptable that the current management has been dismissing this as ‘ear-drum buzz’ or ‘morale diminishing distractions’. Provide full transparency and disclose all facts as requested by NRN who is well within his rights even as an ‘ordinary shareholder’.

      2. Every person has a right to criticize another. As much as I admire Dr. Sikka for being a visionary, it is strange to me that he has not able to take the private criticism, now made public, that he was CTO material but not CEO material. So what? It was a known fact that he has never been a CEO before joining Infosys. He was hired for his potential to transform Infosys. Criticism at these levels (or any level for that matter) is par for the course, and as a leader he must be able to face it. In fact, by quitting and the manner in which he has quit, makes me sad to see the lack of will to fight back in someone who called himself a ‘Kshatriya warrior’.

      3. This board is clearly broken and does not have a leg to stand on, Neither has it been able to protect it’s CEO whom it has claimed to fully back nor has it provided a factual response to shareholder allegations to clear the air on the issues highlighted.

      4. Finally, the media and western commentators are seeing this with their own cliched lenses – ‘tussle between the old and new guard’, ‘founder refusing to stop meddling’, ‘clash of Indian and Western ways of work’. The reality is the inability of this company’s management to come clean with facts. A public company exists to protect the interests of it’s shareholders and by failing to provide full facts and transparency on the allegations raised by an important shareholder, the management has failed.

      5. All references to the company’s performance over the past few years attributed to Dr. Sikka, initiatives to transform the company are all important, but in the context of the governance queries raised by NRN, these amount to ‘ear-drum buzz’ (using Dr. Sikka’s own term) that doesn’t come clean on the core issue raised.

      1. says:

        Pramod – I assume you saw the Second Statement from the board.

        As I said then, it is inconceivable that the board would make those statements unless it believed it acted in good faith and with facts to hand. Murthy was interviewed by the independent review company. The board say he could not offer a shred of evidence. That’s clearly not good enough for Murthy.

        Offering this latest slew of content into the public domain now changes nothing as we have to assume these were part of the document cache the independent reviewers considered.

        Since he also seems to be passing judgment on the auditors he could have asked for their replacement at the AGM. He had a perfect opportunity to deal with all of this at the AGM but chose not to turn up. What does that say?

        I find it interesting that the SEC has chosen NOT to get involved. They are usually very quick to jump onto this kind of thing.

        As for the rest? Well, we have seen this playbook before.

    3. KirkOut says:

      Vishal as Infosys CEO was an big challenge to begin with. I just could not imagine him fitting there..
      But I would have been happy if this would’ve worked out.

      As ex-Infoscion, I have high regard for NRN, but here is something he hasn’t been able to let go.
      As in – let go. For good.
      It’s hard and emotional (with what he had done with Infosys). But he has to let go.
      It means, letting the new leadership build their own foundation, vision and value system. If they are wrong they will fail. That is what it means – to let go.

      On Vishal’s end, I do see the notion of ‘he talks way too abstract and does less tangible stuff’ is consistent impression from SAP to Infy.
      Also the very ‘quality’ (if I may use it as such here) of >some< of his 'SAP-hires' is indeed questionable (privately formed view).

      I still chose to tilt in Vishal's end.
      You bring someone to do a job. Let him. As an ex-insider & influencer – help him navigate the cultural barrier. He needs a reasonable autonomy to effect the ambition he himself laid out.
      As if cultural barriers were not enough for him to deal with.

      The nature of change Infosys has to go through is not specific only to Infy, but to the entire industry it bellwethers. I am yet to hear a reasonable better strategy, of what can turn service centric industry model around. If you challenge Vishal's approach & execution, I very much am interested in your own take.

      It is not enough to say "he doesn't understand services". He doesn't need to, in its existing form. One needs to imagine & understand services in its new form. The notion of value has changed.