Disclosure: I've known Vishal Sikka for many years, I consider him a personal friend and he has been a personal client in some years. Infosys, the company of which he is CEO has been a premier partner. Neither I nor my company has had a professional or monetary relationship in the last year.
Last evening I saw a shocking article entitled Advisory firms back Murthy’s stand on Panaya deal report.
The ongoing spat between the Infosys board and N Murthy's clan of co-founders who, at least in my mind, laughingly refer themselves as 'promoters,' had largely been limited to judiciously leaked Indian press content for reasons that seem divorced from any commercial reality I understand.
The founders have poked at Infosys governance, primarily over the Panaya acquisition, claiming, among other things value destruction. I find that argument hard to sustain because according to calculations, the founders have benefitted from some $300 million in dividends the last couple of years. Thats on top of the billions they still hold in capital value.
What I do know is that in SAP/Oracle deals, consultants tell me that having Panaya in the toolkit helps close deals.
This latest article ratchets the story. Here is what we see.
Proxy advisors are usually in the mix to create trouble such that the board of a company is forced into making significant changes designed to drive perceived shareholder value.
In this case, the motivation is far from clear but article writers Business Line chose to go with this quote without questioning the underlying reasoning from Ingovern, the company they chose to cherry pick for the purpose of a headline:
“There is merit to what the founders are saying and enough reasons for Infosys shareholders to be worried,” he said.
Note that Business Line didn't bother to ask the obvious question as to what 'merit' means. Neither did they ask on whose behalf Ingovern are acting.
To put this in context, the founders have waged a nit picking campaign at the Panaya acquisition to the point where Infosys was compelled to engage an independent review of the transaction. Infosys came out of this with a clean sheet. At the time, CEO Sikka said:
“There is a lot of irresponsibility and maliciousness in what you see. You don’t appreciate that... the people who are feeding the wrong stories to the media,” said Sikka, at pains to point out that he wasn’t referring to the promoters of the company. “Lot of people, bystanders, the Monday morning quarterbacks. It is a price you pay for being at Infosys. I try to not let it get to me. Life is too short.”
That was not enough for the founders. They insist on having the independent report is put into the public domain along with further questions around the relationship between Infosys and the Panaya shareholders.
For my part, I have to ask - what does Murthy & Co expect to achieve and for what purpose?
When Sikka was appointed in 2014, it was on the back of moribund performance at an iconic but failing Indian outsourcer that clearly had no idea how to transition to the 21st century services model.
At the time, I counseled Sikka on the difficulties he'd likely face at an Indian heritage company that he believed (and still does) can transition to software and services based upon a fresh model with which the company was largely unfamiliar at the time.
Sure enough, Sikka quickly faced plenty of passive aggressive resistance from inside a Bangalore centered management that could neither understand nor accept the problems the company faced. Management changes followed and, as you might expect, Sikka brought in a slew of his people to assist in the transition.
Fast forward three years and, as you might also expect, a bunch of those Sikka brought over had enough of the Indian bullshit around what can and cannot be done and who decided to walk.
Chief among them are people like Michael Reh, Sandeep Dadlani, Ritika Suri, Sanjay Purohit and others. Looking from the outside, it is always hard to watch good people walk away but understandable when the internal organization is undergoing massive and painful change.
Most recently, Sikka has defended the exits, saying on video that the number of top flight people lost is well below industry norms. In that context, I think about the slew of top SAP executives who have recently departed. Did anyone notice?
Thinking through the events and specifically the ongoing reported attacks on the board, it is hard to understand what Murthy & Co expect to achieve. They represent a failed past yet seem unwilling to let go and allow the current professional management get on with its job. As my friend Vinnie Mirchandani said on Facebook:
Infosys must be an extreme example of how founders and early execs continue to meddle years after they should have retired and played golf. They insist on showing up in customer visits, speeches at events, shareholder events etc
Must be incredibly tough to be an outsider exec like Vishal Sikka
Where to now?
Rumors persist and while we have no dog in this fight I called up Sikka to get some answers. He is adamant that Infosys can transition and that he wants to be the person to deliver that. He called up examples of autonomous vehicle experiments inside the company campus that both delight and hold promise for the future. Asked whether he was under pressure to step down the answer was an emphatic 'no.'
Asked if he has the confidence of major shareholders, Sikka said he has no reason to believe major investor representatives have lost any confidence. On customers Sikka confidentially pointed me to brand leading customers who are looking to expand engagements.
As a final question, I asked how he responds to the drip feed of what I see as founder driven poison on a company that, left to its management, stands a decent chance of successfully navigating the very difficult terrain of labor arbitrage that has supported the Indian heritage outsource business for so many years but which will not survive into the 2020s. His answer:
We have amazingly talented people who are inventing things that could not have been possible a few years ago. That's worth celebrating. The design thinking and Zero Distance initiatives are working. You see those in the stories our clients tell. Go ask them.
What more do the diasaffected founders want? A return to a failed past? For myself it says a great deal that the founders chose not to attend the AGM and raise their concerns amongst peers, but instead choose instead to continue a salacious campaign among an ignorant Indian media hungry for juicy but unhelpful content. Shame on them for not doing their homework.