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Corporate Aug 30, 2013

Ashok Vemuri’s move is bad for Infosys but good for iGate

By NS Ramnath

Ashok Vemuri, global head of manufacturing and the Americas at Infosys, has resigned and will be joining iGate Corp.

While iGate hasn't confirmed, Economic Times reports that Vemuri will in fact be moving to the company that hit the headlines after it fired its CEO Phaneesh Murthy in May this year. iGate has been on a hunt for a new chief since then. Its search was widely followed and passionately discussed because of the outsized image Phaneesh had in the industry. In fact, what differentiated iGate from other mid-tier companies was Phaneesh himself - with his supreme confidence and superior salesmanship - and the way he positioned the company around the (less popular) outcome based pricing model. In effect, this meant a new CEO cannot simply take over from where Phaneesh left. He will have to establish himself afresh and create a new identity for the company.

Ashok Vemuri. Image from Infosys website

Ashok Vemuri. Image from Infosys website

Vemuri is not Phaneesh. But he might just be the right person to head iGate. He was a contender for CEO post at Infy; he was in charge of its biggest market, and doesn't lack in ambition. On the flip side, the issues that iGate faces are very different from and more challenging than the ones that Infosys does. The broader market is not exactly conducive for mid-sized IT services companies right now, and iGate has its own internal issues including Patni integration. On balance however the consensus is that Vemuri will have a positive impact on iGate.

On the other hand, his move is mostly seen as a negative for Infosys, not just because he held a $2 billion portfolio, but also because his is the third big exit in the last two months - Sudhir Chaturvedi, Infy's US head of financial services resigned last week and Basab Pradhan, its global head of sales quit last month.

Yet, this should come as no surprise for two reasons. One, ever since Narayana Murthy took over as the IT major's executive chairman there has been a big shift in Infosys in terms of power. Insiders say while SD Shibulal, Infosys CEO, was happy to give more power to top managers (such as Vemuri and BG Srinivas), under the new chairman decision making is getting more centralized. The chairman's office never had so much influence as it does today.

Two, leadership change in any organisation results in high profile exits, and Infosys is no exception. It might even do good, as it gives more space for Murthy. (One of the management concepts that influenced Murthy's thinking as he considered returning to Infosys was 'transient advantage', proposed by Rita Gunther McGrath, a Columbia Business School professor. In an article in HBR, she wrote: "In a lot of companies, the more assets and employees you manage, the better. This system promotes hoarding, bureaucracy building, and fierce defense of the status quo; it inhibits experimentation, iterative learning, and risk taking." McGrath called this situation empire building trap. Interestingly, it's a term that Infy an insider used to describe the situation while I was reporting for a story on its strategy.)

The issue that Narayana Murthy faces is something different. When he returned to Infosys, Murthy brought in his son Rohan Murty, a PhD in computer science from Harvard, as executive assistant - which went against his stated principle of not letting the children of founders work in the company. He said Rohan was around only to make him more effective as chairman. More recently, it emerged that Rohan would be designated as Vice President, a move that was not looked upon kindly even by those who were forgiving the first time. (What next?) The big risk that Murthy faces today is not the perception that he is letting talented people go, but that he is letting his cherished principles go.

This was first published in Forbes India

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