Corporate Jun 15, 2013
Bangalore: Recalled to ride out the bad times for Infosys, its Chairman N R Narayana Murthy today said the task of rebuilding a "desirable" Infosys would take at least 36 months and there would be some tough decisions resulting in "pain."
"The challenge is daunting and the task is tough," said Murthy in a candid address to shareholders at the 32nd Annual General Meeting here, two weeks after he was recalled and made Executive Chairman of Infosys which has reported poor earnings disappointing investors.
He said "the task of rebuilding a desirable Infosys will take at least 36 months, even with a high quality team and full dedication of every Infoscion. In the process, there will be some tough decisions resulting in pain as we move forward."
Murthy sought the shareholders "understanding, support and encouragement in this exciting and rewarding journey of the next three years."
Murthy, who had shed executive role seven years ago and retired as head of Infosys in August 2011, was made Executive Chairman on June 1, replacing K V Kamath during whose tenure the company shares slumped 15 percent.
In a move that surprised many, Murthy had also brought in his son Rohan Murty as his executive assistant.
Murthy said since the company's focus on the third revenue stream was blurred in the last two years, it has to refocus on winning large revenue-yielding outsourcing projects in the short-term.
The company should also ensure that it accelerates its progress in the first two streams in the medium to long term.
The first two revenue streams talks about focus on opportunities from consulting-led, end-to-end solutions leveraging technology for higher margins and developing intellectual property-based solutions to delink revenues from effort, he said.
Murthy said in the next three to five years, the company was committed to refocusing on the third stream to enhance its win ratio in large outsourcing deals.
"Such extra focus on commoditised businesses has the potential to accelerate our revenue growth while reducing our margins. I want you all to be aware of the downslide."
Murthy said the current discussion on the new immigration bill in the US was both an opportunity for innovation and a challenge for growth and he would like every Infoscion to see this as an opportunity.
To make the company's strategy yield the desired results, it will strive to enhance the respect for the corporation from its shareholders in every one of its discussions, Murthy said.
The company would also focus on cost optimization and elimination of wasteful expenditure, Murthy said. "We will divert the saved funds towards some of the productive investments needed to make Infosys the market leader."
Infosys will make its sales force more effective by improving the quality of sales talent and providing them with incentives and every resource needed, Murthy said. "We will adopt a flexible pricing policy to enhance our growth rate."
"The company will innovate to improve the quality and productivity of our software development teams to deliver even better value to our customers. We will use such innovations to improve our margins even in the most competitive and commoditised businesses," he said.
The predictability of company's earnings forecast has weakened during the last couple of years and it has resulted in its inability to provide earnings guidance to the market, Murthy said. "We will refocus on building a more predictable earning model in the medium term," he added.
On Thursday, Infosys announced salary hikes for all eligible employees which is seen as the first concrete step that the company has taken since the return of Murthy to an executive role.
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