Narayan Murthy at IIM Indore
Students of IIM Indore had the privilege to meet the founder of Infosys, Mr. Narayan Murthy when he visited the campus recently. He spoke about the IT Sector, Education in India and how he started Infosys in a free-wheeling chat with the students of IIM Indore.
This interview is no longer available. It has been taken down on request from the IIM Indore Media Committee
Q: In the American market, we see Tech-giants like Google, Microsoft, Facebook entering the mobile market. In the future, can we see Infosys, Wipro, TCS doing the same?
A: First and foremost, we must improve the productivity of people and find sufficient opportunities for our people to prove themselves. Perhaps today’s generation will get there in 20 years, but right now, we must appreciate the value of opportunities.
Q: It is observed that there’s a fundamental shift of Infosys from Services to Products. Is this the way forward for Indian IT?
A: Infosys is into IT consulting to enhance the per capita productivity. The margins are lower from our R&D division. As clients sit up and take notice of the role that we’re playing, they will see our point and set us projects which are product oriented. We have to invest in creating more platforms like Finacle and EdgeWorks. About 51% of our revenues come from Business IT Solutions. Going forth, I would like the numbers to change with equal shares of revenue being generated from Product development, Consulting and Business IT Solutions. Strategy is all about creating a sustainable competitive advantage so that we can get higher margins than competitors. We’d like to focus on higher margins, and I believe that a great business is one which makes money hand over fist. For now, Infosys will remain a Service oriented company because of two reasons. Firstly, Competitive advantage of India is the large number of people who can be educated, and can contribute to services. Second, Irrespective of the number of players who enter the IT market, there will always be a large scope for service oriented companies.
Q: Is Infosys shifting from an effort based model to an outcome based model?
A: In areas of business management and Software, Transaction based pricing is the norm. Infosys modernized the IT processing in India. As an example of this, we have the Online Income Tax filing system which charges Rs.x for every e-form that is filed. Although it is still early to say, but only 3% of our revenues are generated as a result of the Outcome model, but we are confident that it is the right model. The shift is still a work in progress.
Q: With emerging technology, business is changing. Small organizations are able to adapt faster. How does Infosys, as an incumbent, deal in such a dynamic environment?
A: In today’s world smarter organizations will succeed rather than larger organizations. It is difficult for larger organizations to change. If we look at history, it seems rather silly to me than IBM accepted defeat when a 20 something guy challenged them with MS-DOS and gave up on their OS research plans. If IBM had given enough importance to their OS guys, they would have made a big impact. Every organization must remember this – Don’t fix whats not broken. The financially stronger must not suppress the innovative people. There is a constant struggle between the mind (thought in progress), and our mindset (our fear, over-dependence on beliefs and past successes). Those who win the battle of the mind over mindset will succeed. Its not an easy battle, and everyone should work on it.
Q: In recent years, the attrition at Infosys has been on a constant rise, from 15.9% to 17.1%. We hear about Infosys giving pink slips. Why are the top executives exiting the companies? Why is Infosys giving away pink slips to deal with attrition?
A: If a company is not performing well, then it is the Leaders involved who are responsible for it. The problems are always at the senior level. We need to ensure that there are good leaders at top level of the company. Growth rate of Infosys has declined in the recent years. Operating margins have dipped from 29.5% to 23.5%. Between 2010-11 and 2012-13, the Indian rupee has depreciated by about 25%. Around half of our revenues come in as Indian rupees. In that context, our Operating margin should’ve gone to 38% but settled at 23.5%. We’re doing whatever it takes to bring the company back to Industry levels. Every leader has to shoulder responsibility and has to be accountable. If they’re not in a position to lead the company, then we should offer them help by giving them an opportunity to learn. Else, we will have to bid goodbye to them. The problem of attrition must be tackled at the top level, in order to impact the bottom levels of the organization.
Q: What changes should be implemented in Undergraduate level and Bachelor level education to make an impact in developing product oriented companies?
A: In India, barring a few of the IIT’s, learning has been put on hold. Coaching institutes have ruined the concept of learning. We need to encourage problem solving approach. Unless our education systems help the youngsters we will not be able to make an impact.
Q: What prompted you to start Infosys?
A: There were three things that struck me when I was working in France.
1) There was a lot of poverty in India. I needed to create more and more jobs with better salaries
2) The power of entrepreneurship enables one to do this
3) It is not the responsibility of the government to create more jobs, but only to create an environment which enables individuals to create more jobs.
While I worked out my plans to return to India from France, a lot of changes were taking place in the global context. The 32 bit super minicomputer was introduced which was more powerful than IBM’s mainframes which dominated the picture. More financial companies would use this and they would be able to cut down costs by 65-75 percent. Along with this, the super minicomputer manufacturers also introduced industrial strength online transaction processing software based on the concept of RDBMS. Data General, Apollo started building the hardwares and the softwares which enabled companies to build their own applications. This compelled companies to unbundle their hardware and software offerings. At this point of time, there were a lot of intelligent Indian engineers who were looking for a job. I seized the opportunity and decided to start Infosys.
Q: As a person, you are vocal about issues of national importance. What’s your wish-list in the policy domain?
A: I’m a novice when it comes to these matters. But as a concerned citizen, I would be interested to know if
– Activities are taking place at the required pace and depth?
– Are we reducing friction for businesses to grow at a faster pace? Are we helping them create more jobs?
– Have we created a transparent taxation system which is simple, clear, easy to follow and easy to understand which will not be misinterpreted? Are we using it to collect more money?
– Are we creating an efficient top down system to make life better for every citizen? Even the rich have an important role to play in the development of the country.
– Are we doing this to make life easier for people in both rural and urban areas? Everyone behaves in a manner which conveys that improvement is required only in rural areas. There is a wrong perception that money should not be spent on higher education but only on rural development.
Q: The CEO of Infosys is slated to change in 2015. Will it be an internal hire or an someone from outside?
A: Progress is best when people from different culture, religion, gender and backgrounds come together and work at the same time. If we spot anyone outside who is a good fit, then we will recruit them
Words of Advice:
When I was younger, I did not have the confidence, the opportunities or the access to information through internet that today’s generation has. You’re coming to the prime of your life when India can play its deserving role in global affairs and when it has a reasonable chance to solve its longstanding problem of poverty. It requires a lot of hardwork, effort, proactiveness from the younger folks. You must remember that such opportunities come rarely in the history of a nation. We got that chance in the mid 90’s and when we entered 2000. If you don’t act with rationality, then we cannot succeed. We need a plan for tomorrow, a vision. For this, you need to be disciplined use your smartness. You need to put the interest of your country before personal gain. You are lucky to be born in an age of opportunities, and surely you’re luckier than I was. Don’t give up on the opportunities.
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