The Godfather Part II

Despite IT services turning into commodity, the scope for family interference is limited as licences do not drive
By Mohan Sule

Some movies cry out for sequels. Typically, the script vests the protagonist with near-mythical powers to overcome adversities. Eventually, the mayhem and wreckage dissolve into triumph till the next obstacle course. The most famous of all franchises is the one starring James Bond. The most appealing feature of his pervasive popularity is that despite the fancy gadgets at his disposal he does not require to don a disguise while embarking on his rescue act. He is smart yet can get distracted from his task. Because he is so life-like, there is always a crisis waiting for his intervention just like in the real world. He can never ever think of retiring, always poised to serve Her Majesty’s Government. Unfortunately, very few corporations want to replicate the lessons from the spying legend. This is surprising considering that the objective of the board of directors running a company and a government of a country is similar. Both want their empires to run for perpetuity and in good health. Yet, even performing governments are voted out of power in democracies and some countries have imposed term limits on their executives. Company bosses, too, are assigned a shelf life. If a leaf it to be taken on how to survive and prosper, is not 007 a better number than 65, when most top managers retire? Shareholders seem to prefer a dashing driver at the helm, just like Mr Bond, but do not appear to accord as much importance to his hands-on experience and the intuitive ability acquired to spot the next opportunity or a downward curve during his enduring inning.

Recent events, however, suggest that there might be rethinking towards CEOs and their usefulness. If Steve Jobs represents the best-known case of a discredited boss making a spectacular comeback to the company he set up, in India the focus is now on N R Naryan Murthy, who has been plucked out of retirement to once again lead the venture he co-founded in 1981. If Apple was the disruptive force in the personal computing market, Infosys was the showpiece of how outsourcing could cut operating costs. If the half-bitten fruit logo symbolized design excellence, the Indian tech company was talked about for being among the rare domestic establishments to focus on corporate governance to enhance market value. The i-products of Apple empowered consumers in the same way as stock options powered employees of Infosys into the millionaire’s club. The most visible difference between the two is that while Jobs fully justified the confidence of his shareholders by stunning the marketplace with one bright idea after another, it remains to be seen if NRN will be able to revive the glory days when the tech company outperformed the industry average and its growth was used as a benchmark to assess peers. Crucially, Apple’s founder had been sacked after running his enterprise to ground, while the Infosys builder had completed his full innings, leaving behind a thriving outfit. Just as there was skepticism in the board’s wisdom to recall Jobs after 11 years, there have been murmurs about NRN’s induction, a mere two years after stepping down, with some even questioning the pioneering firm’s business model.

Indeed, the performance of companies run by professionals is once again under scrutiny. There is anxiety if Infosys is transforming into one of those family-run businesses in the commodity sector, which are in place because of their proximity to wrung out licenses from policy makers and not because of any skill sets. In fact, the turmoil at Infosys can be traced to the increasing commodification of outsourcing services. In this market, branding has no place. Rather pricing is the vital factor. However, a big difference is that commodity makers have a captive audience, while services providers have to convince the buyers of their choice. The inherent aim of outsourcing is to economise production expenses. Getting the best price is a benefit derived when the number of players offering the same kind of service increases. In this circumstances, tying up orders calls for networking and sales skills. The focus shifts from operations to the marketing team. With his image as a leading light of India’s outsourcing business, NRN is uniquely placed to bag orders based on his profile. The comeback of one of the original inceptors could once again help Infosys to clinch deals at better margin in the short term. In the long run, however, the company has to once again work on reinforcing the perception that it is the generic byword for offshoring just as Apple has become the torchbearer in the smartphone and tablet markets since reinstating Jobs. Also, NRN occupying the corner office does not spell an end to the nascent experiment of manager-driven companies, which are ideally omnipresent in the services industry. Happily, the share of the services sector in the country’s GDP is now nearly 60%.