NEW DELHI: Salil S Parekh’s appointment as CEO and MD is finally set to bring some stability to rift-ridden Infosys. Combined with Nandan Nilekani’s return as chairman, it gives a sense of closure to industry, employees and investors — seen in the revival of Infosys’ stock value (up 2.8 per cent) on Monday.
But, Parekh’s entry is hardly a fix-all solution. Analysts, while acknowledging it as a net-positive, expect the market rally to be short-lived. Several external and internal variables could play a role in how the IT major performs over the next few quarters.External factors are no mystery. The Indian IT sector, and its global peers, are in the midst of an epochal transition — new technologies, combined with automation, are making traditional headcount-driven revenue generation models obsolete.
Some crucial internal variables that need watching, according to Nomura, are possible escalation in attrition given that Parekh is an external candidate “as seen post Vishal Sikka joining in August 2014”, Parekh’s approach to the software and platform based strategy put together by Sikka, Nilekani’s role, and whether Parekh will be “given a free hand to run the company and shape its strategy”.
Parekh’s appointment is also indicative of the board’s preference for “tried and tested over experimental and execution over conception”, believes JM Financial Institutional Securities. With Parekh’s portfolio at Capgemini squarely overlapping Infosys’, cultural concerns of promoters have been taken care of. However, Nilekani’s continuation as chairman and his deftness in juggling conflicting interests is seen as critical to ensure a harmonious promoter-management-board relationship.
The decider is set to be Parekh’s background and how that impacts Infy’s strategy. Unlike Sikka who came from a more product-centric business, the new CEO is “deep-rooted in IT and business services”. However, the latter’s experience overseeing Capgemini’s cloud services business and Sogeti, its technology and product engineering services subsidiary, is a point in his favour. In the end, how Infosys performs during Parekh’s tenure will depend largely on his growth strategy.
But, until the new chief executive outlines his roadmap (unlikely before the end of the financial year) stakeholders can take succour in the fact that the firm can finally begin turning its focus outward -- on navigating disruptive currents in the new epoch, and making money.