Will Murthy’s return be a game changer for Infosys?

Founder brings on board son as a top aide.

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By R. Chandrasekaran

In a pleasant surprise to investors, one of the founders of Infosys, N.R. Narayanamurthy, is returning to the company as the executive chairman of its board on June 1. K.V. Kamath, who assumed charges of the executive chairman on August 21, 2011, has stepped down from the chairmanship paving the way for Murthy to take over the mantle and refurbish the strong image Infosys, India’s second biggest IT software solutions provider, had until a couple of years ago.

Murthy is also bringing in his son Rohan Murthy to assist him in the planned creation of chairman’s office. The younger Murthy is the first second generation family member of the Infosys founders getting involved in a leadership role.

Of late, there has been a lot of big chorus for Murthy to return to the company’s fold and lead it in the same way Steve Jobs did at Apple when it was struggling to retain its hold in the market. After Jobs’ return, Apple has delivered robust returns to the shareholders of the company.

The latest development is a complete U-turn for Murthy. A few weeks ago, when there were strong rumors of his come back plan, he had indicated to Live Mint that he was not approached by anyone from the company to take over the mantle and that he was quite comfortable in what he was doing. In fact, he did not see any room for his come back and termed all the news related to his return as speculation.

However, he had also indicated that he was not aware of what will happen the next day. This suggested that he was not averse to coming back if the company’s board desired his return.

Nonetheless, there were reports that indicated his active involvement in Infosys’ management through back door in the recent past after the company was performing below its potential and industry forecast. He was also reportedly not fully happy with certain issues that were hindering the company’s growth prospects.

Responding to Infosys’ management’s call to come back, Murthy said, “This calling was sudden, unexpected, and most unusual. But, then, Infosys is my middle child. Therefore, I have put aside my plans-in-progress and accepted this responsibility. I am grateful to K.V. Kamath – the Chairman, the Board, and every Infoscion for giving me this opportunity. I intend to do my best to add value to the Company in this challenging situation.”

He has been given a five-year term subject to the approval of the shareholders, which should not be a problem given the company’s growth during the period of his chairmanship. While shareholders and analysts may be happy to see the return of Murthy, he will have a tough time to deliver the expectations of investors.

While Infosys sees revenue growth of 6 percent to 10 percent for the fiscal year ending March 2014, National Association of Software Service Companies (NASSCOM) projects revenue growth of 12 percent to 14 percent. Tata Consultancy Services and Cognizant Technology Solutions, two of its competitors, have guided above the trade body, indicating a probable underperformance by Infosys.

One of the strong points in the company’s software vertical is banking. When Murthy was at the top in Infosys, the IT sector was growing steadily as more financial institutions were willing to allocate budget for IT.

However, the financial turmoil in the United States in 2008 had altered the situation somewhat if not completely. Surely, it will not be an easy ride for him. However, for a person of Murthy’s caliber, challenges can be overcome through a meticulous planning over a period of time. In any case, the fruits of his return to the top in the near term are ruled out. Nonetheless, the mood and the behavior could change gradually.

Interestingly, the entry of Rohan Murthy encourage other founders to bring their children in to the management.

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