Infosys CEO: 'The Global Delivery Model has a long way to go'
14/01/2008
Kris Gopalakrishnan, CEO, Infosys Technologies, believes that Infosys is geared to take its Global Delivery Model to the next level. In an interview with CIOL.com, Kris spelt out his vision and discussed the company's growth plans.

According to Kris, the Global Delivery Model can be adapted to deliver new services, solutions and consulting. "Global Delivery Model offers the opportunity to increase penetration with existing clients in new markets and geographies and expand the service footprint."

Kris spoke about Infosys' plans to impact growth. He said that Infosys is leveraging its service portfolio to harness opportunities in remote infrastructure management, business process outsourcing and independent validation and testing. Kris added that Infosys is also exploring opportunities in the domestic market as Indian companies are increasingly adopting mature IT services.

Kris said that Infosys is addressing the appreciating Indian Rupee by "looking at geographical redistribution of revenue as the Rupee has not appreciated as much against the Euro and the Yen." He also mentioned that the company is increasing efficiencies in operations, improving workforce productivity and focusing on services that deliver higher margins.

Kris discussed Infosys' plans for mergers and acquisitions. He said that Infosys' strategy is to make fewer acquisitions, but ensure that they are successful.

DQ IT Lifetime achievement Award conferred on Narayana Murthy ------------------------------------------------------------

BANGALORE, INDIA: Becoming more and more relevant to customer is name of the game, says N.R. Narayana Murthy, chief mentor, Infosys, in an interaction with Pradeep Chakraborty, Executive Editor, CIOL. According to Narayana Murthy, companies of the future would have to focus even more on business value to customers, as he takes us through a journey of Infosys' past, present and future. Excerpt: CIOL-CMN: Let me start by asking you, how was it back in those days when people used to consider either medical science or engineering as a career to pursue? You choose and took engineering? Back in those days, how was the vision of budding entrepreneurs?

N.R. Narayana Murthy: No, I don't think we ever thought of entrepreneurship in those days. The environment was not conducive to entrepreneurship. Also, I came from a background where entrepreneurship was unknown for all of us.

The path was very clear, we had to do reasonably well in studies, take a big job in civil service (in government), which, of course was the number one option. Else, you join the private sector. So really, there was no idea of entrepreneurship was possible for people like us.

CIOL-CMN: What inspired you to become an entrepreneur. As you said, back in those days people probably never used to think in those terms, what compelled you and what made you venture in this area?

NRN: Well, let's remember that I did my engineering in 1967 and the idea of entrepreneurship came to me somewhere in 1974-75. It happened because during my stay in Europe, I read a lot, met a lot of people and looked at various philosophical foundations, and I came to the conclusion that the best solution for countries like India to solve poverty is to create jobs through entrepreneurship.

So, I decided to conduct an experiment. But then, I knew that I was completely ill equipped to do so. So, I entered the private sector in India and got some experience, and then thought of Infosys with six other like-minded people.

CIOL-CMN: You mentioned that you were based in Europe. What were the learnings that you actually acquired from time you were based outside the country?

NRN: I wouldn't say that I learnt much in computer science because I had been trained pretty well as part of my degree at IIT Kanpur, and during my stay at IIM Ahmedabad. We wrote India's first basic interpreter. We wrote an operating system, so there was not much that I learnt in France in the area of computer science.

However, in the area of economic development I learned a few truths.

One, the only way you can solve the form of poverty is by creating more and more jobs with higher and higher disposable income. Second, that there are only a few people who can succeed in becoming entrepreneurs, just as there are few good journalists, there are few good doctors, there are few good lawyers etc. Third, all human beings need incentives to perform. Those incentives could be in the form of money, they could be in the form of power, they could be in the form of recognition. It doesn't matter, but they do need incentives. Fourth, it is not the responsibility of the government to create jobs, but it is the responsibility of the government to create an environment where there are more and more incentives for these entrepreneurs to create more and more jobs and more and more wealth.

These were the four or five lessons that I learned during my stay in Europe. I was a strong leftist when I was a student, and I was quite disillusioned with leftism at the end of my stay. I read a lot about Marxism, I read a lot about Leninism, I read a lot about practices in China, Russia, in Cuba, in Vietnam, and of course in India, in all the kind of things that were happening. I came to the conclusion that none of this is really the path to solving the problem of poverty.

CIOL-CMN: What made you enter the IT field?

NRN: Back in those days, if I remember, people never really looked IT as a field to enter, as it was probably very risky.

CIOL-CMN: How did you or what drove you to take such a risk?

NRN: Well, there were a few discontinuities that were taking place at that point of time in the software sector. First, there was unbundling of software. Thanks to a certain decision in the US. IBM had to accept unbundling of software. Second, online transaction processing engines based on relational database were becoming available on many computers and many super mini-computers. Third, the PC revolution had just started. You know, Bill Gates founded his company in 1975 and IBM released its first PC in late 1970s or early 1980s. Fourth, Borland revealed its first sub-hundred dollar software, which was compiler for C language and Basic, etc.

Then, we realized that the cost of hardware is coming down because the cost of software was coming down. We knew that there will be an explosion in the use of computing equipment in operations to gaining competitive advantage and consequently, there will be an explosion of opportunities for customized development of software. So that's how we decided to start the company.

CIOL-CMN: In early 1980s or in late 19070s, or maybe even in the mid 1980s, outsourcing or offshoring were completely unheard of!

NRN: No, it was not called outsourcing. We knew very clearly that the opportunities were exploding in the West, particularly in the USA. Second, India had an enormous potential in terms of its talent base. So we said ? why don't we combine all of these? That was the idea!

CIOL-CMN: Can you take us through the path as Infosys took off? How difficult it was to take off, now you have traveled a very long distance!

NRN: We started with $ 250 or Rs. 10,000 at the current exchange rates at that time. Now, Rs. 10,000 doesn't get you anywhere. Even in those days, it didn't get you anywhere.

So, what we did was, we went to our client ? our first client. We gave him a very compelling value proposition where we accepted very tough performance criteria and then we said why don't you give us 20 percent advance because our strength is not money! Our strengths are scholarship, hard work, and our strength is a little bit of smartness.

In fact, in every project that we did, in those days we used to get advance. That's why there was no need for any working capital for us. Second, the environment for doing business in the country at that time was not encouraging. It would take us anywhere around two to three years to get a license to import a computer.

We used to go to Delhi 20-30 times and wait in the corridors of the Lok Nayak Bhavan. It was very painful! I decided to be in India and my colleague went to the US to do projects. I had to travel by train in those days, as there was no money.

Going by train took about two to two-and-a-half days to travel to Delhi. Then, I had to stay in wretched hotels because we had no money. Then, these bureaucrats would not see me for four days, five days, six days, etc., and at the end of it all, they would not tell me whether they would give us the license.

Around that time, one of the companies released a diskette, which gave us one and half times the capacity and half the price ? in other words, three times the monetary advantage or three times value advantage. But, to change our license, to change one model number in our license, it took us about nine months. Nobody in the world would believe that this was the kind of condition that prevailed in India.

CIOL-CMN: Did you ever at that particular time think to give up all of this?

NRN: No, not at that time. Let me give you a few more points. For example, it would take us two to three years to get a telephone connection. Those days, there was a higher priority for a retired bureaucrat for a telephone connection, when compared to a corporation that was exporting. Third, to travel abroad for a day, it would take 10-12 days of waiting in the corridors of the Reserve Bank of India (RBI) to get foreign exchange. There was no way opening offices abroad.

You know, I used to joke with both Dr. Jalan and Dr. Reddy. They are extraordinary governors of the RBI and I have tremendous respect for both of these great people. I used to joke with them and say: 'Look, do you believe the Reserve Bank used to say, first get money and then we would give you 50 percent of that as your entitlement of exchange!' Nowhere in the world did such a business model exist! That is: first, lend money and then we would give you 50 percent of it as your maintenance allowance for the next month. In other words, the conditions were extremely tough and absolutely anti business.

CIOL-CMN: What we wanted to know did you any point of time thought of giving up?

NRN: Well, we did, in 1990! Somebody had offered us $1 million or so around that time to buy the company. We had a discussion. Several colleagues of mine expressed an interest that maybe, this is a lot of good money that we have got and we should give it out. But finally, we all came to the conclusion that we should show a little more patience and be more optimistic. And I'm very glad that patience and that optimism paid off because as against $1 million today, we are somewhere around $ 23-24 billion today.

CIOL-CMN: This a major success story in itself now! Some years ago, you also introduced the ESOPs concept and then other companies followed you. What was the idea of wealth sharing and what's the concept behind it, and how do you see that going on?

NRN: We are all brought up as middle-class people. We believed in sharing whatever little opportunities for wealth creation we had, because we truly believe in this, and most of us had leftism background and this a good aspect of leftism.

Even to this day, I am a laborer in social matters and a conservative in economic matters. So we said that we should share whatever wealth possibilities are there with our large number of employees. We have given 35 percent of the equity of this company to our employees and nowhere else in the world has this happened!

Well, now it is somewhat difficult because for those of us who have listed in NASDAQ or on NYSE, we have to spell out the capital gains, so that's difficult. But in those days certainly, many could have done that, absolutely!

CIOL-CMN: Lets come to the IT industry. We always keep hearing about attrition and the lack of skills. How do you feel about all of these and what should be done?

NRN: These are all parameters of business. After all, it is our responsibility to make sure that Infosys is attractive to all of our employees and our potential employees. If our employees see better opportunities elsewhere, it is only fair that they would go there because we have failed in our duty to convince them that this is the best place to be in.

Everybody has a dream. Their dream is as worthwhile as my dream, which was to start my own company. So, at Infosys we take the view that it is our responsibility to convince our people to stay with us. So, I don't at all take negatively of those things as these are all parameters.

CIOL-CMN: How has been the support of your family right through the journey that you have undertaken?

NRN: I have been very lucky in the extraordinary support that I have received from my family. My wife is a much better engineer, and a much better computer person than I am. She got first rank in all of the 10 semesters. She had distinction from the Indian Institute of Science (IISc.) in her masters. But she said, "look, you chase you're dream and I'll support you." And she did that!

We used to be away for 300+ days in a year. We had very little money when we founded Infosys, but my wife didn't complain, and my children didn't complain.

In fact, once, my son broke his hand and I was away in France for six months. I used to call my family once a month as that was all we could afford! Once, when I called, my son picked up the phone and said his hand was all right and then I said what happened to your hand?

Then my wife came on the phone and she told me that he had broken his hand. She said: "I didn't want to tell you because you're already worried about hundreds of issues, and why should I tell you so. She has done an extraordinary job!

CIOL-CMN: Will there be another Infosys sometime soon?

NRN: Well, for the sake of India and as a patriotic Indian, I will say that there will be thousands of Infosys. Look, we have already seen that, we have seen Bharti as wonderful company, we have seen Reliance, and they have grown from strength to strength. You know, you have seen many such companies. So, why not I think for the sake of this country, for the sake of creation of jobs that there should be thousand of Infosys. That's what would make me very happy.

CIOL-CMN: From Founder, to CEO to chairman to Chief Mentor ? which role has been the best? How do you see yourself now?

NRN: You know I am a man of action. I believe in doing things! I am restless if I have something pending. So, I would say that I probably enjoyed most building up this institute absolutely!

There were lot of challenges and there were lot of difficulties. The joy that we had when we got our first customer, the joy I had when we had our first cheque, the joy I had when we got our first license, the joy I had when we imported our first computer, the joy we had when we built our first heritage building! It's extraordinary! So certainly, I enjoyed that aspect.

CIOL-CMN: What's the future of Infosys being to be like?

NRN: I don't want to talk about any numerical figures. But I would say that I want this to be a base where people of different nationalities, races and religious beliefs will work together in an environment of intense competition with most courtesy and dignity, to add greater and greater value to our customers day after day after day. That's what I want Infosys to be!

CIOL-CMN: What is your message for the global IT industry and what role do you see yourself playing in the global IT industry?

NRN: I don't know what role I can play in the global IT industry because I am a man of the past, considering the average age of this industry. Having said that, I would like to say that the companies of the future would have to focus even more on business value to customers.

In everything they do, they have to ask questions like in what way can I become more and more and more relevant to our customers business? So, that, I would say, is my suggestion and not so much advice to the future business leaders to try and become more and more and more relevant to your customers business.

Of course, do it in an environment where the employee moral is high, where you follow the finest principles of corporate governance, where you do not violate any law of the land, where you live normally with the society. Becoming more and more relevant to the customer is the name of the game.