JPMorgan questions Narayana Murthy’s claim on attrition

BANGALORE | MUMBAI: The head of business operations at Infosys has resigned in a move that was anticipated but which shone the spotlight again on the company's struggles with senior management exits.

Chandrashekar Kakal, a senior vice president who was perceived to have lost out after a major reorganisation in January, bowed out of Infosys after 14 years at the company, the tenth executive from the top management to bid goodbye after founder NR Narayana Murthy returned last June.

The senior-level attrition at the company was also the theme of a report by JPMorgan Chase and Co, which questioned Murthy's claims that the exits hadn't hurt the company. "Based on some channel checks, we think that the senior management departures from Infosys that made the headlines have likely hurt them a bit," JPMorgan analyst Viju George said in a note on March 18. 

Infosys said in a regulatory filing on Thursday that Kakal conveyed his decision to quit on March 19. His role, running the bulk of the delivery of the orders that Infosys won, was seen by some as redundant after Murthy consolidated Infosys' operations under BG Srinivas and UB Pravin Rao as presidents. Kakal's resignation is effective April 18.

Among the executives to have departed from Infosys since June are board members V Balakrishnan and Ashok Vemuri and global sales head Basab Pradhan. In a series of recent investor conferences, Murthy has said that barring a couple of exceptions, a string of senior exits comprised mostly those who added no value to the company. Still others, who get million-dollar salaries, must add value or leave, he added.

Murthy returned as executive chairman and has set himself a timetable of three years over which cost cutting, improving sales and improving execution on orders should put the company firmly on the path to industry-leading growth, he has said. Growth in the current quarter will likely be affected, chief executive SD Shibulal told investors at a conference earlier this month, even as Infosys continues to win orders from companies, including Volvo Cars and Lansforsakringar, a Swedish financial group.

Shibulal warned the company will end the fiscal year through March 31 with revenue growth only nearer the lower end of the 11.5-12 % guidance Infosys has set itself. Slower spending among retail customers, some cancellations owing to "skills mismatch" and cutbacks among consumer electronics customers within the manufacturing vertical, were the reasons, the CEO said.

Tata Consultancy Services, Infosys's larger rival on Tuesday, said its growth too would be affected in the current quarter , but remained confident about the fiscal year 2014-15 that starts April. Kakal, who was based in India, was in charge of application development, maintenance, testing, and infrastructure management services, all of which were seen to be consolidated under Rao. Srinivas, widely seen as the next CEO at the Bangalore-based IT services provider, is the other president and was put in charge of all marketing and sales operations.

Infosys also dismantled its executive council, which was meant to be a decision-support group one level below the top management, but was seen as redundant in the new scheme of things. Kakal was also a member of the disbanded council. JPMorgan's George said what was more alarming than the loss of top executives was Infosys's high attrition of mid-management comprising account managers and project managers.

While the rainmakers get the company the big orders , it's the mid-management people who ensure that the projects are run well, he said. "It's a bit of a circular loop." Once the company loses critical middle management talent and as a result delivery and client satisfaction suffer, hurting growth. Once growth is seen slowing, talented people look for options elsewhere for better prospects, he said. "Infosys must break this circular, vicious loop.
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