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Narayana Murthy pledges Infosys turnaround in 3 years, re-focus on 'bread and butter business'

By FnF Correspondent | PUBLISHED: 16, Jun 2013, 14:08 pm IST | UPDATED: 16, Jun 2013, 14:21 pm IST

Narayana Murthy pledges Infosys turnaround in 3 years, re-focus on 'bread and butter business' Bangalore: Infosys, India's second-largest software services provider, will take the tough, painful decisions needed to return the company to a "desirable" state in 36 months, co-founder NR Narayana Murthy said.

The company will "re-focus on building a more predictable earnings model", Mr Murthy said at the company's annual meeting, after shareholders accepted a proposal by the board to bring him back as executive chairman.

Earnings' predictability had made Bangalore-based Infosys an investor darling and the $108-billion Indian IT industry's bellwether.

Over the last two years, however, the company has turned in a string of disappointing results as it struggled with a strategy to shift to higher value-added services by offering consultancy and software products and solutions.

Mr Murthy committed to spending more on the company's staff of more than 150,000, revitalising his salesforce with incentives, and in a rare public gesture, offered flexibility on pricing to win large contracts.

 “We will adopt a flexible pricing policy, where absolutely necessary, to enhance our growth rate,” Mr. Murthy said. Citing Winston Churchill, he said, the company’s “quest for perfection requires us to change as often as necessary.” “Executing this strategy may require me to change some of my long-held beliefs,” he noted.

Again hinting at the failure of the Infosys 3.0 strategy, which emphasised the role of consulting and the development of intellectual property-based solutions in the company’s business mix, Mr. Murthy said the excessive focus in these areas had resulted in the company missing several large outsourcing deals that had been treated as “commoditised” by the company. The company, he said, would focus again on its “bread and butter business”

Promising to build a more efficient sales force, Mr. Murthy said, “The entire company is committed to refocusing on the third stream (application development and BPO), to enhance our win ratio in large outsourcing deals.”
He said the “extra focus” on the commoditised lines of business had the “potential to accelerate our revenue growth while reducing our margins.” “I want you all to be aware of the downside,” Mr. Murthy said.

Mr. Murthy also promised a return to more predictable earnings, an oblique reference to the fact that the company had stopped issuing quarterly earnings guidance.

Shareholders were divided in their approach to Mr. Murthy’s appointment. One wanted to know what had been the contribution of the independent directors. Another, referring to the spike in the company’s share on the eve of the announcement of Mr Murthy’s comeback, sought details about the allegations of insider trading. However, many shareholders said they were happy at Mr. Murthy’s return at the helm.

The 66-year old founder, who returned on June 1, had stepped down as CEO 11 years ago. He is the company's second-largest shareholder.
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