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Why Infosys 3.0 Spin Off May Be The Right Move?
by CXOtoday News Desk Jan 07, 2014
Infosys founder NR Narayan Murthy wants to
leave no room for error and is therefore
reported to have hived off its new-generation
business into a subsidiary to gain greater
clarity, visibility and centralization in
business.
Analysts speculate that the move is a retort to
its low financial performance over a period of
time, that is directly related to the failure of
Infosys 3.0 strategy, the brainchild of the
present CEO SD Shibulal. According to a
Economic Times report, as part of the ongoing
restructuring since founder NR Narayana Murthy returned, Sanjay Purohit, the senior vice-
president who heads software products, platforms and solutions, will be named CEO of the
new subsidiary. Infosys will also name Samson David, head of its platforms business as
chief operating officer, and Girish A Ramachandra, as CTO. The new calculated move,
according to analysts will certainly provide a little more clarity about the future of products
business at the company. Moreover this initiative was announced only a few days ahead of
Infosys third quarter result are to be out on January 10 can also be a bonus.
The products, platforms and solutions (PPS) unit that was set up in 2011 is an integral part
of Infosys 3.0 strategy aimed to garner at least one-third of the companys revenues
through IP-based software products, platforms and solutions, it never worked as planned, of
course except for the Finacle core banking unit. The company that had earned net profits of
$1.5 billion in the past one year, struggled to secure business in the US and Europe. The
irony is it had to fight even global counterparts such as IBM and Accenture and invest in
higher-value services, such as management consulting and packaged software for specific
industries, without much significant gain. Even Finacle took over a decade to mature and
still brings not more than 5% of business, pointed out Shibulal in an interview.
[Read: Can Infosys revive its sagging fortunes?]
Experts point out one of the key reasons why Infosys 3.0 strategy failed to take off was of
course the global economic crises that compelled companies to cut costs through IT
outsourcing rather than spend more money on new software and consultancy. Some even
wondered whether Infosys was losing leadership on IT outsourcing, by upholding its 3.0
strategy. As they believe that being part of a services organisation made it difficult to reach
out to clients and sell products.
Narayan Murthy however had a different version to narrate. He has always said that there
is absolutely nothing wrong with Infosys 3.0 strategy. This, according to Infosys, will help
the company focus better on large outsourcing contracts, its core area of strength, while
working towards its future growth potentials, said the company, adding that the subsidiary
has been formed to help PPS operate with more independence, and to bring in greater
clarity on its strategy.
[Read: Will Infosys' new strategy pay off?]
Tags: Infosys 3.0 strategy, SD Shibulal, NR Narayana Murthy
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