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July 31, 2006 5:22 pm

Playing fair is good business

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N R Narayana Murthy on Monday addressed his last analysts’ meeting as chairman of Infosys, all but bowing out from a technology services company that has become a reference point for resurgent India.

Mr Murthy, one of India’s most venerated business leaders, will officially end his two decades as chairman of India’s second-largest software services company on his 60th birthday, on August 20, the company’s retirement age.

He will become non-executive chairman but continue as “chief mentor” – a “motivational” role at the company he founded with six others 25 years ago, and where today the average age of its 55,000 “Infoscians”
is 24.

Mr Murthy, who once banned employees aged over 25 from attending the Bangalore-based company’s annual brain-storming conference, said: “The future of Infosys is with young people.”

Thousands of staff celebrating the Nasdaq-listed company’s silver jubilee in Mysore at the weekend cheered as Mr Murthy marked the occasion by announcing a Rs1.26bn ($27m) bonus to be shared among employees.

Infosys crossed the $2bn mark in revenues in 2005, after taking 23 years to reach $1bn in annual sales, from outsourced offshore services that have revolutionised the way companies in North America and Europe operate their businesses.

As white-collar technology and data processing jobs in the West gave way to pressure to cut costs by off-shoring, Infosys was transformed, along with India’s now $17.3bn IT sector.

But, as Mr Murthy has argued, the transformation was two-way. The pressure to “leverage the power of technology” by outsourcing to Indian companies with lower costs and skilled manpower improved the operating efficiency of western companies.

Today, Infosys and its larger domestic rivals such as Tata Consultancy Services and Wipro Technologies are not only competing with global giants such as IBM and EDS, but forcing them to expand into India to capture the same low costs and business structure, known as “global delivery model”.

“The success of Infosys should be replicated in sectors such as steel, aerospace, agro-food, education, petroleum, and mining,” finance minister P C Chidambaram told the celebrants.

Dalip Pathak, managing director of Warburg Pincus, one of the largest private-equity investors in India, said his biggest oversight was ignoring Infosys when it was a $500m company. “It is too painful to recall,” he said. Infosys’ market capitalisation is now about $21bn.

The company’s listing in 1993 at an IPO offer price of Rs95 was rescued by the lead manager after poor investor response. After stock splits and bonus issues, the share-price closed at Rs1,653 in Mumbai on Monday.

Mr Murthy’s status in India stems largely from his unflinching standards on corporate governance, transparency and meritocracy. That, and a vocal public stance on issues such as education, may have obscured his focus on shareholder value and margins. He said: “[The company] has raised the image of India by conducting business legally and ethically and by earning laurels abroad.”

As Infosys director Onkar Goswami said: “Murthy brings the same zeal to strategy, execution or ensuring decent toilets – which he happens to believe is a sign of a good company.”

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