Billionaire founder returns to helm troubled IT giant after CEO quits

Indian tech billionaire Nandan Nilekani, co-founder of IT bellwether Infosys, is also the founder of VC fund Fundamentum. Photo credit: Fundamentum.

Co-founder and ex-CEO of Indian IT giant Infosys, Nandan Nilekani, has returned to the helm of the troubled company after the ouster of Vishal Sikka, who had been brought in from SAP three years ago as CEO. Infosys announced the appointment of Nilekani as chairman and the exit of four directors, including Sikka, after a board meeting last night.

An active investor in startups and creator of India’s biometric identity Aadhaar, Nilekani is in tune with the new age even though he belongs to the old guard.

“I cannot carry out my job as CEO and continue to create value, while also constantly defending against unrelenting, baseless/malicious and increasingly personal attacks,” Sikka wrote in an email to Infosys employees announcing his resignation last week.

The attacks had come mainly from co-founder N.R. Narayana Murthy, who was the first CEO of Infosys. He expressed disappointment over falling standards of governance and Sikka’s pay package of US$11 million for 2017, which was over 900 times the median pay at Infosys.

The seven Infosys founders, who now hold less than 13 percent stake in the company, had subscribed to compassionate capitalism and pioneered sharing wealth via employee stock options in India.

Nilekani, who had taken over as CEO after Murthy’s stint, ran Infosys till 2007 before becoming co-chairman as the baton went to another co-founder. He left Infosys in 2009 to join the Indian government and create a biometric digital identity for every Indian, called Aadhaar. He has also been an active investor in startups. As such, he’s in tune with the new age even though he belongs to the old guard.

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Nilekani’s return will shore the image of Infosys which has been taking a beating in recent months. It will also be a relief to Infosys’ shareholders who have seen the stock plunge.

The trouble at Infosys raises the question again whether the founders of large Indian companies are able to let go of their overgrown babies and empower professional CEOs.

However, it will take a lot more than that to bring Infosys back to anywhere near its glory days, as the Indian IT services industry as a whole struggles to change from a focus on labor arbitrage to a higher value model in the age of automation and digitization. The US administration’s policy changes under Donald Trump are also affecting outsourcing.

Although the emerging startup scene in Bangalore isn’t directly affected by the troubles in the IT services industry, the washing of dirty linen in public does leave a mark on India’s Silicon Valley. The advent of Infosys was one of the main cogs in the wheel that helped make Bangalore the world’s leading IT hub. Ironically, it is Infosys that is now bringing into question the level of professionalism and management culture in tech companies here.