Vishal Sikka is out of currency. Did AI stump Infosys?

Panaya Acquisition, high salaries were irritants

Do you want to sell sugar water for the rest of your life? Or do you want to come with me and change the world?’

That’s how one of the most iconic stories of the corporate world began when Steve Jobs asked John Sculley, then president of Pepsi, to be his CEO at Apple Inc. Within a year, Sculley fired Jobs from his own company and the rest is history.

A similar iconic story played out in Bengaluru on Friday. It started out with Infosys CEO Vishal Sikka’s surprise resignation which was triggered by this line by founder Narayana Murthy: “They (three independent directors of the board) have told me umpteen times that Dr Sikka is not CEO material but CTO material.”

However, insiders and people in the know say that although the friction between Murthy and Sikka and other members of the board started with the huge salaries being paid to the CEO, it was Artificial Intelligence that led to the climactic turn of events. Sikka was “heavily pushing” the company towards deep learning – something that founding members did not really approve of, or really understood. “They want to run the company like a conventional outsourcing business. Besides, top tech companies haven’t been able to get their head around AI in Europe,” said an industry watcher, asking not to be named.
In February 2015, Infosys completed the acquisition of UK-based automation technology company, Panaya. The acquisition was led by Sikka and opened a can of worms for Infosys in its wake.

It was a bitter end to what began on a happy note in August 2014 (Murthy yanked Sikka off the executive board of SAP AG and brought him to head Infosys). Pictures of Murthy and Sikka sharing a laugh, or having an intense conversation in the living room were the staple of media as Sikka began a tough transition and grew the company’s revenues from $2.13 billion (in Q1, 2015) to $2.65 billion (in Q1, 2016) 2016; the IT behemoth has been struggling to report incremental growth in any of its markets since then. Matters came to a head in February over what Murthy described as “deteriorating standard of corporate governance at Infosys”.

On Friday, this is how the cookie crumbled:

Sikka blames Murthy in resignation letter

Sikka’s resignation was a pointer to the growing acrimony between the company’s board and its founders (the friction started sometime in February over high salaries and severance packages). Sikka said the “increasingly personal” attacks had hit morale at the company, which has been trying to keep pace with rapid changes in the industry. “Over the last many months and quarters, we have all been besieged by false, baseless, malicious and increasingly personal attacks,” he said. The antagonism was taking a “heavy toll personally”, he said.

Sikka said in his mail that he had started his journey with the company with a “calling”, to help reshape it around innovation and entrepreneurship. “In 2014, we started with a very challenging set of conditions, and in the last three years, we have decisively turned things around… I am proud of how we have upheld our values, our culture, our integrity, whilst we have gone about this massive transformation,” he stated.

Murthy’s email about Sikka’s competence

Murthy’s email which was sent to his advisers had reportedly claimed that Sikka was not CEO material and was rather Chief Technical Officer (CTO) material.

However, Murthy in the email had also clarified that it was the view (that Sikka is not CEO material) of the members of the board and not his as he has not seen Sikka work from close quarters.

Besides it also claimed that Murthy often heard complaints about Sikka from three independent directors, including Infosys co-chairman Ravi Venkatesan.

He did not mention who were the two other directors who had a low opinion on Sikka.

He also said that he had nothing against Sikka but had a problem with the governance at the IT major.

Board backs Sikka, faults Murthy

The Infosys Board blamed its founder N.R. Narayana Murthy for Sikka’s sudden and dramatic resignation. “Murthy’s continuous assault, including his latest letter, is the primary reason for the resignation of Sikka despite strong Board support… Murthy’s letter contains factual inaccuracies, already disproved rumours, and statements extracted out of context from his conversations with Board members,” it said. Chairman of the Board R. Seshasayee said that Sikka’s vision for the future of the industry and the Company will remain a strong reference point.

Under attack, Murthy clarifies…

Soon after the very public spat and stories that seemed to suggest that Murthy wanted a larger role for his son, Rohan Murthy, in the company, the Infosys founder issued a clarification which said: “I am not seeking any money, position for children, or power. My concern primarily is the deteriorating standard of corporate governance at Infosys. I am extremely anguished by the allegations, tone and tenor of the statements… I will reply to these allegations in the right manner and in the right forum and at the appropriate time.”

He also questioned the investigations that cleared the technology major of all charges of mismanagement after, among other things, former CFO Rajiv Bansal was paid a huge severance package of Rs 23 crore to keep his mouth shut.

“Several shareholders who have read the whistle-blower report have told me that it is hard to believe a report produced by a set of lawyers hired by a set of accused, giving a clean chit to the accused and the accused refusing to disclose why they got a clean chit!” Murthy said, adding: “They say that this is not the way an impartial and objective investigation should be held”.

Sikka was the first Infosys chief executive who wasn’t one of the company’s founders. He is based in the United States, where the company earns nearly two-thirds of its revenue. He will stay on temporarily as executive vice chairman to ensure a “smooth transition”.

Infosys veteran UB Pravin Rao, currently chief operating officer, will take over as interim chief executive.

Born in Madhya Pradesh, Sikka grew up in Vadodara and did his BS from Syracuse University, New York and later his Ph.D from Stanford University. One of his last tweets (on August 11) before announcing his resignation on Friday was: “But I’m me! So am I!” It was in response to a magazine’s call to write a story in six words.

So, was Sikka prophetically hinting to a second coming?

Or will Murthy, like Jobs after Sculley, come back stronger?

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