The case study ‘Narayana Murthy and Infosys' describes how Narayana
Murthy, set up India's leading software company - Infosys. Narayana
Murthy turned a small software development venture that he had set up
with his friends in 1981, into one of the leading companies of the
country. Infosys grew rapidly throughout the 1990s Narayana Murthy
distributed the company's profits among the employees through a
stock-option program, and adopted the best corporate governance
practices. All this earned him praise and respect. In 1999, the company
became the first Indian firm to be listed on the Nasdaq Stock Market. In
2000, Infosys was poised to become a true global company.By 2000,
Infosys' market
capitalization reached Rs.11 billion and by 2001, Infosys was one of
the biggest exporters of software from India. Narayana Murthy had built
an organization that was respected across the country, with very strong
systems, high ethical values and a nurturing working atmosphere.In
February 2001, Infosys Technologies Ltd. (Infosys) was voted as the
Best Managed Company in Asia in the Information Technology sector, in
leading financial magazine Euromoney's Fifth Annual Survey of Best
Managed Companies in Asia.
KEY SUCCESS FACTORS
With
his sound management skills, Narayana Murthy seemed to have taken
Infosys to the pinnacle of success with the following key success
factors :
1.
Leadership team : The leadership team needs to balance vision with
practical experience. In most cases, a technology start-up will have a
visionary and/or a technical genius (most often, these are the
founders) in place from day one. However, all to often, the leadership
team is not rounded out by people who actually know how to run a
business and how to drive sales. Building a strong balanced team can be
one of the trickier aspects of creating a successful start-up because
it necessarily requires the visionary and the technical genius
(founders) to admit their practical shortcomings and give up some of
the control of the business. The idea behind a start-up is often
somebody's "baby" and, quite naturally, they want to control every
aspect of its development. Once you move these people away from
micromanaging the business, the start-up begins to have a chance.
2.
Well-conceived business plan : This is an area where the
practical experience of a well-rounded leadership team gives the
start-up a leg up. The business plan needs to be practical and
detailed. The business plan provides the blueprint for the growth of
the company. Perhaps more importantly, the business plan is how you
demonstrate the viability of the business to third party investors.
3.
A strong product : It is a given that the product needs to be
special – something that will differentiate itself from the universe of
competing products - but there are other important factors. Ideally,
the product will be one that can be protected by patent. If the
products cannot be protected by a patent, then the start-up has to be
positioned to capitalize on being the first to market. Absent patent
protection, being the first to market and capturing as much market
share as you can before the copy-cats arrive is the next best thing.
The product needs to have a ready market meaning that there is a market
for it and that either there is no real competition or that the product
allows the company to differentiate itself from the competition.
4.
Scalability : The scalability of the business may not be critical
to the success of every business, but it is critical to drive a
start-up to a large scale business. In other words, if the goal is to
become a large, valuable company, scalability is key. However, if the
goal is a little less lofty, then scalability is a little less
important.
5.
Adequate capital :. Without adequate capital, the business will
struggle. Perhaps the business will have phenomenal sales, but be
unable to deliver the product. Or, the business may build the product,
but lack the cash to adequately market it. Or the business will be
unable to attract the leadership team it needs and the team it has is
diluted to ineffectiveness. Or, the business is unable to capitalize on
its "first-to-market" status. While it is true that the management team
for a start-up has to be versatile and willing to wear different hats,
a capital-starved start-up can force the dilution of the management
team to the point of everything being done poorly. Quite obviously, in
many cases, the luxury of having adequate capital does not exist from
day one. Finding the capital in a timely way can be very difficult. The
more that can be done to address the other four points, the easier it
will be to find capital.
Launch of Infosys
Narayana Murthy obtained his Bachelor's
degree in Electrical Engineering from University of Mysore in 1967 and
his Master's degree in Technology from Indian Institute of Technology,
Kanpur in 1969. He started his career as head of the computer centre at
IIM, Ahmedabad.In 1972, he went to Paris where he was part of the team
that designed a 400-terminal, real-time operating system for handling
air cargo for Charles De Gaulle airport. Narayana Murthy was a left-wing
activist and mingled with French communists during his stay in Paris
but his outlook changed while traveling around Europe. He believed that
the only way to pull India out of poverty was to create more jobs, by
setting up new companies.In 1975, he returned to India and joined
Systems Research Institute, Pune,(Maharashtra). He then headed Patni
Computer Systems Pvt. Ltd., Mumbai, (Maharashtra) before founding
Infosys in 1981, along with six other professionals.
The StrategistFrom
the beginning, Narayana Murthy focused on the world's most challenging
market - the US. He had two reasons for this. First, there was no market
for software in India at the time. He believed that Indian software
companies should export products in which they had a competitive
advantage.In 1987, Infosys entered into a joint venture with Kurt Salmon
Associates (KSA), a leading global management consultancy firm.
KSA-Infosys was the first Indo-American joint venture in the US.
People ManagementAnalysts
felt that one factor which helped Infosys to grow at a faster pace than
others was the low employee turnover.The turnover rate at Infosys was
around 11% as opposed to industry average for software companies' of
over 25% during the 1990s.Infosys' retention capability was a function
both of its rigorous selection procedures as well as proactive HRD
practices. About 80% of the middle and senior level executives were
promoted from within the organization...
Corporate Governance and InfosysAnalysts
felt that Infosys became one of the most respected companies in India,
through its corporate governance practices, which were better than those
of many other companies in India. Narayana Murthy's move to adhere to
the best global practices was driven by his vision to become a global
player. Infosys adopted the stringent US Generally Accepted Accounting
Practices (GAAP) many years before other companies in India did...
Leaders in the Making
Narayana
Murthy set up a Leadership Institute in Mysore, India, to manage the
future growth of Infosys. The institute aimed at preparing Infosys
employees to face the complexities of a rapidly changing marketplace and
to bring about a change in work culture by instilling leadership
qualities.
I would like to end with a comment from Sri Narayana Murthy
:
He said, “It is our vision at Infosys, to create world-class leaders
who will be at the forefront of business and technology in today's
competitive marketplace...
This has been at the forefront of their corporate culture !!!
