Nandan Nilekani, CEO, Infosys: Leaning on the future

Dali smiles.
The door to a modern-day Aladdin's cave of treasures slides back at the push of a button.
Buildings sprout, mushroom-like, on a scale-model of the campus.
Sales skyscrapers appear and disappear on a blackboard-screen.
And a tech parable on how the net made a UFO-toy possible unfolds on another screen.
Matrix meets Office Space in Bangalore's Electronic City.
Twenty minutes in Infosys' Experience Theatre.
Twenty minutes to the blinding-flash-of-the-not-so-obvious.
Infy is one mean marketing machine.
The systems are there, the company's heart is in the right place, and downplaying its technical capabilities would be akin to a grudging admission that Schumi, five F-1 crowns and all, can drive a bit, but it is marketing that drives Infosys.

In the mid-1990s, when it looked like India's software celebrations would never end, Infosys, arguably, boasted more sales and marketing pros than its four closest competitors taken together.

So, when Infosys power duo, CEO Nandan M. Nilekani and coo S. 'Kris' Gopalakrishnan, speaks of an increasing proportion of the company's turnover coming from infotech consulting ("it for business transformation," as the strap line accompanying the company's logo puts it succinctly), it isn't just talk.

It is an articulation of an objective that Infosys has nurtured for more than a decade. It is the product of a restructuring the company effected in 1999, creating a consulting arm (Infosys Business Consulting Services, IBCS); a vertically-focused unit, the Domain Competency Group; and a technology-heavy hot shop, Software Engineering Technologies Lab, setlab.

And it is a reflection of the reality that consulting is equal parts intelligence and marketing.

In 2001-02, consulting (or "pure consulting" as some company insiders refer to it) accounted for a mere 4 per cent of Infosys' Rs 2,603.59 crore revenues. The company's senior management is wary of making what stockmarket regulators call "forward-looking statements" and speaks vaguely of this proportion increasing in the future. But they admit that it is, very much, the thrust-of-the-hour.

Only, it won't be easy. Analysts believe TCS has a head start (its middle name is Consultancy). "By 2010, we want to be among the top 10 consulting firms in the world," gushes TCS CEO Subramaniam Ramadorai.

And Infy's role model Accenture has recognised the benefits of a back-end in India and is ramping up ops.

There are other sharks in these waters-great whites IBM and EDS, for instance-but Infosys doesn't scare easy. "The global delivery model takes time to perfect," shrugs Nilekani, referring to the fact that Infosys has been doing work for clients elsewhere out of India for some time now unlike its transnational rivals that have recently discovered the offshore-advantage. "The GDM isn't just about having a bunch of people in India. It is about an entire way of doing things, a way of doing business, and there is intellectual capital embedded in it-the processes we have, the methodologies, the technologies, the infrastructure."

"Infosys' differentiating value," adds Jan Desmet, who heads IBCS out of Dallas, "is centred around its ability to offer solutions based on our excellence in execution." "Unlike other companies, it is around these strengths that we are building a front-end consulting services business, rather than the other way around." Next step: consulting hegemony.

WHO'S WHO IN IT CONSULTING
IBM GLOBAL SERVICES Even before the acquisition of PricewaterhouseCooper's consulting arm, it had strengths in consulting. Now, it has more	Thomas Abraham, MD
WIPRO It is extending its enterprise solutions practice into logical next-step business, consulting; still early days	Azim Premji, CEO
ACCENTURE Infosys' role model has realised the merits the global delivery model...	Sanjay Jain, Managing Partner
CAP GEMINI E&Y ...as has CGE&Y. And both boast the boardroom presence that Infy will have to acquire	Salil Parekh, CEO

Jan Desmet, Dr A. Balasubramaniam, and Subbu Goparaju constitute the unlikely trio that has been vested with the responsibility of running with Infy's consulting blueprint. The first is the Diamond Technology Partners hotshot Infosys hired in 1999 to head Infosys Business Consulting Services out of Dallas. The second, who once headed a software company in sunny Jamaica, oversees the Domain Competency Group and scours the world for people with that unique dual specialisation the DCG mandates. "It's hard," he shrugs. "I've managed to build a team of 40-odd over three years." And the third, Goparaju, is an Infosys-lifer who keeps an eye on the next big thing in technology as the person in charge of set labs. When a prospect sounds IBCS out on what Infy can do to transform its business, domain and technology whizzes from DCG and set labs chip in with their inputs.

Keeping the requests for proposals coming is the front-end's responsibility and given Infosys' considerable marketing skills, that should be possible. It's unlikely that any wins in the consulting business will be publicised: companies seeking the assistance of consultants, it or otherwise, are notoriously fussy about not having their names broadcast. Anyway, says a Mumbai-based analyst who tracks the software sector, "Infosys hasn't managed to break into the big league-most of its consulting customers are small companies who can't afford the big boys." Nilekani dismisses this argument. "Even recently, we have signed on some consulting business where we bid against a full field." "The large global it services companies are bidding very aggressively. There have been cases where they are quoting pretty close to Indian firms," adds Bhupinder Ahuja, Vice President, Deutsche Bank.

Nilekani and Gopalakrishnan-both co-founders, the first took over as CEO, the second as coo, in March 2002-have to manage the transition and it could not have come at a worse time. A recession in the US cut corporate IT-spending and affected Infosys' bread-and-butter software services business. 9-11 exacerbated things, and the recent turn of events in the subcontinent-like the travel advisory issued by certain countries in the wake of recent Indo-Pak tensions, which meant no clients visited Infosys in June-haven't exactly helped. It's a rare it company, then, that has been able to increase its billing rates in 2001 or thus far in 2002. Infosys hasn't. "Pricing pressure has eased," explains Nilekani, "but large deals still continue to be price-sensitive." Not the best time to-borrowing a phrase from analyst-speak-move up the value chain. Not if your worldwide head of sales and marketing has resigned in the wake of a sexual harassment suit like Infosys' Phaneesh Murthy has. But Murthy's replacement as head of sales, Basab Pradhan, is good, vouches a former employee. And an analyst admits the pain of Murthy's departure will be "temporary, if there is any at all". So there.

It also does not seem the best time to bid adieu to a patriarch. Starting March 2002, Nagavara Ramarao Narayana Murthy ceased being Infosys' CEO. As chairman, he says, his role will now be restricted to that of a "mentor".

For 20 years, to the outside world, Murthy was Infosys.

Infosys was Murthy.

Only, for those 20 years, Nilekani, the anointed successor from Day 1 some Infoscions claim, played brain to Murthy's heart. "Every morning when they were both in town," recollects a former employee, "Murthy would meet with Nandan the first thing." It takes passion to build an organisation, and there's no doubting that much of it came from Murthy, that it was he who imbued the other founders with the desire to create an organisation that wasn't just good at what it did, but lived life differently from other companies.

Twenty years on, organisation built, brand established, values enshrined, and with more-positive-than-positive word-of-mouth in the investing community, Infosys is no longer dependent on passion. What it does need are new skills (consulting is no child's play), an image as a consultant, and maybe a CEO who is far more focused on the business of marketing.

"Narayana Murthy was great for Infosys; he was a technology guy at heart," explains Sameer Kochhar, who runs Delhi-based it consultancy Skoch. "Nandan is a businessman at heart. The times are changing and so is the context of business."

Nilekani and Gopalakrishnan then, are Infy's next generation of leaders. And it's their mandate to take the company to the next level of business-a level where Infosys will no longer be vending its services to chief information officers but to CEOs. "You can't talk Java to a CEO," says Gopalakrishnan. "You'll have to talk business."

That requires a different kind of front-end and according to Techspan founder and Chairman Arjun Malhotra that's one area where a largely offshore company donning a suit will find the going difficult. "Offshore firms will find this transition harder to make, since being local to the customer is an important initiation and selection criteria for consulting work."

Nilekani claims the company has been making the requisite investments over the past two years and Infy's Vice President (HR), Hema Ravichandar, points out that the company has managed to hire a "cross-cultural, big-five kind of background" team for it. Expectedly, Infosys' selling and marketing costs have increased from 4.84 per cent of total income in 2000-01 to 4.98 per cent in 2001-02, and further to 9.6 per cent in the first quarter of 2002-03. Whoever said it wouldn't cost to become a consultant?

Five years ago, not too many people would have believed that a bunch of coders in India would one day pose a threat to true-blue consultants. But a recession (or two) can change things, and how. All through last year, say India's software majors, they scored at the expense of consulting firms. The firms themselves deny this, but that hasn't stopped them from building a presence in India-a presence that Accenture's Country Managing Partner, Sanjay Jain, describes as something that "takes on the Indian software firms head-on". Jain is chary of revealing numbers-except to say that the firm employs 500 in India-but the buzz in industry circles is that Accenture has doubled its presence in India in the past year.

It doesn't take an accountant to figure out why curry is the flavour of the season with consulting firms. Bad year, lower budgets, penny-pinching clients, and the need to cut costs but still maintain quality means the next logical step is "to move to India or Mexico or Ireland". Circa 2002, India has the cadence. It has the momentum. And it has, in no particular order but this writer's sense of meter, Infosys, Wipro, and TCS. And so, from outposts that did a little outsourcing work now and then, the Indian operations of any company that wants to be an it consultant, have grown into global hubs.

Take a bird's eye-view of the numbers: IBM Global Services, with a team of more than 3,000 in India, actually competes for global consulting contracts; EDS has 1,000 employees and expects to double that number every year; so does Cap Gemini E&Y which has a dedicated offshore division numbering 160. "India, Ireland, and Mexico are countries where there is tremendous cost advantage," says Anjali Jain, CEO, EDS. Big Five consultants charge anything in excess of $250 a hour; the typical India-based offshore company (and we're talking a large one, like Infosys), does between $40 and $90.

It isn't just the cost. Consulting's traditional mainstay, strategy, no longer accounts for the bulk of the revenues: it does. As much of 50 per cent of CGE&Y's revenues come from it consulting. "Strategy isn't growing," admits CGE&Y Managing Director, Salil Parekh. "IT consulting and outsourcing are the high growth areas." And that's where the paths of consulting firms and software firms like Infosys cross.

"Indian software companies are serious competition to consulting firms in the global market," says Parekh. "Their only issue at this point in time is that they do not have a front-end." The Gartner Group's Sujoy Chohan agrees. "At the moment, Indian firms lack the boardroom presence large consulting firms and systems integrators boast." That's where Infosys' much vaunted marketing skills come into play.

Start at the top. Look at the independent directors: from HDFC-Standard Life's Deepak Satwalekar to Senator Larry Pressler to economist Omkar Goswami to WEF founder Claude Smadja. Go grass roots: run through the list of worthies that has planted trees in Infosys' sprawling front lawn-from Prime Ministers to CXOs. And rewind to the ninth sentence of this composition: Infy is one mean marketing machine. That's one of the edges it boasts over homegrown rivals TCS and Wipro.

Another, says Nilambu Syam, who tracks the IT sector for Kotak Research, is its depth of management. "It'll take them a little longer to enter the league of the Big Five, but its core team is in place."

Faith in both could be one reason for Infosys' strategy of not being overly bothered about its inability to find the right consulting firm to acquire: fit is everything to it. While it continues to shop for acquisitions, Infy isn't averse to alliances like the one with Concours Group, a small consulting firm that specialises in the area of change management. "Infosys has repeatedly said it would like to acquire small boutique consultants," says Syam. "The alliance with Concours could be the precursor to an acquisition."

Infosys is sure it can pull it off. "Corporates are becoming more risk-averse," explains Nilekani. "They want to deal with fewer, larger, well-known, financially strong, longevity oriented corporations." That's the logic behind Infosys' business process outsourcing play, Progeon. "We want to transform ourselves into a full services company," adds Gopalakrishnan. Implicit in that claim are the advantages that can accrue to a company from being one: consulting assignments will result in a significant amount of downstream implementation work. That's a business model, stresses Gopalakrishnan, that not too many companies have tried. "We will be unique."

additional reporting by Vinod Mahanta