Murthy goes contrarian, asks Infosys to focus on low-value businesses

Here's an unusual bit of contrarian thinking from Infosys supremo Narayana Murthy, who recently expressed the nature of his dissatisfaction over his company's recent performance.

According to the article, one reason for Infosys' underperformance in the recent past has been its infatuation — like many other IT services companies — with the huge potential in cloud computing, big data, and analytics. Murthy's grouse is that by doing so, management has taken its eyes off the unsexy, bread-and-butter businesses that were the mainstay of the company in the past, and responsible for a big chunk of its bottom line.

"People in the trenches did not realize that not only should they succeed in these challenging areas (newer areas such as analytics and cloud computing), but they should also focus on the large, revenue-yielding opportunities, which are commoditized. I would say this is the main reason," said Murthy in the article.

It's not often that you hear someone urging his business to focus more on efforts that are lower down in the value chain rather than the higher-margin ones. But these are not ordinary times. As the article explains, Infosys, for the first time in its storied career, had begun to slash prices in order to hold onto valuable clients, lest they migrate to arch-rivals Tata Consultancy Services or Cognizant. This is a far cry from the 20 to 25 percent premium that Murthy said Infosys commanded over other companies.

As you may know, Murthy violated his own rule set at Infosys that forced founders to permanently retire at the age of 65, which I previously wrote about here. He also sort of went against another code that prevented founders' children from joining the company when he inducted his son Rohan as his non-executive "assistant". But Infosys was in such a mess that ultimately, it was seen as a positive thing ("no one can sell a line of business like Murthy can" is the industry sentiment).

Given the mess that Infosys was in, and given Infosys' positive performances post-Murthy's return, everyone in the industry is probably listening a little carefully to what the old warhorse is saying.