Wipro, Infosys and the mess in Indian IT

A few years ago, when I interviewed with a business magazine, I was asked which of the big Indian IT companies I would back and why? My answer then was: Tata Consultancy Services.

The reason was not as much the inherent strength of India’s largest, and oldest, information technology outsourcer but because of the obvious challenges Wipro and Infosys, its biggest rivals, faced. My reasoning was based on the obvious lack of complete professionalism in both Wipro (over 80 percent owned by founder Azim Premji) and Infosys (CEO position reserved for its founders), and the lack of a succession plan in either.

Recent events suggest my worst fears were not unfounded.

Wipro has drifted since Azim Premji let go the company’s only professional CEO-type, Vivek Paul, mainly over control and ownership. At the start of the year, Premji abandoned a two-CEO (Girish Paranjpe and Suresh Vaswani) experiment, dumping both and bringing in a company veteran, T.K. Kurien. Reports suggest the job market is flooded with resumes of middle-level and senior executives from Wipro.

Infosys might end up worse. One of its founders, T.V. Mohandas Pai, has walked out of the company, slammed its management for being conservative and letting go its advantage in the market. That is not all. He also criticized the company for its lack of transparency in picking the CEO – a charge that should hurt co-founder N.R. Narayana Murthy more than others because of the tall claims he has made in the past about his professional and ethical legacies.

Some reports suggest Pai may have quit because he was being ignored for the top job. But I don’t find it fully convincing. A few years ago, Pai voluntarily quit his position as chief financial officer, and instead took up a human relations role. That seemed to suggest he didn’t want to be considered for the CEO’s position, which has so far been reserved for its founders, belittling claims of a meritocracy.

Shibu Lal, another founder, is expected to be named CEO, succeeding Kris Gopalakrishnan. With Murthy’s tenure ending this summer, and founder and former CEO Nandan Nilekani out on government service, Infosys has a leadership vacuum with the potential to cause further damage.

While both Wipro and Infosys are posting mediocre results in a resurgent market for IT outsourcing, TCS consistently thumps the market and Cognizant, a company headquartered in New Jersey but running a similar outsourcing business, has made huge gains. TCS, which reported its results today, said net income in the fourth quarter rose 23 percent and volumes grew 2.9 percent in the quarter (compare with minus 1.4 percent for Infosys).

TCS, the oldest of the three IT biggies, has a far better management hierarchy and structure, one that has consistently tapped the growing global market. Both Wipro and Infosys need to evolve quickly, and differently, to retain their blue-chip status.