It's bad enough to see a good CEO get pushed out by old-guard founders looking to turn back the clock. It's worse when the leadership change happens as the company affected by it deals with a host of secular and competitive challenges.
Indian IT outsourcing giant Infosys (INFY) is less than two months removed from seeing its shares slump on news that Vishal Sikka, the former SAP SE (SAP) CTO who had been named CEO in 2014, is stepping down following a long-running dispute with then-Chairman Narayana Murthy and other founders. Not long afterwards, the founders carried out a successful board coup, along the way naming one of their own -- Nandan Nilekani, who was CEO from 2002 to 2007 -- as non-executive chairman.
Murthy had taken issue with Sikka's pay and -- though an outside auditor cleared the company of wrongdoing related to the matter -- alleged there were governance issues related to the company's $200 million purchase of Israeli app-testing and quality-management software firm Panaya. The Panaya deal did strike at the heart of Sikka's grudge match with Infosys' founders, but not due to any malfeasance.
Rather, because the deal was a prime example of how Sikka -- both via M&A and organic investments -- tried to lower Infosys' dependence on basic, low-cost, software outsourcing services and grow its exposure to more differentiated offerings in areas such as e-commerce services, software-automated services, machine learning-based analytics and services tailored for different verticals. He also more broadly sought to change Infosys culture to make it more innovative and responsive to industry changes.
And some of those industry changes are pretty big. Cloud app and infrastructure adoption, though by no means eliminating the need for the traditional services Infosys supplies, has been shrinking the pie. It also hasn't helped that companies are shifting their IT services spend away from large-scale "digital transformation" projects to favor smaller deals. Or that rivals such as Accenture Plc (ACN) and Cognizant Technology Solutions Corp (CTSH) are investing a fair amount in differentiated services as well.
There are now giant question marks surrounding the future of the transformation efforts that Sikka put into motion. And considering the circumstances surrounding Sikka's departure, odds are high that those efforts will be disrupted... and not in a good way.
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