Indian Forum for Managerial Excellence

P Alagarsamy A 0098762

An Interesting Interview of Mr Murthy…

When you are so energetic and are still capable of doing so much, why did you leave the CEO’s
position so soon? Is it merely to accommodate somebody else?
I believe that every human being has to have incentives to perform, be it money, recognition, titles, etc.
Money is not a big issue for the senior management at Infosys; all of them are fairly well to do. I believe that
people should get the opportunity as early as possible so that they can create a lasting impression on the
company.
People should take responsibility when they are energetic and young rather than at the fag end of the career.
I wanted to leave at 45, at some point in time I thought I would do other things but then I realised that I
wouldn’t be competent (in doing other things). It should not become a musical chair where every year you
are changing senior management. Given that all of us have agreed on a retirement age of 60, my belief was
that a person should get a tenure of five years at least.

Was there also an understanding that most of the founders should get a chance at running Infosys?
No, there has been no such understanding. Mr Raghavan retired at 57, Ashok Arora left much earlier. As
long as a founder is fit enough to lead the company, I think it’s only fair. After all he has spent long years with
the company, made sacrifices and demonstrated competence. So why not? On the other hand, any non-
merit based criteria will not be used for founders or anybody else.

So how does it feel to lay off?

Actually Nandan and I haven’t laid off. However, we have left it to the CEO, COO and the CFO to ask us to
participate on an issue. On issues that for some reason have not got resolved within a certain acceptable
period of time, Nandan and I have a right to intervene. Because at the end of the day, if the company does
not perform or fulfil its obligations, what’s the value of the title?

Personally, how does it feel to let go? After all, you worked so hard to build this company, put
together this team and built this base.
In April 2002 when I stepped down and Nandan became the CEO, I took a decision to spend more and more
time outside Infosys. I joined the board of several universities and companies. I accepted invitations to speak
abroad. I spend less than 10 days a month in Bangalore so my motivations changed. I was much busier with
my obligations outside, so I never felt that I was twiddling my thumbs and no one was calling me.

Did you stay away so that Nandan could come into his own?
Absolutely, otherwise everybody would come to me all the time for every decision. While outside Infosys, I
respect peer-to-peer relationships very well and participate in a low-key manner, within Infosys, I have
always been very comfortable being in charge. I have always driven from the front so it’s not easy sitting in
the office and waiting for someone to contact me. I deliberately took a lot of responsibilities outside.

Is Nandan doing the same? He is not seen too much in public now.
We all agreed that the CEO, CFO and COO would be the only people to speak on business matters inside
India. Outside India, we all participate because if there is an opportunity then we should leverage that.
However, I find that Nandan is more active internally today. I find him much more proactive in discussions
because he realises that the best way he can make this succeed is by putting in 120% of his effort while
leaving all the glory to Kris. That’s the beauty of Infosys. So Kris is the leader, and a leader here is first
amongst equals and all of us work even harder to make sure that he succeeds.

When you turned 60 and stepped down, one of your peers said, “Has he really retired? He may not be
in charge but for 200 days in a year, he is still building the Infosys brand globally”.
Yes, both Nandan and I have been doing that. Whenever I go out and give a speech, I always look for
connecting the corporation with prospective customers. There’s nothing wrong or illegal about it, we are not
upstaging anyone. When I receive dividend from Infosys and have a decent investment in this company then
why not? Infosys is like our daughter and we take pride in her; she is now a smart, young lady. She has
found somebody more attractive and much younger with whom she wants to spend the rest of her life. It is
sad to let go of her but it’s a natural progression.
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The founders decided not to allow spouses or children to work in Infosys. If you believe in
meritocracy, then why should you exclude your children if they are talented?
No matter how correct we are, if our family works here and a decision goes in its favour people might raise
objections. At this point of time in the history of this country, it is very important to conduct an experiment and
create an example. It is definitely unfair to our children because our kids are in Yale, Harvard and Stanford.
But it is better that there is unfairness to a few individuals if it benefits a lot of people. In a civilised society, a
few people have to make sacrifices so that the majority benefit.

If someone from Yale, Harvard or Stanford came to work at Infosys wouldn’t you welcome them with
both arms?
Yes my daughter can join Wipro, TCS, IBM or Accenture. It is her right. But in a professional company, it is
much better that you do not give opportunities to your own kin. In Ramayana, Rama was accused of letting
down the interest of Sita. But there is a lesson in that fable and that is for the sake of majority; leaders have
to set an example.

There was a key milestone in your life, when all the founders wanted to sell out for $1 million and you
said you would buy them out. What if they had said yes to your proposal? Would you have been able
to build Infosys?
We had run this company for nine years in an era when India was business unfriendly and one Saturday we
sat down and had a discussion and people were feeling dejected. As the leader, I had to put a positive spiral.
I didn’t have the money to buy them out. I would have been able to raise it. But I doubt that I would have
been able to create an Infosys that is as strong as it is today without this teamwork. I would not have wanted
to run the company by myself, probably I would have spoken for another three hours and managed to
convince them (laughs.)

What was going on in your mind that day?

I have always had tremendous respect for the youth. Of all the founders, except Raghavan who was older
than me but junior to me in PCS, the rest were all very young. When the company was founded, I decided to
keep 30% of the equity and Raghavan had 19%, Kris and Nandan had 15% each. Setting aside the humility,
there were very few cases where a person who had 13 years of experience, was willing to share equity at
that point in time. I had tremendous faith in their smartness and teamwork. I knew that together we could do
a lot more than I could do alone.

When you left Patni and took away the brightest minds, it must have rankled them. How would you
react if Infosys faces that situation today?
It is the right of every individual to find betterment. We had 5-6 young employees who left to form a company
called Manhattan Associates. Even today they come to Infosys and we are good friends. If any group from
Infosys wants to leave to start a company, I will try to convince them to the best of my ability to continue at
Infosys, but if their arguments are better than mine, they have our best wishes. There are organisations
which believe that anybody who leaves is an enemy. We are not like that. I don’t blame the Patnis. It is
normal human reaction. But we are on good terms with them. I am attending Ashok Patni’s son’s wedding in
January next year.

Do you sometimes feel that in creating Infosys you had to neglect your family? Was there ever a
conflict about being Mr Murthy the founder and Mr Murthy the dad?
I have been very lucky that I had a wife and children who have been very understanding. I used to travel so
much, I remember once I was in France for six months negotiating with Reebok France and UK.

We had no money. So I used to call home once a month. One day my son picked up the phone and told me
his hand was all right. It was only then that I came to know that he had jumped from the car and had broken
his hand and my wife didn’t tell me because she didn’t want to worry me. They have never asked me why I
work so hard or why I am neglecting them.

How do you strike a balance between these two roles?

I don’t strike a balance. Infosys comes first. If India has to fully redeem on her promise, a few generations of
leaders have to put the interests of the country ahead of their personal interests. I would go as far as to say
they should not get married.

It may look silly but you have to work 24 hours a day to make our grandchildren and great grandchildren’s
lives better. Kasturba Gandhi was an extraordinary lady; she gave her husband for the sake of the nation.
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She set such a fantastic example for the country.

It must be bitter for Gandhi’s children, it was difficult and I don’t think they liked it. But the suffering that his
family went through gave us the freedom in the most spectacular manner. Leaders must be ready to sacrifice
their personal lives and the family must be ready to undergo that hardship.

Giving up the GE business was a turning point in the company’s history. Was it difficult to take that
decision?
We are very grateful to GE; it helped us in learning a very important lesson — that we had to de-risk our
model. When GE decided to stop working with us (I am being very charitable), it formed 25% of our topline
and 8% of our bottomline. In May 1995, they sequestered all the vendors in different rooms in Taj Residency,
Bangalore. We had a two-day meeting, where they would discuss terms with each of the vendors in separate
rooms and drive down prices. Finally on the last evening, I took a decision that there was no way we could
work on those terms. As I was coming back Phaneesh (Murthy) was in the car with me. He had just become
the global head of sales. He was very extremely upset and said, “Mr Murthy, you don’t seem to be bothered
about it.” I told him, “I am as much concerned as anybody else but as the leader I cannot show panic. But
this is an extraordinary opportunity for you to start on a clean slate”.

Was Phaneesh’s leaving a difficult period for you and the company?
Yes, it was very difficult. Phaneesh was clearly my favourite, and even today I am fond of him. In October
2001, we had a board meeting and everybody internally — Nandan, Kris, Shibu and Srinath — advised me
against hiring 1,500 engineers for the next year. But Phaneesh wanted to hire them. I had so much respect
for his intelligence, analysis, confidence and touch of the market that I decided to go ahead. But I was wrong,
I was absolutely wrong. In 2002 the markets fell and we had taken a big risk.

Do you meet him now?

Once in a while we meet. Sudha likes him and when she is in San Francisco, she meets his family. At the
end of the day, I have a simple rule. I always put the interest of Infosys ahead of any personal relationship. It
is Infosys and then the rest of us. Because I have that black and white principle, I accepted the decision
about Phaneesh in three days. I was the chairman of the company and this was an issue of governance; it
was my primary responsibility. We made sure that the decision on how to disengage with Phaneesh was left
to the external board.

What did that incident teach you?

The first requirement of a leader is courage of conviction, to take tough decisions. Many of our peers in the
industry were shocked; they said how could you let such a smart person leave the company? It’s true that he
is extraordinarily smart but if we claim to be an ethical company, if we claim to have a value system, those
value systems will have to be tested only under these circumstances. It was painful but I am glad we took
that decision. At the end of the day, it is teamwork that counts; no matter how smart an individual is he can
only add so much value. The year Phaneesh left our revenue was $535 million, this year we will be $4 billion,
so this engine has not stopped.

In the last 26 years, have you ever felt pessimistic about Infosys?
No, never.

In the ’80s did you think you would be here?

No not at all. Remember those days it took three years to get a licence, it took two years to get a telephone
connection. A government official had a higher priority for telephone allotment than a software company. It
would take 10-12 days to get foreign exchange to travel abroad. All that we knew was that we would be
ethical and seek respect and that has not changed.

Where do you see yourself 5-10 years from now? Personally, what do you want for yourself?
That’s what my son keeps asking me. After I am 65, I will not come to this office. I assure you that in this
company we will not roll back rules because it suits somebody. I have three years and 10 months here,
during which I have the right to come to this office; afterwards if invited certainly I will come. Because I have
been so focused on Infosys, I have not been able to think of anything else. I will continue to be on the boards
of companies.

You could take up teaching...

I have had many invitations. Right now, I have accepted to be the Steve Denning Professor at the Stanford
Graduate School of Business. I am doing 3-4 weeks a semester. I start that on October 14. I have invitations
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from Cornell and IIM (B), Wharton and Yale. The problem with me is I am a doer. While I am very
comfortable, giving exalting speeches on the podium outside, back here I am most comfortable at the ground
level. I look at the minutest details; I check toilets at the gate.

Do you want to run for the public office?

No, I won’t. I am not really fit for any political office in the country. I am too straightforward and I don’t believe
in mincing words. A lot of my friends and colleagues tell me that I am half western and half Indian. So you
will always find me on time, I will always respect contracts, I believe in putting the interests of community
before mine, I give feedback easily and I receive feedback also. I don’t mind people criticising India as long
as it’s with data. I believe our performance should speak for us. At the same time, I believe in our ancient
philosophies like Gita, our familial relationships, affection and contentment that are all part of our culture.

How about writing a book on Infosys or your life?

I have deliberately decided against that. If I write a book, I have to be very honest about our people, about
outsiders, and about our own failures. So why do it? What’s the upside? I have so many requests, including
from an agent who represents the most famous CEO in the world. Jeff Lehman, our independent director,
even asked me to write the book and keep it in Cornell archives for 30 years.

But a lot of people are interested in knowing how you made Infosys such a success?
In 1981, when I sat down with my six colleagues, I said three things to them. One, this company would make
profits from day one, because we will spend less than we earn. Two, we will declare dividends from year one
and three we will pay taxes from that dividend and put that back as equity. We were starting with an equity of
only Rs 10,000 and we wanted to go public in 10 years. So we had to grow the equity from Rs 10,000 to Rs
2-3 crore. I am so happy and so grateful that everybody agreed.

Each year we would declare dividend and immediately put that back in the company after paying taxes. It
was sometimes very painful. These people didn’t have cars and telephones and when the moment of taking
that cheque from them came, I used to feel bad about what I was doing to them.

But I did not see a trace of disappointment in any one of them. They took such low compensation when they
went to the US because I had the stupid rule that we had to make profits from day one.

Did they ever pull your leg over it?

No, I was the number two person at PCS and they were all so young. At that time, I didn’t have that kind of
relationship with them. Today we are friends. I made sure that I would sacrifice more than them. I took a
small increase, actually a fraction, in my salary but made sure that they got a 10% increase. If we have
leaders who will demonstrate by example and sacrifice more than others, I can assure you this will be a
fantastic country.

You are quite wealthy, thanks to Infosys. What does money mean to you?
Money helps me lead a comfortable life, secure my future, I can get the best medical advice. It also allows
me to indulge in my love for gadgets; there is always a race between Kris, Shibulal and me for the latest
gadget. I must have the latest cellphone and I change my laptop every three months. I have the latest iPods,
Zune, Nokia 95, all the latest USB drives and pocket-sized hard drives. But at the same time I am very
utilitarian. So I will not buy an iPhone because I can’t use it here. Since my children do not want to start
businesses, I can also donate for social causes.