Think beyond. Stay ahead.
The Infosys founder on how the company learnt from multinationals and beat them at their own game
he first time I travelled to Paris was in 1971. I paid Rs 800 to fly to Paris with Syrian Airlines. I had never boarded a plane before. At Heathrow, which was very small back then, I was quite surprised to see how the doors opened and closed by themselves. Then the engineer in me quickly realised it was because of the sensors. It was fun. Anyway, thanks to my stay in France and many discussions with the cadre of the parties there — Left, Centre and Right — and extensive travel in Western Europe, I realised the only way societies can solve the problem of poverty is through the creation of jobs with good income. I also realised the best instrument we have for the creation of jobs is entrepreneurship. Therefore, I realised it is not the responsibility of the government to create jobs but to create an environment where there is enough incentive for entrepreneurs to create more and more jobs, and that was the philosophy behind starting Infosys.
Also, a set of events happened from 1975-1980, which made me realise that there would be ample opportunities for Indian companies to play a role in the global software services industry. The first was the introduction of super mini computers. These machines were powerful and inexpensive compared with mainframes. The second development was the decision by a judge in the US to allow third-party software to run on existing hardware — before that, companies like IBM said we could only run their software on their computers, which meant the opportunities for third party software companies were non-existent. But the ruling opened up huge opportunities for third-party software companies. The third thing that happened was that Data General and Digital Equipment Corporation (DEC) released an online transaction processing software based on relational databases to run on these super mini computers in 1977. So now, there was a hardware and software platform that allowed large commercial applications to be developed. Last but not least, India had many good engineers who had no jobs or very few good jobs. These were an extraordinary set of circumstances.
But in the early 1980s, before liberalisation in 1991, running a business in India was challenge. Licensing was a big bottleneck. We had to make 30-40 trips to Delhi and wait for two to three years to get a licence to import a computer. Even if we had to travel abroad for a day, we had to make an application to the Reserve Bank of India and wait for 10-15 days because we did not have current account convertibility then. It was almost impossible to hire consultants from overseas to work in India and we needed them because we did not know how to institute quality processes and systems. We didn’t know branding and marketing and so on. To get these people, we had to pay international prices but that was not allowed by the government.
Raising money, too, wasn’t easy. There was a Controller of Capital Issues who was a civil servant with no idea what capital markets were about. He was in charge of deciding at what price companies could come out with their IPO. We made an application in 1990 and he said we could go at Rs 11 per share, which meant only a 10% premium. We didn’t do that and later, post-liberalisation, came out with our IPO at Rs 95 per share.
In 1992, when many MNC companies like DEC and IBM came to Bangalore, many of my friends said our game would be over because we were very small. They said our employees would leave us and nobody would join us. Therefore, we had three options. One was to say, “Look, this is our destiny”, and give up, which we didn’t do. The second was to say, “We will fight these multinationals”. It would have been very easy to raise the anti-multinational feeling but it was against my principles. Instead, I said, “Let’s see what these MNCs do and learn from them; and see if we can beat them at their own game on our home turf.” Because if we could not beat them on our home turf, we would not be able to compete with them overseas.
I realised that MNCs were doing certain things that made them attractive. One, they paid good salaries. Two, they created very good physical and technological infrastructure. Three, they created a good career path and articulated it to their employees. So, we thought, why don’t we do that? We knew that we couldn’t pay those high salaries so that’s when we said, “Let’s go public and create a good stock option”. I think by doing that, we made so much more money for our people that no multinational could ever compete with us.
|"In 1992, when MNCs like IBM came to Bangalore, my friends said our game would be over as we were very small"|
When our revenue was Rs 13 crore in 1993, we decided to build our first facility, in Bangalore, for Rs 19 crore. We had just gone public and raised money. So we built this campus and put money in technology. Given our revenues, that was quite bold at that time. People had to commute a bit but in return they got a good work environment with a huge campus and cafeteria. Again, no multinational could compete with that because most of them didn’t believe in owning real estate. It was only much later, maybe after 2000, that Intel built its first campus. So we managed to create a differentiation in the physical infrastructure and technology that we offered to our employees. We invested 8-10% of our revenues on technology, which was quite high at that time.
We were probably the first Indian software company to put out a full-page advertisement inviting youngsters to join us in The Times of India towards the end of 1992. I remember I sent Nandan [Nilekani] and Hema [Ravichander] to Bombay to conduct the interviews. The interviews were held at Leela Kempinski and about 1,500 people gate-crashed and even broke the glass there. I remember because we had to pay for the glass. Never in the history of any Indian company had this happened before. Before Nandan and Hema went to Bombay, we created the career path we would offer for software professionals in terms of what they would be doing over the next five to 10 years, and what different technologies they would be working on. We created a good vision of what the company would offer youngsters and that was important. We did that early on at Infosys.
By 1995, we realised that if we wanted to become a worthwhile player in the global market, particularly in the US, we needed to get the mind-share of the CFO. We knew we had to be listed on a stock exchange they understood. We felt if they saw our name on the ticker tape everyday on Nasdaq or NYSE, they would realise we were there to stay, and they could trust us. So we started to prepare to get listed on the Nasdaq. We eventually did this in March 1999.
Around the same time, we said we had to get to global standards of quality and productivity. We were the first Indian company to get ourselves evaluated for ISO 9001, to be certified at Level 4 of the Capability Maturity Model (CMM) and also, to be evaluated on the Malcolm Balridge Quality Framework in the US. Since we weren’t an American company, we didn’t win an award but our score of 685 would have fetched us an award if we had been an American company. We did all these things because I believed in what Louis Pasteur said: “Chance favours only the prepared mind.” I said, “We are not very certain whether we will succeed or not but one thing I do know, if you are not prepared to seize an opportunity, then you will not succeed.” And for us to seize an opportunity or even recognise an opportunity, we had to be prepared. The Y2K and the internet boom happened soon after.
Learning from experience
I have absorbed different things from different people. Professor JG Krishnayya, whom I met while I was working in IIM-A, taught me the importance of being a professional, and how to look at issues objectively based on data and facts. He also taught me how to move from transaction to transaction without the history of bias. If the last transaction was not right, then the next transaction should be done on a zero base so that you have the full opportunity to prove yourself.
When I was working in Paris, my boss, a South African called Colin Boucher, taught me what true leadership is all about. I was part of a team that was building an operating system and when you are building an OS, there is nothing in the machine. So, if we had to test anything, we needed some six people to be there. If we ran our programmes and one of them bombed, all we would get was a huge dump file and, from there, we would have to trace whose programmes had gone wrong.
|"True leaders raise your confidence and make you achieve things that you thought were impossible"|
One Friday evening, we got a dump file and the finger pointed at me as my programme didn’t work. I had completely wiped out the disk. Almost everyone in Paris has plans for Friday evenings and nobody wants to stay in office. We found that the back-up files were not copied properly so the back-up tapes were not working, and we had to recreate the database with thousands of programmes before Monday morning. Colin cancelled his dinner plans with his wife to help me. It took us 20 hours to recreate the whole thing and through the whole time, he was really very encouraging, and even bought me dinner and coffee. He kept saying, “It’s alright, we can fix this.” But when the whole thing was over, he said, “Kid, the next time you do this, I will spank you.” It was then that I realised what leadership was all about. When I was worried and tense, he raised my confidence and gave me hope that I could fix the problem and achieve what I had to. That’s what true leaders do — they make you achieve things that you thought were impossible.
Infosys has always operated as an enlightened democracy. Democracy doesn’t mean no decisions or no leader. For me, it has always meant equal opportunity. Before I take a decision, I make sure all relevant people with competencies have the opportunity to give their views. We would set a time limit and have discussions, and then take the decision. So, it is unlikely that we would have done anything differently because this was the result of discussions of fairly enlightened people.
In Infosys, I brought certain beliefs to the table and my colleagues were kind enough to accept them. First, I only believe in the bottomline. I don’t believe in topline. For me, if you are running a business, you have to be the most profitable business in that industry. From Day One, that is the way I have operated. Second, to me, every decision has to be based on verifiable data, fact and models. That’s why, in our acquisition strategy, I had laid a set of conditions and said that unless those filters were met, we would not go further. Last but not least, I always believed in recruiting people who were smarter than me. I realised that if I start recruiting people who were less smart than me, and they started recruiting people who were less smart than they were, then before you can say Jack Robinson, the company would be full of idiots.
I am a man in a hurry. For me, speed is of the greatest importance. I realised pretty early in my career that speed is extremely important, especially in a growing economy like India. So even today, every decision I take as a chairman has to be completed by 5.30 pm. My deadlines are always in hours.
—As Told To Kripa Mahalingam