Trouble at Infosys: What we know so far
In an uncomfortable position
The dust had barely settled at Infosys when Asia’s No. 2 software services firm once more found itself grappling with a potential leadership crisis. For the second time in about as many years, the Indian icon synonymous with the country’s technological ascendancy is being forced to answer accusations of impropriety.
The whistleblower hit
Whistle-blowers have accused CEO Salil Parekh of instigating employees to inflate profits, mis-represent the lucrativeness of deals, even of abusing travel privileges. In a memo reproduced in newspapers, Parekh’s accusers offered emails and recordings to back up their claims.
Scorn in the USA
The US Securities and Exchange Commission has started an investigation on the whistleblower complaints against Infosys claiming malfeasance in accounting.
A lot like Sikka?
Little evidence of wrong-doing has emerged publicly so far. Infosys pledged a full investigation, while Parekh himself has remained silent. Yet investors blind-sided by the sheer volume of the charges wiped more than $7 billion off the company’s market value in a single day. They may still be smarting from 2017, when internal upheaval eventually sparked an ouster of the popular Vishal Sikka, paving the way for Parekh’s ascension and a board reshuffle.
Govt monitoring situation
Modi govt is closely monitoring the issue but it may be too early to initiate a probe of the company. The events unfolding in Infosys bear a resemblance to those of 2017 that brought down the tech giant’s leadership. Two summers ago, a similar whistle-blower complaint alleged irregularities in a $200 million acquisition, setting off a chain of events that culminated in a vicious face-off with co-founder Narayana Murthy and Sikka’s removal. The accusations against him were never proven.
Sikka and Parekh, a former Capgemini SE executive, were the first outside professionals brought in to run the 38-year-old company, after several decades of co-founders taking turns to occupy the CEO’s office.
Losing its way
Infosys itself can ill-afford the distraction. It’s grappling with fundamental changes in the software outsourcing industry, where younger rivals are snatching away contracts with newer technologies, and clients are moving away from the paid-by-the-hour outsourcing work that Infosys and rival Tata Consultancy Services Ltd. specialized in.