The year 2009 has been a unique one-Narayana Murthy

Date: 27-Dec-2009

The year 2009 has been a unique one. It has taught us, the business people in India, many important lessons. Clearly, the first one is that there could be a synchronised recession in the world. We had all along been brought up under the assumption that India went contra to most other economies. But, the recession of 2008 - 2009 disproved that. Such a synchronised recession affected all sectors of economy in general and the IT industry in particular. Most IT companies did not honour the offers they had made to engineering and management graduates. It was sad to see so many youngsters spending time at home after obtaining their degrees. I am glad my company honoured every one of the offers we had made.

The second lesson we learnt was a reaffirmation of President Ronald Reagan's "Trust but verify" policy. I am referring to the Satyam financial scandal and the embarrassment it brought to some of the finest and most ethical people that served as independent directors (IDs) on the board of Satyam. In some sense, this was a wake up call for the entire ID fraternity in India. This scandal underlined the importance of putting proper systems and processes in place, having checks and balances, asking deep questions and verifying the answers with data. Doing all of these is fair not just to the IDs but also to the executive management. Such mechanisms save the lives of families of thousands of employees and investors, and the reputation of the entire Indian industry. They eliminate the temptation for executive management to violate the norms of good corporate governance.

Even though I have been a non-executive chairman at Infosys since 2006, I have always been an active participant in finding solutions to any strategic problem at Infosys. We learnt an important lesson in corporate honesty, thanks to the difficult year that 2009 has been. We realised that principles and values are not just for good times but for all times. Therefore, much against the temptation to abandon the quarterly and annual revenue and profits as other IT companies had done, we stuck to our practice. For the first time in the 28 years of history of the company, we gave deflationary projections for revenue and profits for 2009.

Deep introspection in finding solutions is an important asset of an Infoscion. The dual challenges for 2009 were to work harder in the global marketplace to improve revenues while reducing costs. Our CEO set a wonderful example by spending 90% of his time away from home, travelling to faraway lands to meet senior management of customer companies. Every member of the executive management set a scorching pace in meeting our customers.

We realised pretty early that the best way to improve stickiness with our customers is to enhance the business value they received from every one of the projects we did for them - consulting, software development, BPO and remote infrastructure management. We also realised that the name of the game is leverage. We realised that if we demonstrate to our customers that they would get back more for every dollar they spent on us than with our competitors, the job is done. The challenge was to develop mathematical and quantitative models to measure the business value leverage. Experts from the Consulting Group, SETLabs, Education and Research, Quality Group and the Marketing Group spread over four continents worked together as a close-knit team on a 24-hour workday basis and created models, case studies and training collateral. This exercise reaffirmed our belief that every crisis is an opportunity for improvement.

On the cost side, our CFO did a fantastic job by converting many indirect cost items to direct cost items and many fixed costs items to variable cost items. The former helps us to reduce costs that do not add any direct value to our customers. The latter helps us to link costs to revenues and eliminate many cost items that do not add any value to our customers. In conclusion, I must say that the year 2009 has helped us build our character by focusing better on our customers, controlling costs and making sacrifices.

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