In 1981, seven young entrepreneurs in Mumbai set out to create a global corporation from scratch. They bootstrapped by necessity, getting their start through a gracious Rs. 10,000 (US$250) contribution from the wife of co-founder N.R. Narayana Murthy. They were stymied at many turns by India’s proliferation of commerce-choking regulations. And much like today the economy was in the tank, further dampening business prospects.
And yet the company they founded, Infosys Technologies, managed to become a US$4 billion information technology powerhouse, with more than 100,000 employees. Infosys, today based in Bangalore with offices worldwide, offers a broad portfolio of services: business and technology consulting, business software services, product engineering, business process outsourcing and more.
During a recent Wharton Leadership Lecture, S. “Kris” Gopalakrishnan, the company’s chief executive officer and one of its seven founders, shared some of his lessons learned as an entrepreneur. No matter where they’re from, entrepreneurs share a set of universal characteristics, he said — including courage, vision, a strong values system, imagination, speed and execution. Now, he added, those traits will come particularly handy given the challenging economic climate.
Gopalakrishnan, 52, said that one thing the Infosys founders had on their side in 1981 was youth. “When you are young, your ability to take risks is very high.” At the company’s outset, “[t]here was no expectation; we had nothing to lose.” But, he said, the relative stability and comforts of having a job begin to erode the adventurous spirit required for successful entrepreneurship. “As you age, you have a family, and it becomes more difficult.”
They did not know what to expect, but Gopalakrishnan and his fellow co-founders set the bar high for themselves: “We said we wanted to build a globally respected corporation.” The mission statement was “aspirational,” he noted, but the effect of committing to such a declaration was that every consideration, decision and action of each employee in the company has been calibrated and compared to world class standards.
That explains why the company made its global initial public offering on the United States’ NASDAQ stock exchange in 1999, he said. Infosys complies with the requirements of the stringent Sarbanes-Oxley accounting rules, even though as an Indian company, it doesn’t have to. “To become a global company, we must go up with the best companies in the world.” Moves like the NASDAQ IPO had motives beyond raising capital, he noted. They raise the company’s profile and by offering transparency, demonstrate that “it is possible to run a business legally and ethically in India.”
A Rocky Road
The journey from struggling start-up to multibillion-dollar multinational offers several lessons for entrepreneurs, Gopalakrishnan said. Two essential leadership traits are courage and vision — which keep the entrepreneur and employees focused not just on short-term goals, but also on aspirations. While today we are dazzled by stories of tech firms minting overnight millionaires, Gopalakrishnan said that for Infosys, it was a rocky road at the start. “Definitely, the initial years were quite difficult.”
In 1983, for instance, the company could not get venture capital or bank financing to expand — largely because very few investors understood the business or its potential. Eventually, the government provided some funding for growth. Archaic import restrictions limited the company’s ability to bring crucial equipment into the country.
Despite some successes, by 1989 the Infosys founders felt they were just spinning their wheels. Their peers outside the business were getting on with their lives, while Gopalakrishnan and his partners had devoted eight years to their vision and seemingly had “nothing to show for it…. We almost gave up.”
But, he added, then-CEO Murthy said, “Let’s give it one more try…. Let’s go for broke.” Gopalakrishnan and his colleagues began to think “things will change.”
Change they did. Aided by massive policy reform in India, business exploded during the 1990s, leading up to Infosys’ listing on the NASDAQ. In 2002, Business World called Infosys “India’s Most Respected Company.”
Gopalakrishnan takes umbrage to the idea popular in the United States of cheap Indian labor undercutting the jobs of skilled Americans in massive numbers. “When you talk to businesses, outsourcing is not about job losses…. I think the more important driver is access to talent.” Companies have particular difficulty finding information technology and engineering employees, he said.
Remarkably, five of the company’s seven original founders remain active with the company. “The relationship between the founders is one of friendship, one of respect,” Gopalakrishnan said. Through all the ups and downs of building an IT empire, the founders shared a personal bond as tight as that of any family. “You have to clearly articulate how conflicts are resolved, how decisions are made.”
Innovation and the Economic Crisis
In an age where competitors are quick to copy a successful business, Gopalakrishnan noted that it’s crucial to foster an atmosphere of innovation — no mean feat considering that most people resist change. At Infosys, the solution is a controlled blend of encouragement, incentive and a bit of blunt force. For instance, technical employees benefit from available ongoing training, and they must obtain increasingly higher certifications if they wish to advance in the company. Managers are required to come up with two innovations per year or risk losing part of their departmental budgets.
Gopalakrishnan is realistic about the potential impact the global economic crisis may have on Infosys. It will be felt, but Gopalakrishnan declined to say by how much, given that no one is certain how long it will last. One early victim: the company’s US$753.1 million (Rs. 33.1 billion) bid to acquire Axon Group PLC, a United Kingdom-based SAP consulting firm. Rival Indian firm HCL Technologies put in a higher bid in September and Infosys quietly let the deal slip away as the world’s economic turmoil worsened.
But like many CEOs, he speaks of “opportunity” that may lie in the wreckage of the financial crisis, as companies feel more urgency to reduce costs and re-shape their businesses.
India’s National Association of Software and Services Companies, or NASSCOM, earlier this year predicted sector revenue growth of up to 24% for 2008, down slightly from the previous year’s 30% growth in light of the economic downturn. Despite the ongoing turmoil in global markets, the group predicts a negative impact on the Indian IT sector for “at best” three to four quarters.
As for what’s ahead, Gopalakrishnan sees a more globalized and culturally diverse future for the firm, whose company slogan is “Win in the flat world.” The company wants to balance its sources of global revenue from the current ratio of 60% from the United States, 30% from Europe and 10% from Asia, to 40%, 40% and 20%, respectively.
“We hope to be much larger and have a broader number of services,” Gopalakrishnan says. While the company is probably best known for its operations capability — for instance, applications development and back-office support functions — its has made clear that it wants to expand into a more strategic partnership role with customers. Infosys and competitors such as Wipro Technologies and Tata Consultancy Services see knowledge process outsourcing, business transformation partnering and other higher business functions as the next big evolutionary step for Indian IT firms.
Gopalakrishnan also indirectly addressed a frequent criticism of Infosys and other Indian IT firms — that it will have difficulty becoming a truly multinational company with a homogenous workforce, the overwhelming majority of which is Indian. “You will see Indian companies having non-Indian leadership,” he predicted.