When N. R. Narayana Murthy spoke at Wharton’s MBA commencement on May 20, he chose to title his remarks “Reflections of an Entrepreneur.”

The word ‘entrepreneur’ hardly does justice to Murthy, chairman and CEO of Infosys Technologies Limited – one of the largest software companies in India. Since the founding of Infosys in 1981, Murthy has established himself as a visionary noted as much for his business acumen as for his concern with the welfare of his employees and society.

Indeed, as he described to his audience how he and six others founded Infosys in 1981 with $250 in initial seed capital, Murthy recited the “simple yet powerful” sentence that provided the vision for the company and that even now “captures the core of our values and aspirations … That vision was and is to be a globally respected software corporation providing best-in-class business solutions employing best-of-breed professionals.”

Twenty years later, Murthy would appear to have achieved his goal. Infosys, located in Bangalore, India, is a world leader in providing IT consulting and software services with a global client list that includes such companies as Aetna, Aon Corp., Swiss Re, Visa International, Cisco Systems, Nortel Networks, Vodafone, Apple, Boeing and Nordstrom. In 1999, Infosys became the first Indian company to list on the Nasdaq. Under Murthy, who received his bachelor’s degree in electrical engineering from the University of Mysore and his master’s degree in technology from the Indian Institute of Technology, Infosys was the first Indian company to offer employee stock options. On its web site the phrase “powered by intellect and driven by values” follows the company name.

Recently, however, Infosys has felt the effects of the slump in the U.S. technology market. Because of the company’s heavy reliance on its U.S. customer base – one news report said that North America accounted for 73.5% of revenues last year – Infosys is projecting a lower growth rate – 30% – for 2001-2002. By contrast, sales for the fiscal year ending in March were $413 million, a 103.5% increase over the previous year. Indeed, in a recent letter to shareholders quoted in the financial press, Murthy referred to the “challenging times” facing IT services companies and noted that “as self preservation and prudence descend on U.S. industry, the near-term demand outlook for IT services is not as rosy as in the boom years. The immediate future is, therefore, uncertain.”

Infosys, however, is hardly standing still. The company is reportedly considering an investment in the Multimedia Super Corridor, a high-tech zone in Malaysia due to be completed by 2011. And it recently announced plans to add another 1,500 to 2,000 employees to its 9,800-member workforce. As Infosys’ letter to shareholders put it: given the fact that “many US-based IT services players are facing extinction, with value-for-money emerging as a key imperative and with increasing recognition of the quality of its talent, India is all set to consolidate its position as a major force on the global IT services map.”

Well-rested Assets

During his presentation Murthy described the three concepts on which Infosys was built: “the criticality of customized software in creating competitive advantage for a corporation, globalization and professionalization of the corporation.” Every successful company, he said, “is built on an idea that is taken seriously in the marketplace. For this, an idea has to achieve one or more of the following: improve customer satisfaction, reduce cost, reduce cycle time, improve productivity, increase customer base, or improve comfort level of customers.”

Strategy, he said, “is all about becoming unique in a marketplace. This requires that every corporation build uniqueness into its business rules and models. These rules and models become embedded in the information systems of the company. Thus, there was, is and will be considerable opportunity in creating customized software.”

Back in 1981, Murthy noted, the market for the idea behind Infosys didn’t yet exist. The company had to embrace globalization which he defined as “sourcing capital from where it is cheapest, producing where it is most cost-effective, and selling where it is most profitable, all without being constrained by national boundaries. When we founded the company, we knew that India, with its vast pool of English-speaking, analytically strong technical talent and the excellent work ethic among its professionals, had the essential ingredients for global success in customized software development. Thus, our idea was to produce software in India for clients in the G–7 countries. Our approach, while distinctive, was far from unique; companies in industries such as textiles and semiconductors were following similar strategies.”

Equally important was the company’s policy towards its employees, said Murthy. “It was our belief that the first duty of a corporation is to uphold respect and dignity for the individual … Our core corporate assets walk out every evening, mentally and physically tired. It is our duty to make sure that these assets return well rested, energetic and enthusiastic the next morning.

“Our respect for our professionals can be summed by our belief that the market capitalization of Infosys becomes zero after working hours end at 5 p.m. no matter what it was during the day.”

On Hold for a Year

Murthy described several of the obstacles to doing business in India in the early 1980s. “It took us a year to obtain a telephone connection, two years to get a license to import a computer, and 15 days to get foreign currency for travel abroad. Thus, the first ten years of our marathon seemed interminable and frustrating. Although we managed to keep our heads above water, we were floundering.”

The lifeboat that rescued Infosys arrived in 1991 with the advent of Indian economic reforms that “changed the Indian business context from one of state-centered, control orientation to a free, open market orientation, at least for hi-tech companies. We at Infosys … have never looked back. The lesson from the Indian experience is a clear clarion call for all who are willing to listen: free trade can bring great benefits to society.”

In passing along insights he has gleaned from 20 years at Infosys, Murthy spoke first about the company’s value system. “The importance you attach to your value system is reflected in the cost you are willing to incur for your beliefs and convictions,” he noted. “Thus, the more profound one’s commitment to a value system, the greater is the cost one is willing to incur to defend it. At Infosys, we have had several instances when our value system was severely tested. These events occurred in our dealings not only in India but also all over the world, including the US. In every incident, we were firm and stood by our values because we knew that taking short cuts that compromise our values would be suicidal for us … Our value system at Infosys can be captured in one sentence: ‘The softest pillow is a clear conscience.’”

Second, every company has to recognize its strategic resources and ensure their long-term supply, Murthy said. “In our case, human intellect, technology and processes are the three key strategic resources. We operate in a domain where customer preferences and technology change rapidly and business models, paradigms and rules quickly become obsolete. Thus, the only constant for us is change. These days, the world moves so fast that often the person who says that something cannot be done is proven wrong by another person who is already doing it.”

Infosys’ success, he said, “depends on our ability to recognize, learn and assimilate these changes quickly and to bring business value to our customers by leveraging the assimilated knowledge. Thus, learnability is critical for us. We define learnability as the ability to extract generic inferences from specific instances and to use them in new, unstructured situations. Our company has always placed a premium upon recruiting people with a high learnability quotient. In fact, the implicit belief at Infosys is that each person should surround himself or herself with much smarter people.”

The PSPD Model

Leaders, Murthy said, “transform reality from what it is to what they want it to be” and “raise the aspirations of followers. It is about making people believe in themselves; it is about making them confident; and it is about making people achieve miracles. Leadership is about dreaming the impossible and helping followers achieve them. Lofty aspirations build great firms, great countries and great civilizations.

“The best form of leadership is leadership by example. In a knowledge company whose core competencies include human intellect and learning through a process of observation, data collection, analysis and conclusion, leaders have to walk the talk. Any dissonance between rhetoric and action by leaders will hasten the loss of credibility.”

In this global age, leaders in the business world can come from anywhere, Murthy said. “The best ideas or business models will dominate, regardless of their national origins. It is in this competitive global regime that the best hopes and aspirations of my country of origin, India, rest. It goes without saying that many challenges lie ahead, but I am sanguine about the future role that India, and other human-resource-rich countries such as China, will play in the global knowledge economy.”

A well-run corporation, he added, embraces and practices a sound Predictability-Sustainability-Profitability-De-risking model. “We call this the PSPD model at Infosys. A good forecasting system for sales based on data gathered from the trenches ensures predictability (although predictability of costs is also needed to have predictable profit streams). Sustainability is achieved by energetic and motivated sales people who pound the pavement and make sales happen; by production people ensuring that quality products are delivered to the customer on time; and by billing and collecting on time. Every enterprise must focus on high profitability in order to ensure the best returns for its shareholders. Indeed, the long-term success of a corporation depends on having a model that scales up profitably. Finally, the corporation must have a good de-risking approach that recognizes, measures and mitigates risk along every dimension. The Degree of Affordable Risk (DAR) is a composite measure of the risk threshold of a corporation. Every corporation must measure its DAR, constantly improve its DAR, and operate within the limits of its DAR.

“Having emphasized the importance of de-risking, I must hasten to add that I do not, even for a moment, want to dissuade you from taking risks. Take risks you must, but carefully thought-out risks.”

Advice from Joseph Campbell

One of his strongest beliefs, Murthy said, “is that corporations have an important duty to contribute to society. While, on average, tremendous progress has been made in enhancing the economic well being of people, the chasm between the haves and the have-nots of the world has unfortunately widened, especially in the developing world. No corporation can sustain its progress unless it makes a difference to its context. In the end, unless we can wipe the tears from the eyes of every poor man, woman and child on this planet, I do not think any dream is a worthy one.”

He went on to offer his audience some personal advice based on his life experience. “First, I want to emphasize the importance of being trustworthy with all in your dealings. It is on such foundations that great organizations are created. Second, fear is natural, but do not let your actions totally be governed by it. Just as fear may sometimes be the hidden voice of your intuition alerting you to what your rational mind may not yet have seen, it is also sometimes an invitation to explore a new part of yourself and the world.

“Third, a supportive family is the bedrock upon which satisfying lives and careers are built. Create a support system for yourself with people who will rejoice in your success and be there for you … Fourth, learn how to manage yourself, especially your feelings in a way that respects the dignity of others and yourself. I have found it helpful to separate the merits and demerits of a decision from the accompanying feelings. We call this ‘being transaction oriented’ at Infosys. Finally, live your life and lead your career in a way that makes a difference to your society.”

Murthy closed with a memory from the series of interviews that Bill Moyers did several years ago on PBS with Joseph Campbell, the American mythologist and folklorist. Deep into a profound discussion about life, Murthy said, Bill Moyers leaned over and asked Joseph Campbell, “Joe, I am sure you have thought about this question. Why are we here on this earth? What is the path for one to follow?” Joseph Campbell smiled gently and said, “Yes, I have thought about it and the only answer I have found is this. Follow your bliss. All else will follow.”

Accordingly, Murthy urged his audience to “choose a worthy dream for yourself. Go after it confidently. But always, without fail, ensure that you are following your bliss.”