Every downturn a boon for Indian software companies: Narayana Murthy

“In my belief India is a large country, it produces a large number of engineers. And right in 1980 before I founded Infosys, I realised that our charter has to be to create a large number of jobs for our people,” says NR Narayana Murthy, Founder, Infosys.

What are your views on the current scenario of the IT sector?
This is perhaps somewhat heretic what I am going to say but whenever there is a downturn in the major markets for Indian software companies, the demand for the Indian software companies goes up. Why? Because in a downturn, people are trying to reduce cost, trying to get better value for money and Indian software companies, by definition have provided better value for money than most other software services companies.Therefore, I think every downturn is actually a boon for Indian software companies except some extraordinary events like 2008 when the banking sector went down very badly and that was a reasonably large sector for large Indian software companies like TCS, Infosys etc. But even during that year, I still remember Kris Gopalakrishnan was a CEO, we grew by 25% so that was not bad.

Not bad at all. But you know it is quite disheartening to read the global headlines around layoffs these days and these are the global tech mega giants, the likes of Alphabet, Apple, Meta etc. that are laying off people. In your own career, have you ever faced the demon of layoffs and what would be your advice to businesses who are currently facing the conundrum of ethics versus economics?
Well, first of all, we must all accept that downturns are part of the business cycle. It is part of the existence of any corporation. Having said that when Infosys faced such a downturn particularly in 2001 there was internet bust, what we did was the senior management sat down and said that, look, we have offered appointment letters to some 1500 youngsters. Now, it is not the fault of the youngsters but it is our fault because we could foresee or we could not forecast that downturn. Therefore, it is not fair to punish the youngsters. So what we did was the senior most management took the biggest cut in salary. The next level took slightly lower. Like that, we went on and we made sure that every one of the appointment letters we had given was honoured and we were the only company to have done that, I am very-very proud of that.

Well, absolutely and that has been the heritage of Infosys, right. The talent has been the backbone of the company as you have always pointed out. But as a country, we are facing this problem of brain drain at the moment. There are youngsters who are complaining about lack of innovation in the country etc. and that is quite visible in the IT sector as well. And if I may, the entry packages for the freshers has remained stagnant over the last 10 years while the pay of the CEOs have been rising to an exorbitant amount, if I may. What is your take on that?
I retired from Infosys in 2014 and I do not take much interest in the company. I do not take that much interest in the industry because I read a lot of physics, mathematics, theoretical, computer science etc. so I am probably not the right person to answer that question. All that I would say is we in India have to embrace compassionate capitalism and make capitalism an acceptable paradigm and that can only happen if we offer as much of comfort to the people about capitalism. We should demonstrate that capitalism is all about high growth, higher earnings and better salaries for everybody. And the leaders will make whatever sacrifice is needed to ensure that the youngsters are not inconvenienced.

Okay, fair enough. That point is taken. But I also wanted to bring out this criticism that the Indian IT sector usually faces and that is the lack of the innovation quotient. In the sense it is always said whether cloud, artificial intelligence, big data analytics etc. they all are conceived in the Silicon Valley and Indian IT just follows suit. Would you concur with that view?
Well let me tell you in my belief India is a large country, it produces a large number of engineers. And right in 1980 before I founded Infosys, I realised that our charter has to be to create a large number of jobs for our people. And I also realised that services sector is the one that will continue to flourish for a long time whereas products may come, they may go quickly, because how many products out of thousands that have come to the market have sustained, on the other hand, look at how TCS has grown, look how Infosys has grown since 2017. I think, therefore, I said we Indians should focus on services for a very important reason. First of all, no matter what systems a corporation in a developed country has installed, it needs to be modified. It needs to be enhanced to keep pace with changes in technology and changes in business practices therefore there is always a revenue stream. Second, even if you have a product that is very popular, you need to build a layer of customisation around it. SAP is a classic example.
For every dollar of license revenue, probably there were $2 of services revenue so therefore right in 1980, I said we in India should focus much more on services because our charter is to bring happiness to our youngsters. It is not to say I invented some product, I take only a small number of people, and then I do not care, I will make money that has never been at least our philosophy and I think that has stood the test of time. And also in the services itself, remember we came out with the formalisation of global delivery model. We came out with 24-hour productivity, we produced a lot of technology for these two paradigms and then we started creating technology for easy servicing of new paradigms like cloud and AI and others.

So while the Indian software industry may not have focused on inventing new ideas, it has been very-very successful in creating the technology for servicing the needs of those new technologies. So I am very-very proud of it. But do you think the Indian IT is now geared up to probably take up innovation as well?
Well let us remember one thing that Infosys Finacle is probably the most successful and popular product. But that perhaps contributes about half a billion dollars today out of $17 billion of Infosys revenue, half a billion is 3% so it is not a big deal. So therefore, by nature, I think the top management in most Indian software services companies, they are focussed on services. They are focussed on making those services better, more of higher quality, better value for money etc. So therefore our mind-set is one of creating lots of jobs for our youngsters in the country.

So the main focal area is creating jobs for youngsters as well. But I want to talk more about what you said with respect to services. If you were 35 years old today and starting up a new business would you still look at IT services as your business interests or would it be something else, manufacturing, VC, platform tech etc.?
Well I did my graduate studies in computer science. I worked abroad in France in IT applications, in operating systems area etc. So I would continue to look at IT but I would also look at what is suitable for the country, what will help our country, because I am not in it just to say, oh I will make some money and then go that is not the focus. The focus is how can we add value to the country, how can we bring smile onto the youngsters? So therefore, I would say, given that the disposable income in the developed countries are higher, given that in a country like the US, there is a clear acceptance of the role of technology in delivering competitive differentiation. Therefore, I would say that my view would be to focus on developed world, to focus on countries like the US, and provide software services.