India best placed to fight global eco mess: Narayana Murthy

Q: One of the opportunities in current times is acquiring low price assets or good assets at attractive prices. Infosys despite having made a statement that we want to make acquisitions has been very careful and today it is looking very glorious having done that. At the same time we know that Indian companies became acquisitive rather late in the season and some of the stock prices have been beaten down by the market alleging that these acquisitions were not very attractive. The flip side for Infosys has been that it has been from periodically developing a large reserve of cash and of course you have distributed it couple of times to the shareholders – it is not that you have been very found of cash for the sake of it. And I want to ask you a related question – you emphasized being ethical, being strictly legal all the time and the third dimension of governance which you have practiced is one of prudence that whether it is dividing your business by markets by customers, by service offering etc, - you have driven this with a great fervor. I must say that we don’t come across this prudence aspect very often. One way to describe the current crisis really is that prudence was given a go by in a big way in the world – whether it was leverage of the banks, whether it was the Reliance of the markets. I have linked the two questions and if you would share your experience and views.

A: There are two fundamental characteristics of Infosys. One; we are an engineering company. Two; we are a company founded by middleclass people. I will link the two. Being an engineering company, we discuss and debate, collect data, analyse, argue and then come to some conclusion. As we are middleclass people that founded the company – we don’t go by flats, we don’t go buy fashion and we don’t want to look good in a party just because we have spent a billion dollars to acquire a company.

When you combine these two powerful attributes, you end up being conservative. There is no doubt at all. Infosys is conservative, but there is a method in this conservative behaviour. We have clearly laid out rules for operation. We said our people will have to collect money because at the end of the day the real happiness is cash in the bank. We say profit is an opinion – the real happiness is cash in the bank. We created incentives for our sales and customer facing people which would ensure that they collect money.

Secondly, we hired pretty smart sales people in the industry and that’s why you will notice that we have anywhere from 500-600 basis point of higher operating margin than any of our competitors because we tell them that if the customer thinks that USD 100 is the price – your smartness is to sell it for USD 105 and give the customer USD 110 worth of value. Don’t cheat him, but sell it at USD 105 and provide value of USD 110. That is what we have focused on a lot.

Thirdly, there is tremendous cost consciousness in the company. We are not judged by how opulent our rooms are – we are not judged by whether we travel in this class or that class. So right from the beginning we focused on that. When you focus on middleclass values, when you focus on analytics – it is easy to have a lot of cash in the bank.

Q: You sit on the boards of some of the biggest companies in the world and also some of the most respected universities. Would you like to share the companies and individuals who inspire you as role models?

A: I make an attempt to learn from everybody. I learnt to focus on growth in topline and bottomline and sustain earnings growth from Bill Gates. I learnt to focus on quality from Idei San who used to head Sony. I learnt to focus on human resources from leaders of Hewlett Packard. I learnt so much from my own colleagues.

I learnt from Dean Bob Joseph of Stanford, the importance of being agile. Even in an environment like a university, Stanford revamped their curriculum, made it much more international. They brought in new ideas to encourage critical thinking. I learnt great ideas from Michael Treschow and Patrick Cescau of Unilever on how to sell consumer products.

I learnt how to maintain your sense of balance when you run a large bank like HSBC from Stephen Green. So, I have learnt so much from many people.

Q: We started by talking about the depression of 1930, there is much to get depressed about today and not seeing a reference point in the past. As we started saying that it is about depth of your reflection and the purity of your process that you are able to deal with this crisis. I can tell you that there is much dismay and discomfort both amongst corporates and the youth, the youth particularly about whom you are always very hopeful and enthusiastic. Would you like to share as we depart a few thoughts for each of them – corporates and the youth?

A: I have always said that a good leader simplifies business. It doesn’t matter what business he or she runs. So, I would suggest that we use simple business rules, not complex or compound ones. The good thing about simple business rules is that it is easy to understand, easy to practice, easy to communicate, and you cannot cheat anybody with simple business rules. And you can enthuse every one of your colleagues with simple business rules because there is transparency, there is fairness, and there is accountability.

As far as the youth of this country is concerned, I would say that for the first time in the last 300 years, this country has received recognition in the global markets, and received certain respect. This is the time for us to work hard, this is the time for us to work smart and consolidate on the gains. Indians are generally not known to have the killer instinct or not known to run the last mile. Yesterday was a wonderful exception when the Indian cricketers beat the Australians. But that is a rare one.

We have to make it a habit. We have to make it a habit of what Dhoni and others did yesterday. That is make sure that all the good things that they have achieved in the last 10 years becomes a habit. To do that, you need continued discipline, hard work, smartness, integrity and putting the interest of the country above your own personal interest. There are lots of things that are not good that we read in the papers every day. I don’t want to comment on them, we have all seen this morning’s paper.

But let those shameful incidents not be the beacons for our youngsters. So, that is what I would say.

Q: For all these good qualities we need a reference point. Where do you see Indian growth over the next three-four years?

A: I believe that India is better placed than any of the leading economies of the world to recover from the mess that the world economy has got into because of a very simple reason. We are primarily a domestic economy focused nation. Our fundamentals are good. Our productivity is improving. Yes, we had a huge stock market fall, but that was because we are all linked in some sense - we have 25% of market capitalization held by foreign institutional investors and when they see uncertainties in their countries they dramatically want to pullout as much as possible from foreign countries. I do think that things will get back to normalcy, get back to buoyancy quicker in India than in most of the countries – that’s what I feel.    

Q: Would you like to put a growth number? This is a number crazy group.

A: I think people up there are much smarter than I am, and much more capable than I am in coming out with an estimate. So, I don’t want to hazard a guess because at the end of the day we have experts. We have a Finance Minister who is a fantastic person, we have an RBI Governor who is another highly knowledgeable person, we have lots of economists and we have people like you. You people should come out and give wisdom to rest of us who are in the trenches. You people have a 50,000 feet view of our economy.

Q: Infosys has shown Indian corporates the way to good governance and how good governance leads to goodness for everyone. When do you think that good people like you would lead the country to good governance?

A: I do think there are wonderful people. I have tremendous respect for Dr. Manmohan Singh, and tremendous respect for his colleagues. But we have to work a little bit more at enhancing the quality of leadership at the state level. There is no doubt at all.

That does not require people like me to participate in the governance at either the national or the state level because we have our work cut out. We have to make our corporations; we have to make areas in which we are interested. Right now I am interested in higher education; I am interested in making a difference to the poorest of the poor and so on. I think if we can put in more hard work, if we can show a little bit of smartness in what we are doing, the country will be better off.

So, I think the current leaders will continue on all sides of the aisle, whether it is the Congress or the NDA or the UPA. It doesn’t matter who is going to be in power. But I think there are pretty good people on both sides of the aisle.