Wipro, Infosys downplay exodus, but losing execs sure to hurt IT firms

Cross-country rivals Wipro and Infosys are witnessing an unusual churn at the top, with the CFOs of both IT services companies resigning within three months.

The sudden resignation of Infosys CFO Nilanjan Roy cannot be seen in isolation, as eight other senior management executives have left the company in the last 12 months, including the company’s president, Mohit Joshi.

Wipro is going through a similar phase. According to a report in The Mint, half of 750 executives, including general managers and above, have left the company since its CEO, Thierry Delporte, took over in 2020.

Downplaying exodus

The top management at both companies has tried to downplay the wave of departures. However, it is unusual for top-tier companies to witness the exodus of key personnel in such large numbers. Indeed, it must worry them more than those who keenly follow their fortunes.

What is, however, significant to note is that some of the top management personnel who have left these companies now hold leadership positions in similar ones. Mohit Joshi, the president of Infosys, left to join the $6.5 billion Tech Mahindra and is its MD and CEO. The former HR head and executive vice-president, Richard Lobo, is now the chief HR officer of Tech Mahindra. Ravi Kumar S, earlier the president of Infosys, has joined as CEO of Cognizant Technologies.

Jatin Dalal, the former CFO of Wipro, has joined Cognizant in a similar position. Gurvinder Sahni, the former vice-president of Wipro, has joined Persistent Systems as chief marketing officer.

Most of the other key personnel who have left these two companies may have received better offers from other companies.

These exits highlight that some top-level personnel left to join leadership positions in other companies because they realised that their chances of growing further in their respective organisations were nearly non-existent. In a blog post on LinkedIn, Joshi quoted a Chinese philosopher, “When I let go of what I am, I become what I might be.” Joshi’s exit was costly for Infosys as he is learnt to have been the person behind bagging some of the largest deals for the IT bellwether. Jatin Dalal, a rare combination of an engineer and a chartered accountant, was another top executive who served Wipro in various essential roles for over two decades and was involved in the company's bagging of billion-dollar deals.

It is essential to recognise that several top executives had dedicated almost 20 years to their companies before leaving to assume leadership positions in organisations ranked slightly lower in the industry hierarchy.

Exits may affect firms

Infosys and Wipro have been quick to fill up these posts, but the departure of these personnel could hurt the companies in several ways:

Concerns over near-term impact: The exodus of six top-level executives from Infosys since October 2022 has raised investor concerns about the short-term effects on the company, especially as the tech industry faces an increased demand for delivery-related roles.

Manageable risk and structural growth prospects: Despite these concerns, some analysts, like those from Motilal Oswal, view these departures as manageable risks. They maintain an optimistic outlook on Infosys, citing the company's structural growth prospects and ability to handle potential short-term disruptions in project management.

Near-term risk amidst a stable long-term market: The leadership changes pose a near-term risk, particularly in the current challenging macro environment, which could impact delivery capabilities. However, the long-term demand for IT services will remain steady, suggesting a potential rebound once macroeconomic conditions stabilise.

In the case of Wipro, it faces grim prospects, with revenue growth for Q3 of FY24 expected to be from -3.5 per cent to -1.5 per cent from -2 per cent to 1 per cent last quarter in constant currency terms. This weak guidance reflects demand headwinds and potentially higher-than-usual furloughs, particularly in the BFSI (Banking, Financial Services, and Insurance) vertical. Despite this, the company's leadership remains optimistic about overcoming these challenges.

Challenges in securing big deals: Wipro has struggled to secure mega-billion-dollar deals compared to its peers like Infosys and TCS. This is despite having a solid order book and the total contract value of large deals increasing over the past years. The inability to translate these into revenues suggests challenges in the company's approach to large deals and potential issues in small-sized digital transformation deals.

The top-level exits at Infosys and Wipro in 2023 present challenges and opportunities. Infosys faces near-term risks but retains optimism in its long-term growth prospects, while Wipro confronts more immediate concerns regarding its growth trajectory and ability to secure large contracts.

The impact of these executive exits will likely be more pronounced in the short term, with the long-term effects depending on the companies' strategies and the evolving market conditions.