Infosys has decided to split the business into smaller units. The newly created companies will be managed by the next generation of management. The decision of Bengaluru-based India’s IT major comes days after the rival Tata Consultancy Services played the similar card. After Vishal Sikka was roped into the Infosys team, the company has been facing series of exits from a bunch of management professionals. Recently, Manish Tandon, who was in charge of healthcare, insurance and life sciences left the company for unknown reasons. After his exit, the IT major gave the overall responsibility of the various departments to the Presidents. However, the industry sources have questioned the move behind this attitude of the top management. Commenting on the development, Viju George, an analyst with JPMorgan disclosed that Infosys has just three members who are mainly responsible for the functioning of all the verticals instead of eight at TCS.
Speaking to reports on the sidelines of an event in Pune, Sikka revealed that he is breaking up the company into small autonomous units with profit and loss responsibilities. This was done by TCS seven years ago when N Chandrasekaran took over as CEO. Sikka said that this kind of system will provide the required scalability, isolation and also bring accountability of individuals.
Small units will have estimated revenue of $700 million
The new business entities will be created in such a way that its revenues will be pegged between $500 million and $700 million each. Moreover, each unit will have a dozen clients. If implemented, the new structure will provide Sikka and his presidents the capability to keep track of the requirements of the clients and follow up with them.
Total number of business units not revealed
Even though Sikka announced that Infosys will be divided into several units, he declined to reveal the total number of units. He also declined to provide names of the so-called next generation leaders.
Meanwhile, Phil Fersht, CEO of the IT consultancy HfS told a leading television channel that breaking the company into smaller units would help in better coordination for finishing the deals. Moreover, the company should formulate a consistent set of policies for pricing, outcome definition, and key metrics.
Growth of digital business
According to Peter Bendor-Samuel, CEO of IT advisory Everest Group, Infosys should rapidly grow the digital business by grabbing a major chunk in the traditional businesses. Sikka said that the company is following the natural path for a business of great magnitude.
In 2009, TCS split the company into smaller units, which ultimately contributed to the huge success of the company. Its revenues have beaten its major competitors over the last few years. As of writing this, TCS had over 20 people managing their own profit and loss accounts with complete ownership.
