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November 20, 1999


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Trust is the one thing that keeps people together

Estimates of his wealth vary. But everyone knows that N R Narayana Murthy is, at 52, one of the three richest Indians today. By virtue of having created in less than two decades what is undoubtedly India's No 1 IT company: Infosys. Built on the basis of values and sweat equity. Email this interview to a friend. No wonder its Rs 10 share trades at Rs 8,000 and the Infosys ADR hit an all time high on Nasdaq twice last week, driving its market cap to a sensational $ 11 billion! Pritish Nandy spoke to him recently.

What is the single most important lesson you learnt while building Infosys?

There were many lessons. The first was that if you put public good ahead of private good, it always leads to better private good. There were many occasions when we were tempted to use our corporate resources for personal gain. But we did not. We did not dilute the quality of profits in the company.

The second was to be transaction-based in your relationship with people. This makes it very easy to handle them and, wherever necessary, even send them negative messages. If you applaud me for three or four transactions where you think I have done well, you can always criticise me for one where you think I have failed. I will not take it amiss. It means starting every transaction at zero base.

The third thing is that we realised rather early that it is better to have a small part of a large, growing pie than a large part of a small, shrinking one. Most people are obsessed with control. But that is no way to grow. The way to grow is to make sure that you have a large number of committed stake holders.

The final, most important lesson was simply this that speed and imagination are two context invariant, time invariant attitudes that (no matter where you are) you have to focus on if you want to succeed.

The environment is fast changing. New dynamics are at play. Competition is becoming infinitely more intense. Do you see the values that you enshrined while building Infosys under threat today?

No, I do not think so.

They are not even under pressure to change, adapt?

No, and for that I have the government to thank. Not once have we been under pressure to do anything that we were not comfortable with. Of course, we got the odd job application recommended by the chief minister. But we always responded saying that we would take the person if he or she passed our usual battery of tests. I must say this to their credit that no one has ever held this against us. My personal belief is that no one minds you being blunt as long as they know you are even handed. That you are treating all applications in the same way and not favouring one for the other.

Why do you think investors are so bullish on Infosys? What is so special about your company?

There are many reasons for that, Pritish, but I guess investors should respond to that question.

Why do you think investors are so fida over your company? Is it just performance or is there something we are missing out on?

Perhaps they believe that here is a company that has a competent management, a very high degree of transparency and the finest disclosure levels, as well as the readiness to give bad news well in time. In 1995 when we lost our business with GE, we held a analysts meet and told them upfront that we were in trouble. What people want is to be able to trust the company. That is where we score high.

Do you think trust is the most important factor in investment decisions?

Yes. People understand that business goes in cycles. When all other parameters are the same, people prefer to invest in or stay with a company where they can trust the management. Technology can change. Business scenarios can change. But trust is the one thing that keeps people together.

Do you see the Indian economy moving away from its traditional manufacturing bias towards becoming more information based?

Sure. There's no doubt the service sector in India has increased in a very big way.

Do you see India eventually emerging as a knowledge economy?

We are still in the early stages but, yes, there's a clear move towards that. Most major houses have got into software. Others are also diversifying. But what we have to see is whether this is ephemeral or not. After all, this is a sector which is doing very well right now which may explain why everyone is entering it. Let us see if this sustains.

Why are you so tentative about it?

Because this is the first time that India has created for itself some competitive advantages in a sector like software. Hence the capital market has rewarded this sector well. If this happens two or three times or this sector goes through a few cycles then I can say with certainty that it is here to stay.

But India has traditionally done well in areas that the capital market has not looked at? Media, movies, entertainment, television software. These are all high growth areas which conservative investors have not tapped. It is only now, when India is globalising, that we are realise our core competencies lie in areas like information, knowledge, entertainment.

I see self-reliance as recognising, developing and strengthening a few areas of core competence and leveraging them to create enough exports so that we have enough hard currency to buy the best products in the other sectors.

What do you see as India's core competency in the next millennium?

Apart from, of course, agriculture, it has to be in the knowledge industries. IT-enabled sectors offer considerable opportunity. We can reach 50 billion dollars quite easily. The Indian diaspora is also increasing. So is the disposable income. Ethnic products like Indian foods are also bound to do very well. A much higher of level of marketing will, of course,, be required, but I believe that the knowledge industry, engineering design and things like that will do well.

Skill, talent, ingenuity?

Yes, I think so. Of course, we will have a very different kind of marketplace soon. But whether we can produce truly world class companies, I frankly cannot say.

Where do you see the future of Infosys?

We want to be a company where people of different nationalities, different races, different beliefs come together in an environment of intense competition, to add more and more value to our customers.

How do you see the Internet changing India in the coming years?

In a very big way because it has brought in the paradigm of any time, anywhere. We are, after all, a large, resource starved nation. Internet, you must remember, brings with it the death of distance. That is why we need it much more than anyone else. We cannot drive 200 miles to have dinner like people in California do. To transform lives out here, we have to take the Internet to the villages. We can bring them medical advice, crop information, weather reports, primary education.

But won't that change the political paradigm?

It certainly will. The advantage of the Internet is precisely that. It makes larger and larger amounts of information available to larger and larger number of people.

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