The Exodus of Infosys Executives and the ‘End of Outsourcing as We Know It’

Don Tennant

On Jan. 2, I wrote a post in which I provided my assessment of what would likely be the biggest technology story of 2012. Since it’s only September, there’s no way of knowing whether I’ll be proven correct. But it’s kind of looking like I will be.

I began the opening paragraph of that post this way:

Just under a year from now, when 2012 is drawing to a close and the pundits are talking about the biggest tech story of the year — the one development that altered the IT landscape more dramatically than any other — it will be a relatively easy call. They'll use phrases like "game changer" and "the end of the IT services industry as we know it."

So you can imagine why the headline of a Sept. 7 ZDNet.com story caught my eye: “End of Outsourcing as We Know It.”

The story, by New Delhi-based freelance journalist Swati Prasad, had to do with the recent exodus of several senior executives at Infosys, beginning with the resignation in May of Ritesh Idnani, chief operating officer of Infosys BPO, the company’s business process outsourcing operation. That, Prasad reported, was followed by a more recent “slew of top talent heading for the exit.” She explained:

As per new reports, Amit Kothiyal, head of multiple industry verticals at Infosys BPO, Michael Wong, the head of China operations, and Ayan Chakraborty, country manager in the Philippines, have all quit and are currently serving out their notice period.

Earlier this week, parent Infosys saw the U.S. head of its financial services practice, Shaji Farooq, poached by rival Wipro.

Prasad went on to provide her assessment of the reasons behind the exodus:

There may be several reasons behind the discontent among Infosys and Infosys BPO employees. First, Infosys is going through a restructuring exercise (changing strategy from Infosys 2.0 to Infosys 3.0). Second, the company may still be coming to terms with the change in leadership with the co-founder Narayana Murthy retiring, and Nandan Nilekani taking on a bigger role as the chairman of the Unique Identification Authority of India. Infosys has been underperforming the industry for at least a year now.

Third, Infosys is known to charge a higher rate in the industry for even plain-vanilla jobs. So this may have led to contracts going out of its hand.

But the most important reason is the economic uncertainty, which is impacting the IT spending decisions of companies across the world. As a result, IT firms have no option but to redefine their offerings, as they look to offer clients more transformational solutions.

Prasad drew the right conclusion that the end of outsourcing as we know it has arrived, and she even nailed it by correctly basing her conclusion on the state of affairs at Infosys. What’s stunning is that she failed to recognize, or at least failed to report, what really is the most important reason why the end of outsourcing as we know it has arrived, and why it’s Infosys in particular that’s dealing with the departure of top executive talent.

The real reason was the development that I identified as the top story of the year back in January. It’s what I wrote at the conclusion of the opening paragraph of that post:

The biggest tech story of 2012 — and perhaps the biggest business story of the year — will be the implosion of the H-1B visa-centric business model of the major U.S. and non-U.S. IT services providers.

In that post, I went on to explain that the implosion would be the requisite outcome of fundamental business changes that Indian outsourcers and other visa-dependent IT services providers would be compelled to make as a direct result of the U.S. government clamping down on visa fraud, beginning with its criminal investigation of Infosys.

Indeed, it’s hard to fathom that the gravity of the criminal investigation and its ramifications could possibly be lost on many senior Infosys executives who have first-hand knowledge of the company’s visa-related activities. It’s hardly surprising that so many would want out before the hammer of U.S. justice comes down.

According to Prasad, “And if some industry sources are to be believed, there may be more exits in the near future.” Trust me, I believe them.

Infosys did not respond to a request for comment.

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Add Comment      Leave a comment on this blog post
Sep 10, 2012 5:27 PM lostmyjob lostmyjob  says:
Hope you will be correct at least this time Reply
Sep 11, 2012 2:52 AM Odumbo Odumbo  says:
Really? Is this what it's come down to. I don't know what I dislike more - Infosys or ths blog. You're now somehow trying to save face by linking executive exodus to the visa allegations? I bet you already know that the Indian IT industry has had double digit attrition rates for more than a decade. I guess you also know that there is a lot of poaching going on between companies. If you think this has anything to do with visas, then why the heck are these executives going to other outsourcing rivals like Wipro and TCS??? You're just depending on strawmen and writing articles based on that. Them leaving Infosys has absolutely nothing to do with your predictions (whcih have all flopped by the way) or the visa issue. I've been in the IT industry to know that poaching is heavy in India... I had the CIO and a bunch of senior vice presidents poached within 6 months when I worked at an Indian IT outsourcing firm that had over 12,000 people back in 2005. Reply
Sep 11, 2012 4:43 AM A curious observer A curious observer  says:
Don, You have been wrong time and again about your doomsday stories on IT outsourcing. Did you even bother to check how many execs are leaving CapGemini and Atos Origin to join TCS and Infosys? There are enough primary information sources available to do some good research on such trends - LinkedIn for example. Despite your repeated failures and ridiculously biased opinions, i am surprised that you can still write on ITbusinessedge. Reply
Sep 11, 2012 5:29 AM SS SS  says:
Don - The new Age Nostradamus :) Reply
Sep 11, 2012 6:13 PM British Reader British Reader  says:
To people not from the UK, this news article: http://www.telegraph.co.uk/finance/financialcrisis/9534993/Buy-British-and-dont-worry-about-Europe-says-Vince-Cable.html Where the equivalent person to the Commerce Secretary is discussing the relationship between the UK and EU regarding public sector procurement, this might not look like code language for "Don't buy Indian". Trust me, it is. The UK public sector is attempting to get out of relationships with Indian IT companies, hiding the decision under the label "High Risk" Reply
Sep 11, 2012 7:43 PM a a  says:
nice joke don, hahahahahaha Reply
Sep 15, 2012 11:30 AM Wakjob Wakjob  says:
Indian IT and business in general is finished. No one wants to to near these people with their $. Most western execs have now seen the long laundry list of hundreds of companies destroyed or damaged by India, Inc. There's no getting around it: the current economic mess we're in is ALL a result of this criminal visa racket that has been perped on USA for close to 15 years now. People are finally waking up that doing business with India, Inc. is the kiss of death. Too bad for India because it had its chance to shine and be a world player but instead had to take advantage and entertain its centuries-old resentments against white people all due to Its history with Britain. Imagine being given the keys to the city for free and then screwing up. That is what India, Inc. has done to itself. Reply
Sep 16, 2012 1:33 PM Dolores Dolores  says:
This is also part of India, Inc.'s desperation: http://www.youtube.com/watch?v=QK0_4Skad3A Both the fact that they posted it, and the fact that they disabled comments because American's aren't exactly sympathetic to them in this economic climate. Notice the profound insult to American-born people that is the premise of this video, too. Way to make friends and influence people, huh? Reply
Sep 16, 2012 3:38 PM jake_leone jake_leone  says:
A parasitic business model can't work if you don't make the host too weak. The reality is that the U.S. is running a Trillion dollar per year deficit, a huge amount of which is related to high unemployment. No country would allow outside business interests to come in and take starting jobs, like "Unix Script Tester", at such a time of high unemployment, except the United States. Our economic problems are not because of inflation, there is no inflation in the cost of goods and services, there has been massive deflation in that area. Our economic problems are not because of an unskilled workforce,. Our economic problems are being caused by too many workers chasing too few jobs. And, allowing our currency to leave the country, where it doesn't come back, except as U.S. Treasury bills bought to support a massive deficit. The only thing China and India are interested in from the United States, are natural resources, and what industries they can copy. Same as any other country. China regularly pays 5x the going rate for mining rights in Africa. They know that resources are needed to support their economy and create jobs, and will use our dollars to help them get those resources Reply
Sep 18, 2012 5:09 AM kiprn kiprn  says: in response to Dolores
@Dolores, wow..you must be really high to link this video is part of India Inc's desperation. Did you even bother to completely watch the video? Do you think, India inc gives a damn about these people. If they had, then they wouldn't have needed to form their own group to take up this issue. Did you even think about it? With your kind of thinking, no matter such important matters are never tackled. The video was talking about common sense laws. But as long as people like you choose not to understand the issues, nobody can help. Disabled comments and comments needing approval are 2 different things. Reply
Sep 18, 2012 3:21 PM Richard Richard  says:
What happened to the criminal investigation verdict. Wasn't the trial date Sep 17 ? Reply
Sep 19, 2012 1:46 PM Pro Pro  says:
Don, Why is there a delay by DOJ/DHS to file charges on INFY or the 'tech' firms? Are the state and local governments so ignorant? They are losing tax revenue and lots of them! A person working on B1 visa (which is illegal) is never paid more than $50 a day when the salary for this position is about $60k-$75k per year. The local cities are losing 1% and the states about 5% of income tax on these positions. The states and local governments are running short of money and are ignoring this loss of revenue! (Class action suit??) Never has a community prospered when the sole aim of the businesses is to extract money and transfer it overseas! (South America/Africa in the 19th & 20th century have been through this and look where they are now). The so called ‘B1 visa jobs’ are still being openly advertised (http://jobsearch.naukri.com/b1-visa-jobs) and investigation by DOJ/DHS seems to be going on forever. Justice delayed is justice denied! Reply
Sep 19, 2012 3:14 PM Odumbo Odumbo  says:
Richard, barking dogs seldom bit. Time to get back to work. Reply
Sep 24, 2012 1:53 PM stop_anti_outsource_sentiments stop_anti_outsource_sentiments  says:
There are a number of good things happening at Infy. Keep reading/waiting the news articles. I have few friends who are at infosys and I hear next 6 months is going to be game-changing for Infy and company has done quite a few changes. Recently I heard the post office deal, tax deal, loadstone, bpo acquistion, multiple policy changes, multiple infys effort to help US economy (new DC in US, joining multiple local colleges) and more hiring locallly including europe... everything seems very positive and much needed for economy. Note this company is not run by some businessman.. but fellow it pros like us and has a strong foundation. Stop feeding messages from other anti-infy and ani-outsourcing sources. Trust me even MS, Google and many top US outlets is not that keen saving economy and help others. I know how they do interviews. hire and fire if you dont have talent. Unlike Infy who trains their employees and shape their future. WAKE UP DON..... Reply
Sep 27, 2012 4:33 PM Odumbo Odumbo  says:
Sorry, that's all crap. I work at Infocrap. They're starting a new "DC"? Like doh! they're in the business of expanding. The only reason they are hiring locally is because they are finding it really hard to bring people from India as they are black listed. That's why I got hired! That's why they agreed to all my salary demands. That's why I don't have to relocate anywhere even if I am on bench for weeks and months at a stretch. Infocrap treats folks from India like crap. Who you trying to fool? Agreed, I have disagreements with Don's blog on how things are presented (much ado over the ado itself). I'm talking from a realistic perspective. And realistically, ever since this case was dumped, it confirmed to all of us that this was much ado over the ado. But that doesn't mean that Infocrap does not indulge in the allegations. Everyone desi working Infocrap knows this to be the case. We all know it. Reply
Sep 28, 2012 12:47 PM Wakjob Wakjob  says: in response to Odumbo
Whom is IndoSys hiring locally? More Indians? TEMPORARY guest workers from India who are now US citizens and never went home as promised? Stop the con IndoSys, we know full well about your plans to take over aamerica. Reply

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