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

    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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