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NS Ramnath
I write about business and technology

Today in Tech: External CEO for Infy; Zynga’s Mark Pincus; Bitcoin and more

Should Infosys hire an external CEO?

Mint reports, some directors on Infosys board want the search for its next CEO “to include external candidates because the company’s current management is struggling to regain its past glory.”

So far, top Indian IT companies have shown preference for internal candidates. N Chandarasekaran, who took over from S Ramadorai, is a TCS veteran who started his career there. Francisco D’Souza’s story is no different. He was hired by Dun & Bradstreet from Carnegie Mellon, when Cognizant was its IT arm. The joke about Infosys is that it not only prefers internal candidates, but it wants them to be from the close circle of founders.

In someways having an internal candidate is good. An insider typically understands the culture and knows his/her way around. It says something nice about the company – developing future leaders and having a good long term succession plan are good management practices. In fact, some studies suggest that, in general, internal candidates outperform external candidates. A 2009 study by James S. Ang of Florida State University and Gregory Leo Nagel of Middle Tennessee State Universitym which looked at CEO transitions in a 30 year period concluded that “in large firms, internal hires provide significantly higher median performance, equal chance of the highest performance, and lesser chance of low performance….. In the aggregate, internally promoted CEOs are associated with at least 25.4% greater total financial performance than external hires”

So, should Infy stick to internal candidates? The answer is ‘No’.

The question to ask about Infosys is not whether internal CEOs, in general, are better than external CEOs, but whether internal CEOs are better than external CEOs for a company that is underperforming?

A study by Ayşe Karaevli of Sabancı University and Edward J. Zajac of Kellog says external candidates tend to do well in companies with a recent history of poor performance. “In these circumstances, it is common for the board to replace a CEO in order to stimulate change. Outsider CEOs — with the fresh knowledge and perspective that they typically bring to the company — can usually make that change more easily. Poor performance is also likely to make it easier for the new outsider CEO to overcome internal resistance to change initiatives,” they wrote.

Some were surprised that Saturday’s post on Infosys sounded so positive when the numbers clearly say Infosys is struggling. The piece was not about the performance of the company, but about signs of change in the management commentary. And I argued there are positive changes. The big question is whether Infy’s management will take these initial statements and steps to their logical conclusion. Here are three things to look for: a. clarity on guidance b. more acquisitions and partnerships c. status of the innovation fund, and similar initiatives. (As of employee dissatisfaction – it’s to a large extent tied to the performance of the company, one of the points that Phil Rosenzweig makes in his superb book The Halo Effect: … and the Eight Other Business Delusions That Deceive Managers.)

Now, an external candidate, free from any baggage, would push such steps forward faster. The question before the present management is whether they would demonstrate that quality in the coming quarters.

 

Zynga’s Mark Pincus on mobile
If there was one big message from Zynga CEO Mark Pincus during his visit to India last Wednesday, it was that its future is in mobile. Zynga is of course best known for its facebook game Farmville. It has since been trying to carve an identity for itself separate from Facebook. But, as it is for Facebook, its success depends on how well it can make people play Zynga games on mobile devices. Pincus believes the answer is in making the games more social. It’s slowly making some inroads into that space. WSJ reports that one of its iPhone games “What’s The Phrase,” has hit the top 10 on App stores after a long time.

 

Bitcoin: stories you shouldn’t miss
Bitcoin got more attention when its value plunged in a very short time, than it got when its value went up in a short time, which says something about our fascination with falls and failures. Here are a few pieces on Bitcoin I found interesting

Never Mind Facebook; Winklevoss Twins Rule in Digital Money | Dealbook

The Winklevosses say this week’s tumult is just growing pains for a digital currency that they believe will become a sort of gold for the technorati. “People say it’s a Ponzi scheme, it’s a bubble,” said Cameron Winklevoss. “People really don’t want to take it seriously. At some point that narrative will shift to ‘virtual currencies are here to stay.’ We’re in the early days.” More

 

How Do You Order A Beer With Bitcoins? | Popular Science

The Bitcoiners want to be ready for the future, however unlikely it is that Bitcoins will actually be used in it. Without physical currency, there’s no real reason to round off your bill to the tenth or hundredth place, and as Bitcoins rise in value (they hit $400 this week for a brief moment, then plummeted), fractional Bitcoins become more and more everyday. More

 

Unfazed By Bitcoin’s Wild Swings And Mysterious Origins, Silicon Valley VCs Place Their Bets | Techcrunch

“My feeling is that Bitcoin has moved away from nerdy tech types and is now attracting more of the finance and Wall Street types,” said Jered Kenna, who just re-launched TradeHill, a Bitcoin exchange targeted at accredited investors and high-net worth individuals. After launching a few weeks ago, he says he’s had investors open accounts and individually send in more than $1 million to buy Bitcoin. More

 

Virtual Bitcoin Mining Is a Real-World Environmental Disaster | Bloomberg

Blockchain.info, a site that tracks data on Bitcoin mining, estimates that in just the last 24 hours, miners used about $147,000 of electricity just to run their hardware, assuming an average price of 15 cents per kilowatt hour (a little higher than the U.S. average, lower than some high cost areas like California). That, of course, is in addition to the money devoted to buying and building the mining rigs. The site estimates the profits from the day of mining at about $681,000, based on the current value of Bitcoins. So mining, at least for the moment, is a lucrative business. More

 

Also of interest:

  • Ahead of the curve: but bendable screens still seek breakthrough | Reuters
  • Hawking: Mankind has 1,000 years to escape Earth | RT
  • You Lookin’ at Me? Reflections on Google Glass | AllThingsD

 

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Long time Infosys observer
Dear Ramnath, Great post again. In my mind, one of the big changes Infosys will indeed take is if it lets the current leadership go and gets in a leader from outside. If they do change the CEO and not just the CEO but the entire leadership under the current CEO, then one can truly say that change is happening. Until then, all the signs you picked up from the results are lip service to a broader structural discontinuity that is there with Infosys vis a vis its peers because the simple fact is Infosys is not performing.
If Meg Whitman can be hired to run HP or Marisa Mayer to run Yahoo, I don't see why an 'outsider' can't run Infosys. Infosys isn't doing 'rocket science' as the saying goes ...
 
 
NS Ramnath
I have been with Forbes India since August 2008. I like writing about ideas, events and people at the intersection of business, society and technology. Prior, I was with Economic Times. I am based in Bangalore. Email: ns.ramnath@gmail.com
 
 
 
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April 15, 2013 21:47 pm by Long time Infosys observer
Dear Ramnath, Great post again. In my mind, one of the big changes Infosys will indeed take is if it lets the current leadership go and gets in a leader from outside. If they do change the CEO and not just the CEO but the entire leadership under the current CEO, then one can truly say that change...
April 15, 2013 12:09 pm by Sachi Mohanty
If Meg Whitman can be hired to run HP or Marisa Mayer to run Yahoo, I don't see why an 'outsider' can't run Infosys. Infosys isn't doing 'rocket science' as the saying goes ...
 
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