- The Washington Times - Friday, September 22, 2006

BANGALORE, India — ‘I started with just $250,” said N.R. Narayana Murthy, the founder of Infosys Technologies Ltd., who thinks that an ethical philosophy is a certain route to success.

Various technology giants to come out of India have been referred to as “the Indian Bill Gates,” but the label seems particularly fitting for Mr. Murthy, founder and recently retired executive chairman of Infosys. Like Mr. Gates, whose mission was to bring computing to the masses, Mr. Murthy appears driven by social goals rather than a desire for riches.

He developed his desire to set up a firm as he hitchhiked his way home from Paris to India in the late 1970s. One of his less pleasant experiences on this epic 11-month trip crystallized his intentions.

Previously a staunch leftist, a 72-hour spell in a Soviet prison was, he said: “the last nail in the coffin of socialism for me. I decided I would conduct an experiment in entrepreneurship, and I embraced capitalism.

“I call myself ‘a compassionate capitalist’ — I’m a capitalist in mind, but a socialist at heart. For me entrepreneurship is the only instrument for countries like India to solve the problem of its poverty, creating more and more jobs with higher and higher disposable income.”

“In Infosys, a few of us have made lots of money, but there is still another section that has not. I believe it is our responsibility to ensure that those who have not made that kind of money have an opportunity to do so,” he said.

Starting up on $250

In 1981, Mr. Murthy and six colleagues set up the company with just $250 and, as is the case with so many good startups, the first office was Mr. Murthy’s bedroom. The company now has a market capitalization of nearly $25.8 billion.

Infosys uses the global-delivery model to develop software for clients in the developed world. Mr. Murthy explained: “This model takes a large task like developing software and splits it into two categories: Those that require considerable interaction with the customer, and those that have very low interaction with the customer.

“Activities like defining the problem, installation of software, training the customer, have necessarily to be delivered at the customer’s side.

“On the other hand, activities like functional design, architecture and programming can be delivered from remote, scalable, talent-rich and cost-competitive development centers, in countries such as India.”

‘Win-win’ situation

It is, Mr. Murthy said, a “win-win” situation: “The customer gets much better prices. Similarly we get much better margins.” Infosys recorded $650 million of operating profits on $1.88 billion of revenues in the last financial year.

However, making profits is not the driving force behind the firm.

Mr. Murthy explained: “When we sat down in my apartment in Bombay to decide on the vision for the company, the seven of us had a discussion for about six hours. First we said, maybe we should become the largest company in revenues, then the most profitable, etc., etc., but finally we came to a conclusion unanimously that we would seek respect from every stakeholder.

“If we focus on respect from customers, investors, employees, vendor partners, the government of the land and society, we will do everything right by every one of these stakeholders, and once you do that, revenues will automatically come, profits will automatically come, market capitalization will automatically come.

“As far as employees are concerned, we will create a fair, open environment where everything is discussed, deliberated and agreed upon, and we will use data to come to conclusions. Because once you use data to come to conclusions, people feel confident, people feel there is fairness in this organization, people feel there is meritocracy, people feel there is no groupism.

“That’s why we have an adage that says: ‘In God we trust, everybody else brings data to the table.’”

A clear conscience

“As far as investors are concerned, we believe they will understand that there will always be business cycles. What they want is that we level with them at all times. They want us to bring the bad news to them proactively and early. So that’s why we use an adage that says: ‘The softest pillow is a clear conscience.’ If you are fair to people, then you have a clear conscience, and you will sleep very well.”

He added: “I know several friends of mine who are billionaires, but they don’t sleep well because they have not done right by all the stakeholders.”

One notable occasion when Infosys had to bring very bad news to investors was in 1995, when it walked away from an agreement with General Electric — which had provided 25 percent of the company’s top line — after GE demanded that Infosys lower its prices.

“We said, ‘If we accept, in the end we will let down GE. We will not be able to invest heavily in processes, the quality will suffer.’ So we walked out of that business and we informed the analysts within 48 hours of that.” This was unheard of at the time, as it took place before regulations required companies to deliver bad news promptly.

A man with an adage for every occasion, he concluded: “When in doubt, disclose.”

Mr. Murthy retired as executive chairman this August on his 60th birthday. He remains nonexecutive chairman and head of the company’s mentoring system.

Pain of letting go

Perhaps because he left so recently, it is hard to see him letting go when he still talks so passionately about its future. He says, somewhat dubiously: “I am there when they want me, because I am the nonexecutive chairman. I would like to add value to the organization if asked and when asked.

“It’s always painful to let go. My daughter was born in 1980, Infosys was born in 1981 and my son was born in 1983. I feel like the father of the daughter that says I have found somebody with whom I can lead an exciting life, somebody that gives me a lot of confidence.

“One part of my mind says that’s right for her, that’s within her calling, she has to seek a better future. And the other part of it says I hope she has done the right thing. So the other part is somewhat anxious, but I know we have wonderful people. They are people with great value systems, people who are very, very confident.”

He is currently debating what to do with his “free” time, although he is already on the board of several companies and universities. “A professorship appeals very much, because I enjoy being with younger people. Second, I come from a family of professors.” He smiled: “I am the only black sheep of the family, so I think I will become a little bit more respectable if I become a professor.”

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