March 31, 2002, in many ways and for many people, is the end of an era and the beginning of a new one. On that day, Narayana NR Murthy, who has guided one of India’s best-known software companies through its birth, adolescence and maturity, stepped aside and Nandan Nilekani took over as chief executive officer of Infosys Technologies, a company he co-founded as a youngster in 1981.

"I have not moved out," Murthy said three months ago, when he made clear his decision to step down at the end of the financial year. "I have just moved aside for younger people to take over when they still have the energy and the ambition left in them." Murthy now becomes ‘Chief Mentor’ of the company, much in the style of Bill Gates at Microsoft, and hopes to play a similar ambassadorial role. Nilekani, meanwhile, moves up from the position of chief operating officer, to CEO.

PASSING THE BATON: Murthy moves on to his new role as ‘Chief Mentor’

It has been an amazing relationship. It began in 1978 when a young Nilekani passed out of IIT, Bombay with a degree in electrical engineering and joined Patni Computer Systems. Narayana Murthy was the head of the company’s software group at that time. Within three years, the two left Patni, and along with five others, set up a small company of their own in July, 1981. Their seed capital—a princely Rs 10,000. "We realized very quickly," says Nilekani, "that there was a need for a very high-quality software company that was very employee-focussed." And Infosys was born…

Today, almost 21 years later, that relationship has held firm and strong, and the company has grown from its seven promoters in 1981 to 10,663 people and Rs 2,300 crore in turnover. But notwithstanding Nilekani’s matter of fact rendering of this history, it hasn’t been an easy journey.

The early days
When Nilekani passed out of IIT Bombay, IBM had just left the country, though a whole crop of new companies were making their first foray into India—including the likes of DEC (Digital Equipment Corporation as it was then known) and Datageneral. There were few domestic software companies, and the few that were there, weren’t the behemoths they we know of today.

It was a different age. Liberalization hadn’t yet happened; India’s soul was still socialist; technology hadn’t come to be so pervasive; and money making was yet to become a virtue. "The only companies of significance at the time," says Nilekani, "were either MNCs, large family-run businesses or public sector units. When we set up Infosys, entrepreneurship was not very hot. And there weren’t very many role models. In fact, the concept of first-generation entrepreneurs did not exist." For the first few years, says Nilekani, "All of us were abroad. Only Murthy was here." They had bagged an order from Databasics Coporation and Nilekani and others were on the clients’ site. Databasics had a solution for the apparel industry and Infy’s first project involved the development, implementation and maintenance of that solution.

Nilekani came back to India in 1987 and the company slowly branched off with orders from General Electric and Reebok. In the late eighties, when the Indian software exports industry was still very small, Jack Welch and team had come to India to identify a few Indian software companies to work with. They looked at TCS, Wipro, Patni, and finally settled on Infosys. This was a big win for the company and the relationship lasted for a long time—GE remained one of Infosys’ top clients for years after that.

For a brief while, Infosys also entered into a joint venture with management consultancy firm Kurt Salmon Associates and formed KSA-Infosys. That didn’t last long though, as Infy realized that what it needed was a strong marketing and brand-building thrust of its own.

The big leap
By the time Dr Manmohan Singh presented his landmark budget in 1991, Infosys had grown to 162 people, but was still not growing the way the promoters had hoped. Things weren’t bad, but they weren’t exactly booming either. This was the time of the company’s first major introspection at a cusp in the Indian economy. "That was when we realized that we had to do things differently," says Nilekani. "Liberalization was happening, large MNCs were coming into the software development sector and, suddenly, recruiting was becoming more difficult—with all IT companies fighting for the same talent pool."

So far, Infosys had survived by ploughing its profits back into the company. "But we knew then," says Nilekani, "that our bootstrapping days were over. We needed a certain physical infrastructure and a new way of doing business." Recruiting wasn’t the only problem. The promoters realized that unless they built a top-tier brand name, they wouldn’t be able to compete with their bigger competitors in the market. And compete they would have to, they knew. The days of demanding protection from the government were over. "Besides," says Nilekani, "in the software sector, we always believed in competition. We believed it was good for us."

To meet this new threat and tap the new market, the company went public in 1993. The rest, as they say, is history.

The challenges ahead
For Nilekani, the challenges ahead are significant (see interview). While Narayana NR Murthy guided the company through its difficult formative years, there’s a completely different challenge in keeping a behemoth going, especially so in a sector littered with the remains of upstarts who made it big really quickly, shined bright for a few years and then simply fizzled out.

Managing growth, however, is not the big issue for either Nilekani or Infosys. Continuing to grow in a completely changed business environment, at a time when the ‘sunrise’ years of Indian software are well nigh over, is. However, the company has grown to where it is today precisely because it has always had a finger on the pulse of the market. For instance, long before the slowdown was being considered a threat, Nilekani had spoken to Dataquest about how 2001 would be more about volumes than value, of how billing and margin pressures would become more and more important. It is with this foresight and legacy of turning a dream into a dream company that Nilekani has entered the CEO’s chamber.

Sarita Rani in Bangalore