Narayana Murthy's revelations in WikiLeaks

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    Narayana Murthy's revelations in WikiLeaks


    Infosys' plan to expand in China was hampered by clients' concerns about China's poor intellectual property protection. This was what Infosys cofounder NR Narayana Murthy told US diplomats in 2007 as per a cable from the Consulate in Chennai released by WikiLeaks.

    "In a wide ranging discussion with US, Murthy discussed the state of Infosys, with particular emphasis on its expansion plans outside of India. He admitted that the expansion plans hadn't been going as well as he hoped.

    Murthy said his clients, particularly European and American ones, are reluctant to have their work done in China due to their concerns about China's poor intellectual property protections," the cable stated.

    The cable dated December 14, 2007, is titled 'Infosys founder on IPR in China, hiring in US.' It is classified as 'unclassified/for official use only.'

    Murthy said he understood the misgivings of his clients and narrated his experience in China to show how rampant piracy was.

    Stepping out of his central Beijing hotel to go for a stroll with Peter Bonfield, then CEO of British Telecom, they encountered a sidewalk vendor selling pirated Microsoft and Windows products. Bonfield jokingly asked the vendor if he had Finacle (an Infosys banking software product) and the vendor replied: "I can get it for you tomorrow."

    Murthy further explains how the company has to spell out all of the locations where the client's work will be done in the master agreement and that clients were initially reluctant to allow China to be included.

    Murthy, however, was optimistic about the long-term potential of China. As per the cable, he stated: "There is nobody better than the Chinese at solving a problem once they are serious about it." Murthy said it would take four to five years for the Chinese to overcome that reluctance.

    There were other concerns for Infosys to expand in China. Murthy told the diplomats that though qualified graduates were available, those with sufficient English skills commanded a high premium. He said retention was more difficult in China than in India, as Chinese professionals are more willing to leave for a higher salary where Indian ones value institutions a bit more.

    During the interaction, Murthy is said to have talked of how Infosys planned to dramatically expand its hiring of US graduates from 300 per year to 3,000 in 2008. He said 95% of the US hires would work in the US, with a small number sent to work in other countries.

    Murthy was philosophical when discussing the effect of rupee appreciation on Infosys. He acknowledged that the appreciation of the Indian rupee had hurt his company, but did not appear overly concerned.

    He admitted that it has a negative impact on the company's profitability, but said: "One of our founding principles is to focus on things that you can control;" the currency appreciation is a "macroeconomic effect, which we have to live with."
     
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