The Secret Behind Infosys 40+ Year Success - Infosys Co-Founder

If customers were not able to pay, we still worked on those projects because the goodwill is important, he said.

The Infosys co-founder was walking us through his tenure as CEO during the 2008 global financial crisis. Projects had been cancelled. Customers had been wiped out. The natural CEO response would have been to cut the non-paying accounts and reduce the headcount.

Kris did the opposite.

The Technology Transition Playbook

Before the 2008 story, Kris framed the broader pattern of how Indian IT has survived over decades.

The industry has been through mainframe, mid-range, Unix, PC, and mobile transitions. Every one of these could have been the moment that ended a services company that failed to adapt. Every one of them was survived by the companies that transitioned in time.

The technology keeps changing, and you have to change with the technology, Kris said. You have to retrain people, create new services. You have to be with your customer.

Being with the customer is the baseline. But Kris identified a specific higher bar.

You have to be ahead of the customer, he said. The customer comes to you because they feel that you have the expertise that they don’t have. It is very important that you have to be ahead of this curve always.

Being ahead of the customer is the entire value proposition of a services company. If the customer knows what you know, they do not need you. The moment the customer catches up, the services company loses.

This is why every Indian IT company invests continuously in training. This is why they build practice areas around emerging technologies before the customers ask for them. This is why they hire people they do not yet have projects for.

This industry has done that very, very well, Kris said. That is why he is extremely confident about the Indian industry’s ability to transition to the AI revolution that is happening today.

Kris is optimistic about the AI transition specifically because Indian IT has already survived four previous technology transitions. The muscle memory of transition management is what makes the next transition possible.

The Crisis Track Record

The second pattern Kris identified was crisis survival.

The 1997 Asian financial crisis. The 2001 internet bubble burst. The 2008 global financial crisis. The 2020 COVID pandemic. And the Y2K challenge that came before all of them.

Five major crises across three decades. Every one of them threatened the Indian IT industry’s global position. Every one of them was survived.

Industry has gone through several crises and come out of that stronger and better shape, Kris said.

That is a specific claim worth pausing over. Not survived. Not returned to baseline. Stronger and better shape after each crisis.

This is the counter-cyclical pattern that distinguishes a mature industry from an immature one. Mature industries use crises as opportunities to consolidate, invest, and build capabilities that will pay off in the next expansion. Immature industries retrench, cut, and try to survive until the good times return.

Both approaches survive. Only one gets stronger.

The 2008 Story

Kris was the Infosys CEO in 2008 when the global financial crisis hit.

The world turned upside down in one week, he said.

That was the operational reality. Not a slow deterioration. A one-week collapse.

Projects got cancelled or delayed. They had to manage all that. And they had to manage the huge bench that was there.

The bench is the industry term for employees who are not currently deployed on client projects. In a services business, bench is expensive. Idle employees generate no revenue but consume salary, benefits, and infrastructure. The natural CEO response to a growing bench is to reduce it through layoffs.

Kris made a different call.

They put people who were on bench to more training, he said.

Idle people got more training. Not layoffs.

This is the counter-cyclical talent investment move. When work is scarce, the pressure to reduce costs is highest. Training is one of the first budget items that gets cut in most companies. Kris expanded it instead.

The reasoning was simple. The people on the bench were assets. Reducing them would reduce Infosys’s ability to serve the growth that would eventually return. Investing in them would increase that ability. The short-term cost was the salary of the training period. The long-term benefit was the higher-skilled workforce ready to serve the next wave of demand.

The Goodwill Decision

The more radical decision was about customers.

If customers were not able to pay, they still worked on those projects, Kris said. Because the goodwill is important.

Non-paying customers kept getting served.

This is the sentence that will stay with anyone who runs a services business. The default in most companies is that non-payment triggers immediate account suspension. Every day of work for a non-paying customer is a day of unrecovered costs. The CFO’s job is to prevent that unrecovered spending.

Kris explicitly overrode the default.

If you are maintaining that customer relationship, if you are maintaining it with your employees, you will lose, he said.

The insight is that goodwill compounds. A customer whose vendor stood by them during their crisis is a customer for life. A customer whose vendor cut them the moment they could not pay is a customer who will never come back.

In 2008, Infosys chose to be the vendor that stayed. When those customers recovered - and most of them did recover - they remembered.

The Margin Cushion

The interviewer asked whether the industry could actually afford this.

It requires a lot of budget, the interviewer said.

Kris agreed. Then he explained what made it possible.

The industry is very profitable, he said. Operating margins at this size are around 20%. This is a fantastic model. That is why companies are financially very strong.

Twenty percent operating margins at scale.

This is the specific financial structure that enables everything else. In a business with 5% operating margins, the CFO cannot approve non-paying customer work. In a business with 20% operating margins, there is optionality. The margin cushion is what allows the CEO to make counter-cyclical goodwill investments during a crisis.

This is the strategic insight that most founders miss. Margins are not just a shareholder return metric. They are the strategic flexibility that enables everything else. High margins mean you can invest in training when others cut. Invest in R&D when others delay. Serve customers who cannot pay when others cannot.

Founders who chase growth by squeezing margins may look efficient in good times. They have no cushion when the crisis comes. The industry with 20% margins survived every crisis and came out stronger. Industries with lower margins did not.

The Universal Insight

The Kris insight has application well beyond IT services.

Every services business faces the goodwill trade-off. Consulting firms. Law firms. Investment banks. Design agencies. Advertising agencies. Each of them will eventually have a client who cannot pay. Each of them faces the choice between cutting the account or continuing to serve.

The margin structure determines the choice. High-margin businesses can afford to make the goodwill investment. Low-margin businesses cannot.

The Kris implication is that services businesses should build their margin structures with the goodwill decision in mind. Not because the goodwill decision comes up every year. But because it will eventually come up, and the business that has the margins to serve it will be the one that survives and consolidates.

What This Reveals

Three things from this segment will stay with me.

The technology transition playbook. Being with the customer is baseline. Being ahead of the customer is the value proposition. Every transition - mainframe to Unix to PC to mobile to AI - is an opportunity for the companies that transitioned in time to consolidate their lead over those that did not.

The counter-cyclical training move. When work is scarce, most companies cut training. Kris expanded it. The people on the bench were assets to be developed, not costs to be eliminated. The next wave of demand needed a workforce ready to serve it.

The goodwill decision. Non-paying customers kept getting served. Not because Infosys could not distinguish between paying and non-paying accounts. But because Kris understood that goodwill compounds. Vendors who stay during a crisis become the vendors for life.

The Real Question For Founders

The uncomfortable question the segment raises is whether your business has the margin structure to make the goodwill decision when the moment comes.

If your operating margins are in the single digits, you cannot serve non-paying customers. You cannot expand training when the market contracts. You cannot invest counter-cyclically in R&D. The choices Kris made in 2008 would not be available to you.

The founders who understand this build differently. They protect margins during growth phases. They resist the temptation to buy market share through pricing. They accept that the customer they cannot serve during a crisis is the customer they will lose forever.

That is the mature-services posture. Kris built it into Infosys during the 1990s. The 2008 decision was the moment when it paid off.

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