India’s top IT Firms experiencing a wave of leadership changes, with at least nine prominent companies appointing new Chief Financial Officers (CFOs) in the past 12 months.
This trend comes on the heels of CEO exits and other leadership transitions that occurred in major IT firms during 2023. While some CFO appointments were driven by retirements, the broader context highlights a significant shift in the CFO role itself.
“The main impact on the industry is the CFO moving from a back office to a front office role, being involved in many more major decisions,” said Phil Fersht, CEO of HFS Research, a global business research consultancy.
“With the marked need to cut down on costs in the wake of long-term changes in consumer demand, CFOs have to be more aligned strategically with the CEO to ensure costs are taken out without harming the strategic direction of the firm,” he added.
Phil said, “In many cases, the CFO has become the protector of the CEO when facing their boards and the equity analysts… There are also several providers looking to move into M&A scenarios, and the need for a CFO who understands and executes against opportunities in the industry is prominent.”
The Changing Nature of the CFO Role
Traditionally, CFOs operated behind the scenes, focusing on financial compliance, reporting, and cost management. However, the landscape has evolved. Here’s why:
From Back Office to Front Office: CFOs are no longer confined to the back office. They have stepped into the limelight, becoming key decision-makers alongside CEOs. As companies grapple with long-term changes in consumer demand and the need to cut costs, CFOs play a strategic role in ensuring financial health while maintaining the firm’s direction.
Tech-Savvy CFOs: Emerging technologies, such as artificial intelligence, have reshaped the business landscape. CFOs are now expected to be tech-savvy, understanding how technology impacts financial performance. Their ability to navigate digital transformations and leverage data analytics is critical.
Protectors of CEOs: In boardrooms and equity analyst meetings, CFOs have become the CEO’s allies. They defend strategic decisions, financial health, and cost-cutting measures. Their role extends beyond spreadsheets; they safeguard the company’s vision and financial stability.
M&A Opportunities: As the industry witnesses mergers and acquisitions, CFOs must grasp these opportunities. Their understanding of market dynamics and financial implications is crucial for successful M&A execution.
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“The CFO role has moved from compliance to business performance,” said Pareekh Jain, founder and CEO, technology information platform EIIRTrend.
Pareekh added, “In this slow growth environment, the focus of IT service providers has shifted to improving margins, large cost takeout deals, and M&As. All these domains have put CFOs in the spotlight and performance pressure,”
IT Firms: Performance Pressure and Margins
The IT sector faces stagnant revenue growth and cautious demand. Consequently, the CFO function has shifted focus:
Business Performance Over Compliance: CFOs now drive business performance. Margins, cost optimization, and large-scale deals take center stage. The board expects profitability, especially during slow growth periods.
Churn in CFOs: The pressure to improve margins has led to churn in CFO positions. Boards push for profitability, and CFOs must deliver. Their ability to balance financial prudence with growth aspirations determines their success.
In turn, some Tier-I company CFOs are joining mid-tier firms as these companies experience higher growth. For example, Vinit Teredesai, the former CFO of LTIMindtree, joined Persistent Systems in May after Sunil Sapre, the company’s former CFO, retired.
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Recent Developments
Wipro’s former CFO, Jatin Dalal, was involved in a lawsuit that lasted over a year. In November, Wipro filed a lawsuit against Dalal, accusing him of violating the non-compete clause in his employment contract by joining rival Cognizant within 12 months of his last working day at Wipro.
On July 9, Dalal’s current organisation, Cognizant Technology, paid $505,087 to settle the lawsuit and related arbitration, thus resolving the non-compete dispute filed by Wipro.
For companies like Accenture, HCLTech and Persistent Systems, analysts said this was more of an organic change of guards.
Shriram Subramanian, founder and MD of proxy advisory firm InGovern Research Services said, “I would think the changes are one-time changes. All these are large companies with deep processes. So, any change in CFOs is not going to impact them.”
Vasu added, “Some of it is people retiring, can’t entirely call it an industry-wide trend. Accenture’s CFO change is not an industry trend, the person (KC McClure) retired after 36 years.”
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