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Krishnan Thiagarajan

`Customer intimacy is why global companies will stay with you. In this market, it is almost imperative that you anticipate the customer needs and act.'

Anybody who has met Mr Ganesh Natarajan will immediately realise that he is in the presence of a charming and suave personality. As the Deputy Chairman and Managing Director of Zensar Technologies, he has the primary responsibility of scaling up a medium-sized company to ride on the offshore outsourcing wave, and creating differentiators to compete with its peers in the industry. Business Line spoke to Mr Natarajan on the trends in the industry.

Excerpts from the interview:

How do you think the economic environment in the US and Europe are shaping up in terms of technology spending and offshore getting mainstream?

Technology spending is flat. I do not think you can expect more than 1-2 per cent growth in spending. But the encouraging news is that India offshore is on everybody's mind. Thanks to this, even small and medium companies are at least trying to understand what India offshore means for them. We have had visits from several companies which till last year would not have thought of going offshore, but now are looking at us seriously. But what is inhibiting is that the US is entering election year. So, the large deals may be in the wait-and-watch mode. Everybody is a little wary. Though all the interest and customer visits are still happening. I think that the floodgates will open by August-September next year. That is when I think we will see large outsourcing happening.

How do you think that the Accentures and IBM's of the world can change the business model for offshoring for players in India? In the sense, offshore is getting mainstream but also getting commoditised in the process...

The expectation is that a lot of these companies will finally know how to do the India story. Their low understanding of how the Indian low cost and high quality offshore model is transient. I think one year down the line, not just Accenture but three of the Big Five players will understand the India model. But what will happen is that as they move more jobs to India, for us we are worried about the backlash from American competition, they will worry about a backlash from their competition. The big challenge which American companies have is not telling customers, but telling internally. Why on earth should we be doing an India-US or India-Europe bid, when they have so many people sitting on the bench there. That will be their backlash. They will have to fundamentally change their business model like we do.

That is their biggest challenge. Look at our enterprise business, except for some sales, pre-sales and some amount of domain consulting, everything else is out of India. If the customer wants India, he means India. These American companies can no longer say that they have the Philippines, China or any other best shore strategy. They have to cross this chasm when they reach it.

Do you think that more of application management contracts are coming India's way rather than application development?

You are right in the one sense that in the last two years there have been more of application management contracts and less of application development coming India's way. But it is not because of any rate pressure or anything, it is just that they want to leverage their existing infrastructure. Our mix today is about 65 per cent of application management/support and the balance of pure applications. What is beginning to happen is migration. Even in Asia-Pacific, a lot of legacy systems are being migrated to new technologies. As that happens, everybody who has implemented ERP, but today everybody is talking about intra-organisational ERP or extended ERP solutions. This is likely to drive a lot of new development. My own guess is that next year we might see 50 per cent more development than has happened this year. But eventually it will still be 50:50 between application development and management work.

Do you think that execution is beginning to get more importance than innovation in the software services marketplace?

Every company has to choose one model, either it has to be customer intimacy, operational excellence or product excellence.

But for the software industry, it is a combination of all these three models. You have to use innovation all the time to build new frameworks for execution. Your execution has to be SEI - CMM Level 5, ISO-9000 and so on for operational excellence.

But at the end of the day, even on operational excellence somebody else can compete. So, finally, it has to be only customer intimacy. The point I am making is innovation is not going away. You need to innovate on technologies all the time. Operational excellence is why global companies will come to you. Customer intimacy is why they will stay with you. In this market, it is almost imperative that you anticipate the customer needs and act.

What do you think are the key differentiators which will help Tier-II companies scale-up in the future?

I think the key differentiator is in project implementation. One is our 80:20 methodology, even for ERP implementation or migration.

Historically people feel that 60 per cent of ERP implementation needs to be done onsite, but we are doing the same percentage offshore. And a client will work with us because he feels we have robust processes and methodologies to make that happen. Differentiator like the vertical is a toehold into the client. But at the end of the day, client referencing plays an important role. After all, these clients have a plethora of choices.

That brings us to the difference between large Indian companies and us. For companies like us, unless we have a definite point of view, which is the reason why somebody to come to us vis-à-vis go to an Accenture or a large Indian company, we cannot exist. We cannot be a small version of a TCS (Tata Consultancy Services) and survive. So, the ability to have clear differentiators will enable 10-12 mid tier companies to also co-exist.

The small players will have to consolidate, merge or get bought out. If you are talking about a 30-35-company industry, all will grow exceeding well in the next four-five years.

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