The Hindu Business Line : A time to talk

"Consulting is a generator and guarantor of future revenues." If Prabhat had to do it all over again, this thought would probably guide him. Here's what he has done.

Mr G.B. Prabhat

G.B. Prabhat is a scintillating conversationalist as eWorld has found over the past five or six meetings, spread over the past three years. Widely read and also someone who thinks about what he has read, Prabhat's conversations cover a wide canvas, offering insights on both local and global developments. His talks are often peppered with a unique interpretation of some recent article or piece of writing or some recent development, whether it is the global slowdown or Japan's financial crisis, or doing business in China, or reading the signs of revival in the US (yes, he did say, in 2002 in the midst of a grim technology slide, that things would become better).

Now to place the context of this interview with him. Since the time we met him first, Prabhat has only now volunteered to talk about his work and his division — Consulting and Enterprise Solutions' — contribution to Satyam Computer Services. This offer, coming after a year or two of coaxing him to talk about Satyam, intrigues you. You want to know why. He simply says: We have been doing some good work. It's time to talk about it.

THE first irresistible question that crops up is: Why did Satyam delve into Consulting, in addition to its software services business, at a time when the rest of the industry was into software development services?

Prabhat traces the answer back to the growth of IT spending since the early nineties. "IT spending as a percentage of total capital spending spurted in 1995. In 1999, it was 50 per cent of total capital spending. Now too, it is 50 per cent." Also, IT spending has grown in absolute terms over the years, not merely as a percentage of total capital spending.

So, why did IT spending spurt in the nineties? Says Prabhat: "If capital spending did go up in the first few years of that decade, it certainly didn't grow tremendously in plant and machinery. In the automotive sector for instance, there are 40 million cars on the road today. There is an excess capacity of 20 million globally. Who would invest in plant and machinery after a certain point? IT was the answer."

While IT became the answer, it was a maze to traverse. If you invested in plant and machinery, it is easy to ask pointed questions on investment, depreciation, capacity requirements, breakeven point in time for the investment and so on. But in IT, the answers justifying an investment were not easy: your CIO tells you the company needs 250 computers, an ERP system and then, can only hope that this investment pays off. Continues Prabhat: "The CEO asks if the inventory turns can be reduced. The answer is in the vague affirmative but no one can tell him by how much it would go down."

Satyam saw the CEO's dilemma: Damned if you do, damned if you don't, says Prabhat, and decided to plunge into consulting. But, he says, "it's not an easy duty to be able to advise the CEO on the business benefits of technology. He wants solutions at lower prices but those that increase productivity and keep stable, if not improve, profitability." But IT certainly emerged from being a back office tool, since management teams had to decidedly suck more out of existing processes, infrastructure and equipment. Consulting came in, when business process re-engineering was required to achieve those same goals.

Cut to the present. What are the challenges now in front of the Consulting and Enterprise Solutions that Prabhat heads? Competition has increased, he says. He was used to, or expected competition from blue-blooded consulting majors such as Deloitte and Accenture, from large systems integrators such as IBM and Computer Sciences Corporation, traditional Indian rivals. "But what came, as a surprise, was competition from product majors such as SAP and Oracle in the consulting space."

The figures

The CES division of Satyam started off as Satyam Renaissance before being merged into Satyam Computers. It had revenues of Rs 2 crore in 1998. Prabhat says, "It is definitely more than 100 times that number for the year ended March 2003." Revenues for CES have grown 16 per cent quarter on quarter and now form 25 per cent of Satyam's revenues. Satyam had revenues of Rs 2003.30 crore for the year ended March 2003.

Interestingly, the consulting practice had India as a platform that helped launch a global initiative. From being a wholly India-focussed practice to begin with, Prabhat says, "Only three per cent of our revenues come from India." And, between 60 and 70 per cent of revenues comes from the West. The division is 3000-people strong.

The next phase

Now that the Indian industry has reached a certain size - in terms of revenues and employee numbers for the top 10 companies, is something different needed to propel the industry into higher orbits? Prabhat feels there is a challenge on two fronts. One, the industry needs to be focussed on a global scale. But, as an industry, we lack the multicultural quality in our dealings, which we need so badly to attain that goal, according to him. Secondly, we don't build distributed leadership. "Once these two issues are addressed, we are on our way." Would acquiring consulting companies with either a client base or a technical skill make sense for Satyam now? Prabhat says, "We are open to it now, after building up our own skills in particular technology areas and in geographies.

Is the mist lifting?

Are the effects of the slowdown of the past two years wearing off? Is it obvious to him? Yes, he says. "Increase in volume of business is very obvious. But $10 billion of Indian software industry's revenues as a percentage of a global total of $500 billion is telling. You only have to get another $10 billion for a 100 per cent growth! But is there increased acceptance of Indian vendors and offshoring as a concept? Yes."

Interestingly, he feels there is a "right mix of threat and prosperity at the moment for IT spending to thrive. Now what was that? He explains that if there is too much of a threat in the economic atmosphere, as was the case these last three years, then IT spending would tend to stagnate or reduce. Too much prosperity could lead to spending in wrong areas that could lead to a period of scarcity.

Finally, would he make the journey all over again? Would he bet on consulting to the revenues path? His answer takes the cake. "Consulting as a business is a sure generator and guarantor of future revenues."

bharatk@thehindu.co.in

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