The Hindu Business Line : `We do IT better'

Whenever a company has a sales opportunity or renewal opportunity for a contract, the number one competitor is always the in-house function. It is always a question of whether to outsource or not.

THE last time Peter Altabef came to India, there was little that the media wrote about him. He seemed happy to let Ross Perot Jr, CEO at the time, do the talking. Now, with Perot as Chairman and Altabef as President and CEO, Altabef has begun to be audible. eWorld garnered the first interview that he has given to the Indian media since his elevation in mid-September. But even if he did talk, Altabef showed himself as a role model for CEOs wishing to stick to the copybook. Not a word out of place - seemed to be his motto, as you would discover in the excerpts from the chat reproduced below. Anurag Jain, now head of the Business Process Solutions group in Perot, which acquired Jain-founded Vision HealthSource, joined us.

Several reports in the media talk about Perot Systems as an aggressive adopter of the offshore model. Some others feel that the action has started only recently. Do think you could have started out earlier?

Peter Altabef

Peter Altabef: I realise that sooner is a relative statement. But Perot Systems first became involved in India in 1995 when we had discussions with HCL Technologies for a joint venture (JV). Keep in mind that Perot Systems as a company was formed in 1988. Only seven years later, we were already talking to HCL - we formed the JV in January 1996. I would submit that we have been there for a majority of our corporate life and tied into what's been happening to India for the last 10 years.

But your activity here has been significant for the last year or two. Could acquisitions have been cheaper had you considered them in the period 2001-2002?

PA: The joint venture company, from which we recently bought out HCL's stake, stood ninth on the Nasscom list of IT companies. In December last year, we decided to acquire HCL's part. In addition, I have been head of the BPO strategic planning group. We needed business process services capability out of India. We began researching that aspect years ago. That resulted in the acqusition of Vision HealthSource last July.

We see that you have raised guidance for Q3. Is Perot seeing any signs that could paint future trends?

PA: We made leadership changes several weeks ago. Ross Perot Sr became Chairman Emeritus and Perot Jr became Chairman. We had an analyst call to describe changes. The press releases on the financial projections should speak for themselves.

In the latest quarter results, you talk about $700-million worth of new contracts. Which areas did they come from?

PA: Outside of analyst calls, we tend not to get into specifics. I would refer you to two significant deals we had signed in the quarter. One was with CVS, the largest retail pharmaceutical company. The other was with Stanford Hospital.

Does India figure in your deals?

PA: We continue to do business in India. Today, the transactions are of a modest size. But we are very excited and actively pursuing opportunities here.

After Perot's acquisition of Vision HealthSource, has your sales structure or the sales process itself undergone a change? We constantly hear of synergy between IT and BPO. How do you position the two?

PA: That's why the business process group excites us. We have about 3,800 people in the business process group out of a total of 15,000. What we are seeing in some sectors and some markets, in particular, is that clients are looking for both solutions. For instance, in the healthcare space, it is frequent and customary that we pick on assignments for IT (including network solutions, data centres, application maintenance and development) as also BPO (including claims processing, revenue cycle management, and financial and administrative work).

Once you acquired Vision, have there been changes in milestones that you reached faster or slower?

PA: Vision is an important part of the business process group but is also integrated. We have people working on same systems, processes and the like. It's an integrated model. The Vision team has done outstandingly well.

Anurag Jain

AJ: We have doubled our manpower size in one year. We have also grown lines of business by five times. First, we were on the billing side. Perot was into hospital billing and insurance processing. We added those two. Then we added accounts receivables processing and procurement processing. Now we are going to begin life insurance processing. So, there has been significant addition to lines of business. Our capacity was 200 seats at the time of acquisition. We hope to have 1,100 seats in Chennai this month. We just buillt a large new building that we think will fill up quickly. So the scope has increased - in terms of seats and middle management.

You recently modified your relationship with UBS. Media reports have it that UBS has preferred to bring back some work for in-house operations. Is there a trend here, a pattern you see for the future?

PA: There are a couple of ways I'd answer that. First of all, our relationship with UBS is very good. Although we do expect that infrastructure services will go back to UBS at end of 2006 when the contract ends, we have other work such as application development - a lot of which is done out of India. That is continuing and will continue and we've said that it will grow.

(As regards the) trend,... I have been in this industry for over 11 years now. What has not changed is that whenever we have a sales opportunity or renewal opportunity for a contract, the number one competitor is always the in-house function. It is always a question of whether to outsource or not. The idea that the in-house (team) is a competitor is not new at all. It has been around for a very long time. Clients make their own decisions. But it is critical to Perot Systems and our benchmark for our reputation is: when and if a client decides for its own strategic reason (in the case of UBS it was a strategic reason) for their own IT philosophy, we will work day and night with them for a seamless transition so they don't miss a beat in doing that. That's what we are doing with UBS. Our ability to work like that with clients - to sit down in a professional manner and work on a transition contract (whether transitioning off or on) - is key to us. This makes clients comfortable about their willingness to give us business in the first place. Because, at some point, if the strategy changes and they want to do something different, we work hard with them to satisfy all their needs.

In the last four-five years, we have heard IT service companies say that they have to be big, be everything to everyone and use killer applications as an opportunity to cross-sell. Now we hear industry captains saying that specialised skills are a must. Your views?

PA: Our approach is to be a trusted advisor for our clients and we will work with them to work out best solutions. If it turns out that we have those, that's great. If not - and no company can be all things to all people - we will work with other suppliers for those capabilities. The key is delivering right services for customers. If it means working with multiple vendors, that's what we'll do.

You sell a good bit to governments. With the backlash against outsourcing and pending Bills that could ban outsourcing contracts from government agencies, how do you see your business affected?

PA: The government business is a large and increasing part of Perot Systems. It represents currently about 16 per cent of our revenues and we're very happy with the expansion of that business. Because of its nature, that is not a business for which we have to do work in India. That is the nature of that biz. We are in a nice position of being able to grow our personnel in various geographies - we are doing that in the US and in India. That's been our approach. For our government business, new jobs are growing in the US. Jobs in our private sector business in the US are growing as well.

What is your strategy for your now fully-owned subsidiary, in terms of manpower addition, the kind of work that it will do... ?

PA: The applications development group has done very well. We've been very happy with the way that unit has been integrating since December. It was a standalone unit, and the process of integration is still under way. Revenues from that unit for the quarter represent a substantial growth over 12 months.

Companies of revenues in the region of $1 billion to $1.5 billion have been getting orders of annual revenues of $100 million. What do you need to do to in terms of positioning and service offering to graduate to $250-500 million? Would the India unit make a difference to this strategy?

AJ: Our India unit is also growing. Integration is one of the things we are doing. We are integrating the India unit's direct sales and channel marketing capability with the sales channel of our traditional business. In fact, we are training sales people to sell joint projects larger in size than the India unit has traditionally sold - a combination of large application projects or larger projects combined with infrastructure, networking, business process and consulting capabilities. The size of contracts for our India unit is larger while maintaining sales force and then gradually building up the size of the relationship over time.

bharatk@thehindu.co.in

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