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For
a company that has shied away from the limelight for the last
few years, Patni Computer Systems (PCS) has more than just
a few tricks up its sleeve. The company has grown quite fast
over the years and was even rated among the Top 10 Indian
IT companies last year. But why has the company kept such
a low profile and what plans are in the offing? Dominic
A Aranha finds out
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According
to Patni, the company’s new identity reflects its
dynamic vision and enduring heritage |
The
Indian software industry has had its share of success stories
and the list goes on. However, while most have shouted hoarse
about their pettiest achievements, there are quite a few who
have shied away from the limelight and have instead preferred
to let their work speak for themselves. Mumbai-based Patni
Computer Systems (PCS) definitely belongs to this category.
With business in the range of Rs 500 crore and listed among
the Top 10 Indian software firms last year, one wonders why
the company has been shrouded in almost a veil of secrecy.
Says Jane Krishnan, senior manager-corporate communications,
PCS, “Recently, we won the Star of SEEPZ award for being
one of the best software exporters in the zone and also got
the Government of India award for software exports. These
things keep coming but we have not been talking about it.
There was no great marketing blitzkrieg because it was never
intended that way. PCS always had a steady customer base and
with regular business coming in, there was no need to go out
and market ourselves. This is why there has been hardly any
recognition for PCS as a company in the software market. But
now things seem to be changing and that is why we too have
had to change our style of working as well. We have always
been among the top IT companies in India and by Feb-March
2002 you will see a new PCS practically a re-launch.”
As part of this re-launch, the company unveiled its new logo
and brand image in Mumbai at the recently concluded ICT 2002.
Announcing the launch, N K Patni, CEO, Patni Computer Systems
said, “The launch of our new identity is a major landmark
in our company’s history. Our new identity clearly positions
us as a leader in the IT consulting business and reflects
both our dynamic vision and enduring heritage.”
Tracing
the roots
 The
origins of PCS can be traced back to 1972 when N K Patni started
a company in the US called Data Conversion Inc. As the name
suggests, the company’s main operation was data conversion
from paper to magnetic form and from one magnetic form to
another. Although the company was started in the US, most
of the work was carried out at the Pune office, which was
the centre of activity at the time. Over time, the company
slowly graduated to doing software development for clients
along with data conversion and in 1978 came to be known as
Patni Computer Systems (PCS). The company was registered in
Pune, but most development work was then done in Mumbai. As
software development increased, work in the data conversion
area gradually decreased to the point where it ceased to exist.
Says Satish, Joshi, senior vice president, PCS, “In those
early days, we basically provided people to go and work at
the customer site. Data General was one of our biggest customers
at the time. Hardly any of our other customers exist now.
Leveraging the relationship with Data General, PCS then ventured
into hardware sales and maintenance and later into manufacturing.
Systems were imported, assembled and even maintained by us
under license from DG. Our software and hardware operations
ran in parallel, although the focus of the two businesses
were completely different.”
While the hardware business concentrated entirely on the Indian
market, the software business focussed on foreign markets.
All software consultancy done in the Indian market was done
piggybacking on the company’s hardware business. In an
effort to provide the right opportunities for growth as well
as manage both operations more efficiently, the hardware business
was spun off as a new company known as PCS Data Products (currently
PCS Industries). Though initially the two worked together
on local projects, that arrangement came to an end sometime
later and both went their own ways. Says Joshi, “After
PCS became a pure software company, the focus for many years
was entirely on foreign markets. We never went and sold purely
software consulting services in India. A fair amount of work
systems development, etc, was done in India, but that was
tied up with the hardware business.”
From its inception till the early 80’s, the company concentrated
on programming services with the US as its core focus area.
At this point of time very little business was done with other
countries. 1990 however proved to be a turning point in the
company’s history. This was the year when it started
working with General Electric (GE). Says Joshi, “In the
beginning, purely onsite consultancy services mainly on their
business applications based on the IBM mainframe was done,
which was the dominant technology in those times. Around that
time, Digital too had emerged as a prominent departmental
server vendor and so a lot of applications were developed
on the WAX platform. That was also the period when UNIX started
moving out of classrooms and began to make its presence felt
in the commercial space. In line with this development, our
technologies shifted to developing applications on that platform
and the client server platform.”
It was during the late 80’s and early 90’s that
the company actually took off. Till then the company had been
offering only programming services and not offshore services.
During this time the company achieved maturity and development
centres were started. Among the first to be set up was one
for DG and then a 30-person team was established for application
development and maintenance of products. As the next logical
step in its move to the next league, all work for DG was handled
from the centre itself. It also marked the commencement of
the company’s offshore focus. Adds Joshi, “Going
outside the DG family and doing business independently in
the UK started in the early 80’s. In addition to DG,
we had another client a manufacturing company called Mancox
in UK. In 1994, we set up an office in the country.”
Around 1995, PCS started diversifying into areas other than
the UK and US, and got business from Hitachi in Japan. The
business grew exponentially into a strong business unit. This
was also the year when a new offshore development centre was
set up at Pune, in addition to the one in Mumbai. In the same
year, the company also received the ISO:9001 certification,
which formally instituted quality and project management systems
all over the company.
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Khare
says that adopting the best practices of clients
helps it do business better and also generates trust |
In
1997, PCS set up a development centre at Thane. Since by then
the GE relationship had grown tremendously, the company decided
to dedicate that unit solely for servicing GE. It followed
it up with the establishment of another development centre
at Gandhinagar in 1999 and the setting up of its own building
in Pune in the same year. This was in addition to the facilities
the company already had at the STP in Pune.
In the same year, the company also extended its tentacles
to Japan with the establishment of an office in the country.
Says Joshi, “The Hitachi relationship was growing and
with the area making up 5-6 percent of our overall business,
it was but natural to open an office in the country.”
The expansion drive continued with a foray into European markets
and the establishment of an office in Germany in 2000. In
the same year, the company was assessed at SEI CMM Level 5.
Two development centres were also set up at Noida and Chennai.
Restructuring:
A strategy decision
Although the company had some of the best delivery schedules
and specialised in building long lasting relationships, it
soon realised that it was not getting the kind of recognition
it felt it deserved. Says Krishnan, “Practically all
the relationships we have been for over a decade. This by
itself speaks volumes about our quality and delivery schedules.
When I say relationships, I’m talking about the GE’s
of the world who have a host of options open to them and yet
each year we are rated as their preferred solution provider.
We have all the certifications, SEI CMM, ISO 9001:2000 etc,
yet no one knows about this since we did not feel it necessary
to talk about it. But then we looked around and found smaller
companies blowing their trumpets at the drop of a hat and
we were sitting there and not getting the publicity we deserved.
We were the pioneers of the ODC (Offshore Development Centre)
model, one of the first companies to set up a base in America,
and yet we ran the danger of losing our customer base over
poor marketing. We therefore decided to change that.”
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According
to Joshi, PCS will remain a pre-dominantly services
oriented company in the time to come |
As
the first step in this direction, the company roped in external
consultants such as KPMG and McKinsey. They were brought in
to review the company’s performance and advise it on
how to proceed from there. The findings, Krishnan points out,
surprised both the premier bodies as they found it hard to
believe that the company was surviving the competition and
that too in good health without clearly defined SBUs, practices
and outdated marketing strategies. In an effort to put the
house in order, McKinsey broke the company into nine SBUs,
each focussing on a particular vertical. In this way, the
company had SBUs focussing on insurance, e-business, enterprise
application integration, embedded technologies, engineering
services, KAGC (Key Accounts and Growth Customers) and network
and system administration. There were also SBUs focussing
exclusively on GE and Japan. Says Krishnan, “This was
how some sort of structure came into the organisation, which
wasn’t there earlier. Though clients continued to be
our core focus, we now had a lean and mean structure that
was an added benefit to the customer.”
While initially insurance was not chalked out as a separate
SBU, seeing the exponential growth in the segment, the company
decided to hive it off an SBU all by itself. The company currently
caters to the insurance, manufacturing, financial services
and banking, utilities and hospitality verticals.
The KAGC SBU plays an important role in evolving offshore
development centres (ODCs) for new and potential clients.
It ensures involvement right from the conceptual phase to
the implementation and post implementation stages, while helping
new practices at PCS grow.
Under the EAI SBU, the company has practices such as Oracle
and BAAN. The engineering services SBU, based at Pune, offers
services such as GIS, document conversion and CAD/CAM. Krishnan
adds, “Though we had completely come out of the document
conversion business, we had to re-enter it due to one of our
larger clients who said that since we were doing so much of
work for them, we might as well add document conversion to
the list.” The company currently offers document conversion
as a full-fledged service under this SBU. It also has a translation
cell and a quality division to take care of the quality aspect
of work done at the company. Krishnan adds that this division,
while meant to look after the overall work done by the company,
is in a special way focussed on the Japanese markets due to
the extreme quality consciousness of the market. The division
has made significant contributions to the company’s business
and buoyed by this development, the company plans to go in
for a re-certification in the near future.
The company believes that is ability to adopt best practices
of its clients has given it an edge over competitors. Says
Vijay Khare, senior vice president, PCS, “When we work
with a customer, we make it a point to not only understand
their business, but also incorporate their best practices
so that they are more comfortable working with us and we too
are able to get better. For example, GE uses the Six Sigma
process, which has been very beneficial to the company. We
therefore decided to incorporate it in our business processes
as well.” This is the USP that the company offers its
customers. PCS believes in achieving the kind of penetration
that the company would have achieved had it been doing the
project itself. For example, personnel working on the Hitachi
or GE account are actually trained in the company’s way
of life so that there are no hitches when they are working
with the company. Ensuring that delivery schedules are stuck
too only helps increase credibility of the company.
Another element that the company says helps it distance itself
from the also-rans in the industry is the value-added services
it offers. Says Krishnan, “Once we get a project we try
to see how what the client is using now and what he would
be using two years hence. We get into the consultancy mode.
The phase where we merely provide people is a thing of the
past. Of course, that still remains our main business and
revenue generator, but now we are getting into the consultancy
mode. We actually advise the clients on what would be better
for their business.”
The foundation of a strong company lies in its employees.
This is something that the company believes in and has accordingly
made efforts to keep its employees happy. “We have a
kind of commitment to the employees. In case we find an employee
holds promise, we make it a point to push them up. In fact,
two of our senior vice presidents at the company started out
as programmers. Even as far as programmers are concerned,
while in most companies the maximum experience you would find
on their bio-data will be two years (unless it is an IBM or
Infosys), at PCS, we have personnel who have been with us
for over ten years. The fact that we have been able to retain
most of our employees in itself speaks volumes about our HR
policies. We are certainly not the best paymasters in the
industry and yet we have retained the cream of our personnel.”
The company, Krishnan avers, will be leveraging this strength
in its effort to scale up from the current 4,700-plus employees
on its rolls.
Forging alliances with some of the biggest names in the industry
has been another aspect of the company’s game plan. Says
Krishnan, “When we talk about alliances, it is not merely
alliances on paper. In fact BAAN’s customer base in India
was built by PCS. Our alliance with them was so strong that
they asked us to implement BAAN way back in 1994. We believe
that trust is an important element in any relationship and
when the client actually gives you the source code, there
is nothing like it. This is something that happened with BAAN.
Ditto with Oracle. We are now their certified solution providers.
Most companies see the PCS association as an added value to
their name and this is something that does not simply come
about. It takes years to build up a name in the industry and
this is something that PCS has done. Further, you have to
remain platform independent. Here again PCS comes out trumps.
We can work on any platform, be it SAP, BAAN or PeopleSoft.”
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Krishnan
says verticalisation of services and the IPO will be developments
to watch out for from the company in the future |
A
recent initiative at the company has been the Product Technology
Initiative (PTI) aimed at creating Intellectual Property Rights
(IPR). This group focuses on emerging technologies identifying
them and building expertise in them. The group is believed
to be also making an attempt to get into products. Adds Joshi,
“Of course we will not be creating shrink-wrapped products,
but rather copyrighted methodologies that can be used for
creating more efficient tools and solutions. In short, we
will be creating re-usable components which can be used for
a wide range of industries.” PCS recently built a Distributed
Computing Methodology that was bought by one of its clients
in Japan. The latter is currently using it to build a new
product. So while the company will own the product, the methodology
involved will belong to PCS.
Future
Even as most companies are talking about taking the product
route in order to make it big on the international arena,
PCS plans to remain a pre-dominantly services oriented company
for at least the next 3-5 years. However, a significant change
will be an attempt to avoid performing work at customer sites
and the verticalisation of services. Joshi points out that
earlier most of the company’s revenues would come from
providing purely generic services, without any vertical expertise
coming into play. However, things would be changing now, he
says.
Also on the cards are the creation of new practice areas and
diversification into the geographies of Europe (barring UK),
Japan and Australia. Says Joshi, “We began focussing
on the Australian market just last year and plan to continue
to invest more in that area in the time to come. Again, Japan
is a market where the potential for growth is phenomenal.
According to our roadmap, we plan to grow by 90 percent in
that country this year and increase our non US business by
35-40 percent over the next 3-4 years.” While an increased
focus on non-US markets may be the company’s plan for
the present, Joshi affirms that this will not be at the cost
of the company’s US business, which will continue to
grow at 35-40 percent y-o-y.
Another change that will take place at the company will be
the addition of more SBUs. Says Joshi, “As practices
mature, they will get floated as separate business units.
Today the SBUs focussed on verticals are manufacturing and
insurance. The others hospitality, retail, utilities and financial
services are all part of a single business unit and that is
something that will change in the years to come. This year,
we plan to focus on retail and hospitality and widen the coverage
of the industry on the whole. As we get traction in this space
we will spin these off as independent business units. The
activities of building these business units have already started
and even the personnel are on board, but we are not completely
ready to start building infrastructure. However, by the second
quarter of this year, we will commence operations.”
 As
part of this exercise, some business units will also change
their complexion. As Krishnan points out, “We have two
business units called e-business and enterprise application
integration solutions. These units are currently more technology
focussed and less business focussed. Over time, we plan to
make them more verticalised. In fact, even now in the e-business
unit, there are four groups servicing four different business
units such as manufacturing, insurance, retail and financial
services.”
Japan is another area in which there will be changes in the
years to come. Says Joshi, “Japan is a completely geographical
focussed SBU, which by itself requires different skills business
practices, language and technical knowledge. We believe we
have reached a stage where we can create more vertical focus
within that SBU.”
However, one of the biggest plans on the cards is the launch
of the company’s IPO in the near future. Says Krishnan,
“We have a model whereby we can sustain ourselves for
the next five years, but we want to rank up faster, and one
sure-fire way to do that is to leverage capital. However,
the market is not too favourable at the moment and the moment
things start looking up, we will go public.”
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