Usually, companies turn towards outsourcing to reduce costs and improve quality. And in the current economic scenario more and more corporations are looking at outsourcing as a mainstream alternative to in-house operations. Today, India is fast gaining acceptance as the outsourcing destination of choice, and companies like Syntel are optimising their first mover advantage in the market, says Stanley Glancy

Atul Kunwar feels that the global delivery model is one of the key reasons for Syntel’s success

The age-old adage, ‘When the going gets tough the tough get going,’ holds true for the $170 million outsourcing giant, Syntel. Even during these tough times, when industry verticals across the globe are under pressure to cut costs by adopting any means at their disposal, Syntel has been making huge investments in expanding the capabilities of its development centres in Mumbai, Chennai and Pune. It’s no wonder then that Nasscom in a recent report ranked Syntel among India’s top five international global offshore companies. By strategically leveraging the strength of its global delivery model, Syntel has not only managed to increase customer loyalty, but has also been successful in attracting new business its way.

Established in 1981, Syntel was among the first companies to realise the potential of India as a global outsourcing destination. Syntel’s Indian presence has been growing steadily over the years, and today the country accounts for nearly 70 percent of the 2,600 employees it has worldwide.

And while the global economic meltdown knocked the wind off the sails of many companies, for Syntel it turned out to be a big growth opportunity. For when companies were scouting for outsourcing partners to cut down on development cost, most turned to Syntel because of its expertise in outsourcing. Another advantage that distinguished Syntel in the crowd of outsourcing companies was that it was the first US-based IT services company to launch a global delivery service in 1992. Today, Syntel is rated among the top five companies in the world for outsourcing. And the Indian operations have evolved beyond the cost-saving objective.

Says Atul Kunwar, chief operating officer (global) for Syntel, “While the world today is rushing towards India for taking advantage of its strengths in software, we were fortunate to discover this strength as early as 1992, when we set up our first Indian development centre in Mumbai. Today, investing in Indian operations is not just a cost-saving tactic, but a strategic decision that delivers value over time. So while our competitors rush to create a global delivery approach, our offerings have become more mature over time.” Due to its pioneering approach, which it took nearly a decade ago, Syntel is earning rich dividends today. Today the company is geared to meet the huge potential that the outsourcing services market holds. Research firm Forrester expects a 50 percent increase in the number of Fortune 500 companies pursuing offshore IT delivery efforts over the next 24 months.

Development centres
Having earmarked India as a potential destination for outsourcing a decade ago, Syntel has been continuously investing in its development centres. Syntel has invested close to $10 million for setting up its state-of-the-art development centre coming up in Pune. The centre, set on a 40-acre area, will primarily focus on the banking, financial services and insurance (BFSI), telecom and logistics segments. It also opened its seventh unit in Mumbai, in addition to the existing one in Chennai. Though none of the centres in India are vertical-based, they do work on specific technologies.

Chennai, for example, is into data warehousing and EAI; Mumbai into application maintenance, Web development and EAI, while the Pune centre focuses on client/server and mainframe projects. All the centres are connected via SyntelNet, a robust private data communications network that provides seamless service capability across diverse geographies. IntelliTransfer, Syntel’s proprietary knowledge transfer system, enables project teams to pass complex information between centres across the globe securely and seamlessly. All the centres, including the upcoming one in Pune, have received the SEI CMM Level 5 certification for application development, maintenance and production support.

A model of Syntel's Development Centre in Pune

Global delivery service
The global delivery model is the key differentiator between Syntel’s business and other software services companies. For instance, most IT service companies are either India-based with offices in the US, or are US companies, which have partnered with offshore Indian companies to strengthen their own capabilities. There are also those with no offshore capability wanting to outsource. But Syntel made a conscious decision to develop a strong presence both onsite and offshore. This hybrid mix has strengthened the company’s competitive edge.

The company was also one of the first to have technical teams based in diverse geographies and located in different time zones to ensure a virtual 24-hour workday. Says Kunwar, “The global delivery model is one of the key reasons for our success. Our strategy is to work shoulder-to-shoulder with the customer instead of phone-to-phone. Towards this end we have co-located our teams to work with the customer. We realised the advantages of this model and have made every effort to perfect the system. We have evolved our processes over the years to achieve the standards we have reached today.”

Challenges
Syntel didn’t have it easy on this front and found this was a challenging task. Initially, Syntel got customers and did onsite work for them before gradually shifting everything offshore. While margins were high, the topline was stagnant. For industry analysts, it meant flat, stagnant growth. Explains Kunwar, “Initially we did face this problem. By shifting people here our revenues used to be cut by almost one-third. Where we were paid $20,000 for completing a project onsite it was cut to almost $6,000 when we shifted offshore. This was necessary, as cost-cutting was the whole point of the exercise. Everytime we shifted work here we had to go through this cycle. We had to explain to the industry in general about the benefits of this model, and now we feel we have crossed this threshold—where the benefits are there for everyone to see.”

Services
Since its inception, Syntel has focused on providing application management solutions that range from large-scale global integration projects to onsite enhancements. Service offerings typically include maintenance, production support and enhancements. Other than application management, Syntel’s core business areas include application development and application maintenance. The company also offers services in the space of wireless development, platform migration, requirement validation, project management, software testing, quality assurance, implementation and training.

EAI
Syntel is also known for its expertise in the Enterprise Application Integration (EAI) space. This space too is a high growth area and industry estimates peg the market close to $22 billion for integration software and services. Currently, Syntel is developing its domain expertise to work with any solution. Its services in this field include integration feasibility, product evaluation, architecture blueprint and design, interface customisation, deployment, testing and business process management. Says Kunwar, “Future business will be around strategic solutions. Companies need to integrate business processes across disparate internal and external systems. We are investing a lot in this area.” Other than the EAI space, Syntel is also concentrating on developing domain expertise in the space of ERP, SCM and CRM.

Verticals
BFSI is a key vertical for many software service companies in India. Syntel too has been strengthening its position in these areas, especially in the financial services segment. Other key verticals for Syntel include automobiles, retail, finance, insurance and healthcare. Currently, 80 percent of the company’s business is generated from these verticals. When it comes to developing domain expertise in different areas, Syntel has an interesting strategy. For instance, to spruce up its domain expertise in the healthcare industry, Syntel employed people from HCA (Hospital Corporation of India) to build domain expertise in healthcare. Going forward, Kunwar expects the upcoming healthcare segment to contribute substantially to Syntel’s revenues.

Web products
During the dot-com heydays Syntel launched a Web incubator project for start-up businesses. The company developed several products, especially for the automobile and textile industry. Though Syntel has given up control over the other products, it still owns Skillbay, a B2B website on IT-related contracting assignments for the Web. Corporates can access staffing services and conduct real-time auctions in an open market setting. It also offers virtual interviewing and a patent-pending talent matching engine.

Says Kunwar, “The intent was never to generate revenues but to provide an incubator to companies that held some potential. Skillbay, for instance is a wholly-owned subsidiary of Syntel. This product provides a market place for matching skills and requirements.”

ATG
The edge intellectual property rights gives a company is well known, and in most cases is the sole reason that companies retain their competitiveness. Syntel’s Advanced Technology Group (ATG) is one such arsenal—the company today employs more than 200 technologists in this division. ATG closely monitors and works on futuristic international technologies. At present, the key focus area of the ATG group is the mobile computing space. Adds Kunwar, “Currently, we are working extensively on wireless technology. We are looking at integrating various applications into different kinds of wireless devices.”

Another area of interest is the DotNetExtreme group. This is a group within ATG that maintains a Web-based toolkit and resource centre for developers of Microsoft’s .NET framework. Syntel decided to participate in .NET as the company believes it is a paradigm for future distributed computing and Web-based applications. DotNeteXtreme recently received the Golden Web Award by the International Association of Webmasters and Designers (IAWD).

Product engineering
Syntel’s latest foray is in the product engineering services segment. Though this is a relatively new area for the company, it plans to make it a priority area in future. The product engineering services will focus on software companies and the R&D segment of non-IT companies. Explaining this move, Kunwar says, “Our business used to be with IT departments of companies. But companies are also into R&D and development of new technologies or products. A huge business opportunity exists here.” This move gives Syntel much-needed experience to work in the product development space without the risk of investing huge amounts. The company is looking at alliances as a part of its growth strategy in this area. It has also developed a framework for customers developing products.

Says Kunwar, “A lot of research and development has gone into putting this framework together. But any customer building products can make use of this framework to cut down on cost as well as time for developing products.”

Fixed price projects (FPP)
Syntel follows a fixed-price and fixed-time approach. Though there are times when the cost has exceeded the estimates quoted at the start of the project, Syntel has stuck to charging the client the quoted price. This has turned out to be one of the biggest plus points for Syntel. Elaborates Kunwar, “We believe in delivering on time and on cost, and we have managed to fulfil our commitments. Costs increase if clarifications are not made on time.

Time is important in FPP. If you take seven days to complete a project that could otherwise have been finished in 24 hours, all the processes are bound to go haywire.” Syntel has learned from its mistakes and has put checks in place and incorporated corrective mechanisms to reduce such possibilities.

Today, as more and more companies open up to the concept of outsourcing, Syntel’s future looks bright. The company has done its bit to remain market-friendly. From teamsourcing, to handling entire projects, to outsourcing and later on moving on to offshore outsourcing, the company has evolved a business model that is flexible, widespread and responsive to customer requirements.