'Offshoring firms experience major changes'

BANGALORE, INDIA: The global meltdown has changed significantly the expectations from the India based offshore players. The large players during the recent boom times had got used to being pursued by clients and to some extent did not have to sell aggressively like the more nimble players. However, the meltdown now means that some of the large clients that were being serviced by various offshore players have actually either been acquired or have gone bankrupt and as a result their business is in itself in doubt, says Keshav R. Murugesh, president & chief operating officer of Syntel Inc.

In a interview with Manu Sharma, Associate Editor of Cybermedia, he spoke on the impact of the global recession and how Syntel proposes to tackle the IT budget problems in India. Excerpts of the interview:

CIOL: Does your company propose to cut its IT budget for 2009? If yes by how much? 

Keshav Murugesh: Syntel is an IT services and KPO player offering globalised services to companies that look to build new business efficiencies or reduce their overall costs thru an offshore or global delivery model. Based on its own pipeline of business, Syntel will continue to invest strongly in its own IT infrastructure. Of course, we will be careful with how we direct our budgets focusing more on cost saving as opposed to discretionary projects.

CIOL: How much of IT work is outsourced in your organization? 

KM: Very little is outsourced. Desktop and hardware support is one area where we work with vendors.

CIOL: Would you still go ahead with the outsourcing works during these hard times?

KM: We would still continue our current practices as what is outsourced is not core to Syntel's portfolio of services. We access these services in an efficient and cost effective manner already from vendors and the overall spend on outsourced services is very low. We are fiscally very responsible in our day-to-day running of the company whether there is recession or not.

CIOL: What steps do you see companies taking to help during this crisis?

KM: The sales cycles would also have definitely increased as the survivors prepare for recessionary times and look to get "more bank for the buck." Also I would expect that discretionary spending would give way to cost saving projects in this environment. 

On the positive side, the need to save more cost and harness more efficiencies would actually push more of the uninitiated to experience offshore IT and KPO services and this is a big opportunity for firms that are flexible, nimble and responsive. Clients will need to have their hands held while they go thru this process and the Tier 2 firms have the biggest opportunity. Firms like Lehman now have been absorbed into three other firms and there is now the opportunity to pursue three clients against one earlier. 

CIOL: What do you foresee as an outcome of this global recession?

KM: The  meltdown has changed significantly the expectations from the India based offshore players. The large players during the recent boom times had got used to being pursued by clients and to some extent did not have to sell aggressively like the more nimble players. The meltdown has meant that some of the large clients that were being serviced by various offshore players have actually either been acquired or have gone bankrupt and as a result their business is in itself in doubt. Since these were large players like Bear stearns, Lehman, Wamu, Wachovia, Fortis, etc it has brought in a lot of uncertainty to players exposed to them. I will not be surprised if some of the offshore players exposed to these firms, announce job cuts as a result.

CIOL: What is Syntel doing to counter this threat?

KM: Syntel with its focus on innovation and being a flexible, nimble, right sized player with superior ‘Risk Management’ policies has been largely unaffected by the meltdown. In fact, we are seeing more attention now than before as clients look to us to help as they aggressively pursue the offshore model. Larger competitors are less geared to serve clients with a smaller spend but our people, technology and processes are built around that reality. We just completed our client event in the US and all our global clients present there spoke confidently about their businesses even in this environment and how they were keen to benefit even more from our focus on our Innovation program called ‘Syntelovation’. We expect decision cycles to be longer but the pipeline is strong.

CIOL: What steps do you suggest outsourcing companies to take?

KM: Companies in the offshore space will need to focus on becoming more efficient thru productivity, utilisation focus and harvesting of reusable tools and components. Every employee has to be focused on being a co-innovator with the client and ensuring the client is able to access new efficiencies as a result.

Every client has to be special and at this time client intimacy will take centre stage. IT and KPO firms like Syntel who have the capability will focus on new offerings around integration, risk and governance. All of this will enable the top line. At the same time since sales cycles will be longer and some clients in the BFSI space may reduce budgets the offshore firms must take steps around geographical expansion, adding new service offerings and waste elimination. 

The short term will be tough for some companies who are not thinking ahead and who are not intimate with their customers or their business. It will also take some time for the BFSI clients to finalise budgets. Firms exposed to the affected these clients will have some uncertainty.  However the impact on other verticals as of now is minimal. In the medium term however the need for clients to reduce cost and drive more innovation will actually mean even more business for attentive IT and KPO Companies who leverage their talent, passion and innovation capabilities. Syntel has increased its revenue and EPS guidance every quarter in this environment and this is a testament to how we are described by the industry analysts " Small enough to listen, Big enough to deliver."