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April 16-30, 2000 MASTER FILE |
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The
Kohli Touch
It's not a dotcom outfit, nor is it a public company with swelling market capitalisation. Yet, when Tata Consultancy Services (or to be precise its supremo F.C. Kohli) sneezes, the Indian software industry catches cold. Through an intimate, first-hand account of Kohli, lovingly called 'the grand old man of the Indian infotech industry', presented here is the formation and growth of Asia's biggest software consultancy firm and India's most profitable IT concern, TCS, and its standing firm in the face of the dotcom surge and M-cap lures. By Abhrajit Gangopadhyay
Perhaps, he is still repaying his debt to the nation (for the Government had sent himon a scholarship to a US university when he was a student). When dotcom is the buzzword, Kohli is on a different trip. He is laying the foundation of a true knowledge-based economy in India. "I'm doing little more creative than what I was doing earlier," says he. His new vision of 'functional learning programme', which apparently looks remote to the purview of IT, is likely to change the country's literacy graph soon. "Despite the best efforts in the last seven years, India could reduce the literacy rate only by 10 per cent," says Kohli. "The present methodology will take at least another 30 years to get rid of illiteracy. Instead of teaching alphabets, I propose to teach people words. If the person is able to recognise 300-500 words he would be able to read one-fourth of a newspaper and which would take only 10-12 weeks," explains a passionate Kohli. His enthusiasm is infectious. "The programme is already under implementation in Andhra Pradesh. We would be applying the latest technology for delivery, use software on monitoring the learning process of each individual. Lessons would be transmitted via wireless and TCS would look into translating the same learning modules in a number of languages," he says. Kohli is determined to add to the intellectual capital base of India. "Software is a knowledge-based industry and we need to upgrade ourselves in terms of numbers to get the best out of it," he says. Recently, the Ministry of Information Technology accepted his proposal to undertake a "gap analysis between the IITs and 50-odd engineering colleges". Such an exercise would highlight what structural changes and facilities are required to make them at par with the IITs. "Right now, software is sucking out people from all other streams of engineering. Top class engineers are severely lacking in infrastructure sectors. We would like to upgrade the curriculum of universities, perhaps in mathematics, and see whether we could extend it to make students suitable for software engineering," he explains. Yet, sometimes his social-consciousness is overtaken by his zeal to guide his company, Asia's largest independent software consultancy firm. "I want TCS to be among the top 10 consultancies in the world," he quips. Kohli, however, is a bit worried about the over-expectation from the Indian IT sector with which he has been associated for the last 30 years. Referring to the Nasscom-McKinsey study that predicted Rs 87 billion software exports revenue from India by 2007, Kohli says, "They could have been a little wiser than this. India's current contribution to the global software export market is only 1 per cent. If the predicted figure was around 1.5-2 per cent, it could have been realistic. I just don't know how they arrived at the figure." But even in that quest, Kohli is confident of TCS' role. Going by the achievements of TCS over the last 30 years, one could easily be assured of the company's prowess in software development and IT consulting. Yet, Kohli says: "The landmark years of TCS are yet to come. We have built up a structure with technology forecasting and we will leverage the new wave through our expertise." The dotcom deluge is likely to step up TCS' success graph as the company hopes to generate higher revenues form servicing dotcom businesses in the near future. Moreover, the Tatas, the parent group of TCS, are entering the arena in a big way along with plans of offering Internet services. TCS is likely to provide all mission-critical software required for these new ventures. In the flamboyant IT industry, TCS has managed to maintain a very low profile for all these years. "Personally, I never go out of way to meet people in power," says Kohli, adding, "in the end you are only known by the quality of your work. Your networking and client-to-client communications help in building your company." The TCS Tag Started in 1968, TCS was floating in uncharted waters of nascent Indian IT sector. Kohli, who was then at Tata Electric Co., was entrusted with the job of steering TCS. His quick study revealed that for TCS to stand on its own feet, it had to grow at a rate of 100 per cent for a period of next five years. Kohli extended that business plan to make it what has been TCS' blueprint for success ever since. The early days marked TCS' responsibility in managing the punch card operations of Tisco. But the revenues were not enough to sustain its 10 consultants and 200 operators. TCS had by then already eaten up the resources provided by Tata Sons, the holding company. The company, which was into management consultancy from day one, soon felt the need to provide solutions to its clients as well. And it happened that solutions needed software. A successful automation of Central Bank of India's inter-branch reconciliation process in 1969 brought the company similar orders from 14 other banks. Kohli's visit to the US (1973-74) in the capacity of a director of the Institute of Electrical & Electronics Engineers and a detour to Detroit, perhaps, fetched TCS its first big global exposure. Kohli made an unplanned visit to Burroughs, the then second largest hardware manufacturer after IBM, to ask for software assignments. The move was prompted by the need to attain technological capability, which could not have been achieved by catering only to the domestic market. Though TCS was not known to Burroughs, Kohli's charm was enough to win the hardware giant over. Soon assignments from others followed. The responsibility of foraying into the US market and generating orders through a new TCS shop there fell upon S. Ramadorai, the current CEO. Leveraging his old contacts (he is a University of California alumnus) and Kohli's IEEE connections, Ramadorai opened the floodgates for the firm. The first major order came from Institutional Group & Information Co. (IGIC), a data centre for 10 banks and 2 million customers in the US. TCS was asked to maintain and upgrade the existing IGIC systems. It was an onsite project for TCS, as red-tapism hindered importing a computer and doing work from the comforts of domestic centre. Another project from American Express on developing an accounts receivables system in 1979 swept TCS off the ground. As US corporations resorted to large-scale computing and outsourcing in a big way, TCS' business flourished through the 1980s. The next decade saw TCS emerging as an established customised software solution provider. Says the US-based entrepreneur and venture capitalist Kanwal Rekhi: "Kohli was the first to project a professional image and focused on being a full outsourcing partner." Among the many feathers in TCS' cap, perhaps the most notable one is the Sega project where it fought with Anderson Consulting to bag it. The successful completion of the project resulted in several big domestic projects falling into TCS' lap, notable among them being the orders from National Stock Depository Ltd and Tata Teleservices. Climbing the Value Chain The effort to move away from the onsite work to off-site developments in TCS peaked around 1988. Currently offshore development accounts for 75-80 per cent of the work. The shift was marked by the installation of IBM mainframe 3090 in Chennai. It was a time when mainframes were being junked. Kohli, however, firmly believed that the big iron would stage a comeback. With infrastructure and intellectual capabilities in place, marketing teams abroad went full-steam on scouting orders for mainframe-related development, their main targets being IBM customers and IBM research labs. Projects started seeping in. TCS has 68 offices in over 50 countries with certain centres dedicated to specific platforms like the Tandem centre in Mumbai, Digital centre in Calcutta, IBM mainframe in Chennai and the AS/400 in Delhi. During the Y2K buildup, TCS had set up a Y2K factory in Chennai as a short-term strategy. Now, with E-business being the buzzword, the factory is developing solutions for dotcom industries. "We have already put in a considerable part of the new strategy in place, but I don't have a time-frame in hand when we can evolve as a full end-to-end systems solutions company," says Kohli. Operation Consultancy Today, about 90 per cent of TCS' revenue comes from consulting, while the rest from products. More importantly, the company derives most of its revenues from overseas. Even five years ago, TCS earned 60 per cent of its revenue from overseas clients, which has gone up to around 75 per cent at present. Also, it is the overseas projects through which TCS makes money, while it just about breaks even with the domestic ones. Kohli says that domestic projects are important to train the people. "We train them here and send them abroad where they acquire new skills. Once they return, they use those skills in the domestic segment. So the workforce employed in overseas and domestic projects is somewhat a continuous process," explains Kohli. Average revenue growth in the past few years have been around 40 per cent. If TCS continues to grow at the same rate, the company's turnover could be touching Rs 4,000 crore by the end of 2003. "I would say such a figure is quite achievable," confirms Kohli. The early 1990s saw a tremendous surge in business, which also resulted in a massive recruitment drive by TCS. In 1993-94, employee strength was 2,345, which swelled to 9,800 in 1997-98 and currently hovers around 13,000 consultants. With such a large (and well-trained) workforce, the company also serves as a favourable poaching ground for other companies in the industry. "Our attrition rate once touched 17-18 per cent. It remained so for two years. Now it has come down to 7-8 per cent," says Kohli. "Attrition has two faces," he continues, "if the rate is less than 12 per cent then there is a fear of building up deadwood." TCS, which recruits heavily at the entry-level, feels that a healthy attrition rate is good for the industry as a whole. "Others are getting ready-made talents, while TCS is helping in honing skills of a different set," explains Kohli. In addition to training, TCS spends around 5 per cent of its revenue on various R&D centres like the Tata Reasearch Design and Development Centre at Pune. The Cybernetics centre in Hyderabad applies system engineering techniques to business solutions; the visual computing lab at Mumbai focuses on simulation, special effects and animations; Java excellence centre in Mumbai looks into competence in the Java language; while the Microsoft lab in Pune focuses on developing solutions based on Microsoft platform. TCS has alliances with several universities like the Indian Institute of Science, Bangalore, and foreign institutions like the University of Boston, USA. Software Business Yet to Take Off Though the company has introduced several software packages in Indian and global markets, response to them are still lukewarm. In India, TCS' financial accounting package 'EX' and the branch automation product 'ISBS' have been reasonably successful. But none of them found a good response in the global market. For a product to be successful globally, it has to be built abroad and which TCS could not afford in the past, while a few failed due to lack of marketing support, he explains. For instance, TCS was the first company in the world to come out with a CASE tool package but could not muster support from hardware vendors. Now, the whole of the product business has been reorganised as a strategic business unit. The company has earmarked nine key areas to focus on: banking, insurance, financial services, telecom, outsourcing, healthcare and utilities. It has set up a special group to monitor the line of technology, identify areas of activities and set the direction for developing technologies and utilities. While the growth in the software business of major global consultancy outfits like Anderson Consulting, PricewaterhouseCoopers and KPMG has gone hand in hand with the development of the management consultancy division, TCS has not been able to achieve the same. It was cited that no suitable person was found to head it for quite sometime. However, to get into the corporate league, TCS had restructured its management consultancy division. It has reconstituted the consultants into what is internally known as lines of business (LoB). Accordingly, those management consultants involved in financial LoB will work with software professionals in the area. |
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1975.
India is yet to wake up from the realms of red-tapism in the information
technology sector, sees computers with uncanny suspicion and very few are
aware of its capabilities. Yet, an electrical engineer by training
foresees the tremendous potential of IT in India and declares: "Many
years ago, there was an industrial revolution. We missed it due to
(factors over) which we had no control. Today, there is a new revolution-a
revolution in information technology, which requires neither mechanical
bias nor mechanical temperament. Primarily, it requires the capability to
think clearly. This we have in abundance. We have an opportunity even to
assume leadership. If we miss this opportunity, those who will follow us
will not forgive us for our tardiness and negligence." Twenty-five
years have passed since Faqir Chand Kohli predicted the emergence of India
as an IT major. He isstill at the helm, shaping the future, laying
foundations and directing new IT practitioners towards a better future.
Kohli is the deputy chairman of the country's biggest (and most
profitable) software services company, Tata Consultancy Services (TCS).
