Computers Today, July 16-31, 2000; Chief Guest

July 16-31, 2000 CHIEF GUEST

"We focussed on the new world, we have no baggage"

If he doesn't figure in the millionaires lists, it's perhaps due to a 'technical' slip. Though Arjun Malhotra outwardly walked away from the HCL group of which he was the co-founder, he has that chip on his shoulder (and may be enough of its stock too). He kick-started Techspan on a totally different platform-purely to Net orient businesses. Based in the US and in Noida, Techspan is already a smart fast-track company. Malhotra chatted with Computers Today. Excerpts:

On Challenges of the New and Old

Our business model focusses on how to deliver digital solutions-primarily business-driven, with typically 6-9 months project time and shorter life cycle of applications and development process being evolutionary. Any company that you know today in India belongs to the traditional model-more technology cost-oriented, with long 2-3 years project time and longer life cycles. Now, how will they make the transition. Can they and do they need to make the transition? These are open questions because what's happened globally is that firms like Cambridge Technology Partners (CTP) are not in the digital economy. They are the traditional companies. They were in the services trade in a big way. Now, they have made the transition. In the digital economy, firms like Sciant and Viant are the leaders with meagre revenues compared to CTP. But they are the leaders and their market cap is way up. That's the difference. Now, the IBMs, E&Ys or the big five (consulting firms) are the incumbents. They have big customer relationships, they can find their way of getting the market share. In fact, someone's report categorised well: there are the pure play firms like ours; there are the incumbents like IBM Global Services. Then there are the converts-traditional IT services firms. The converts own only seven per cent of the market, while the pure and the incumbents share the rest. The incumbents would be there because they make for the relationships. They may lose a bit, but they hold the market share.

Hardware is not Dud

Estimates say that there will be 11 million online users in India in 2003 as against less than a million now. If that happens, everybody should be investing in hardware companies. Imagine 10 million PCs (to be bought) in three years. If it's true, I should be buying stocks in every hardware company. Either the numbers are not right or the people are illogical. Look at the people putting money into dotcoms because there are so many online users. At the same time, they would not (like to) invest in the hardware, it's completely illogical.

Net as the Medium for Change

In 1975, when we started (HCL), we thought microprocessor would change the face of the world. But we used microprocessor technology to build things, products or devices that changed the world. Now you are providing a medium, an access methodology to change. To think of a paradigm shift, think what happened to commerce with the telephone. The voice was always there. And think of what commerce was without the telephone. Today the PC is a device like the telephone. You can now make it interact with commerce. That is exactly what the Internet is doing.

On Dotcoms

Part of it is euphoria. You don't know what is going to happen. Everyone is making some assumptions. Dotcom scenario is exactly like what happened to software services companies a year ago. They get valued very high. By any stretch of your imagination, can you take a Rs 4 crore company and say Rs 200 crore valuation. As no one knows which one is going to be the winner tomorrow, they are going to take the risk. It's like a lottery. In the dotcom, everyone forgets the basic things like profits and cash flow. They think of market share, eyeballs-it has its own language.

On the Pure Play as his Turf

The pure players are getting all new customers, the converts are having a problem because they are not changing enough-from technology-driven services to business-driven model. Nobody talks of the CIO now. We talk about the CEO. He uses technology as long as it delivers to him what he wants to deliver. CEO is not interested in bits and technology. He tells you the problem so that you fix it. You scale it, make sure it is scalable to what he wants. So we have to understand their problem and give them what we consider the relevant technology services. So far from being a technology services company, we become a business consulting company. It's not business process reengineering, but definitely we do some strategic business planning with them.

In the earlier model, I would not even think of doing it because it was someone else's domain. So, you get paid differently. An average services company would get $45-65 or may be $75 an hour in the US. We don't do anything less that a $100 an hour. Our average billing rate is $103 or so. Plus a lot of our consulting is extensive, meaning I don't relocate my people like a normal company does. I fly the guy. He stays in a good hotel, may be for a week or so, and then flies back. The customer pays for all the expenses. That's the fun because that's how you are positioned.

On Techspan as the New Breed

What's happening is that no longer people are talking about a year to develop a project and then two-three years for changes. They say they give something in 20 days and I want to change it right after it, because it is a new paradigm and I don't understand how it works. I am not fully aware, I can't give you specs. I would keep changing. That's really what the world is. That's where we (Techspan) are. Not that we are smart. It's just that when we got into business, we had no baggage.

If we had 5,000 people who are working on the job, reluctantly employed, we change them and say forget what you are doing, let's go into the new world, it's not possible. So, we didn't have that baggage. We focused on the new world, it is growing much faster. And in the supply-demand situation, people want more jobs done than you do and they are willing to pay the price.

On the Chance for India

What excites me most is the opportunity knocking at the door. 'India will do it at its own pace,' that used to be a nice statement. But I say, the world can leave you behind. You (India) are relevant today because you are a source of raw material. But the point is would you like to remain being just a source of raw material or do you want to be a value-added processor?

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