Insights into the business practices that have turned a pair of Bangalore-based technology companies into respected global brands.
AHEALTHY balance sheet or surging stock market quotes may be tangible indicators of a profitable operation. But they sometimes tend to smother real achievements or obscure the far more significant successes that fuelled them. The decade-long saga of the Indian Information Technology industry - particularly the area of global IT-enabled services, three fourths of which are off-shored and outsourced to this country - has been told often enough, mostly in the form of breathlessly delivered numbers.
The publication of Thomas Friedman's book The World is Flat (Penguin India, 2006), an examination of the emerging globalised economy, had one salient point from an Indian perspective: it acknowledged, for the first time, that the achievement of the desi technology and service providers was not just a matter of working cheaper and faster than others. They leveraged their human resources and overcame shortcomings of infrastructure, in the process creating their own business model. This allowed dozens of Indian companies, many of them unknown players, to sit across the table from the world's biggest corporate entities and make them a Godfather-like "offer" they could not refuse. At least three - Tata Consultancy Services, Infosys and Wipro - soon gained iconic status at home and the respect of the predominantly United States-based customers for their combination of ethics and efficiency.
The presence of dozens of foreign interns in a company such as Infosys, who today choose to work in Bangalore to understand the Indian outsourced services model, is proof that the world, at any rate the corporate part, is learning to understand that "we are like that only" may mean more than a good humoured acceptance of eccentricity.
In many ways Wipro presents the most interesting pattern of evolution because it is rooted in a business model we can all recognise: the tightly held khandaani or family enterprise. To make the leap to being a pace setter and a role model for global corporates is nothing short of a miracle - possibly why BusinessWeek magazine encouraged its Senior Editor and software specialist Steve Hamm to spend an extended period with the company's various units to gain a better understanding of "the Wipro way". The result is Bangalore Tiger, a book which Hamm characterises as "a wake-up call for complacent Americans" who may recognise in Wipro the relentless drive for self-improvement and leadership that they themselves were once known to exhibit.
The charismatic head of Wipro's multiple businesses, Azim Premji, was a senior at Stanford University in the U.S. in 1966 when the death of his father forced him to return to India and take the reins of the family business. It was called Western India Vegetable Products and consisted of buying groundnuts and selling them as oil and oil cake. The fortuitous exit from India of IBM a year later enabled Premji to diversify into an area he was more comfortable with - the manufacture and sale of minicomputers. The fledgling player soon decided that the company's strength lay in software and by 1999 Wipro became the first company in the world to achieve the top level (five) of the Capability Maturity Mode (CMM), the industry's most stringent certification.
Gaining a foothold at the American end of business in the mid-1980s meant negotiating the chakravyuha or maze of Indian bureaucracy and foreign exchange regulations. Wipro pioneers such as Subroto Bagchi and Sridhar Mitta (both of whom have since moved on amicably to co-found their own companies) lived out of suitcases or used their bedrooms as offices to establish a foreign presence.
Like the other two of the Indian IT Big Three, Wipro has made the most of the simple economics of cost arbitrage - the ability to carry out business processes in India at a third or a fifth of the cost of those in more developed economies. But it has also branched out on its own in at least two ways: First, it has always maintained a presence as an innovative company and computer/peripherals manufacturer for the indigenous market, even when such activities seemed to make little business sense. And second, it continues to retain its brand name in a wide array of consumer product areas, from toilet soap to cooking oil to light bulbs.
Premji's own frugal habits - he flies by economy class and uses company guest houses rather than hotels - set the standards for a lean, mean operation in the company's formative years. However, the company has been a quick learner, especially when its foreign employees pointed out lacunae in its compensation and perks package. Today, Wipro no longer needs to pay the best wages to ensure talent. Its reputation for fostering an ego-free working environment where you can always knock on the boss' door if you have a bright idea bridges any small gap in pay packet expectations. Nevertheless there may be challenges as a telling quip that Hamm recalls from a former Wipro executive reveals: "They don't know how to have fun."
The presence in Bangalore of a large number of American IT companies has brought with it a sharp change in the workplace environment - where coffee and soft drinks dispensers and exercise machines are as much a part of the scene as bean bags and casual dressing. Wipro and other Indian players have had to make subtle changes in their psyche to ensure that they retain the loyalty of their core staff in an industry where, as branding expert Harish Bijoor famously put it, call centre employees would "change jobs for a better samosa".
The book is peppered with insights like this that ensure that it rises above an awed `gee whiz' success story. In another revealing instance, Hamm reports that Wipro decided in 2006 to spend $3 million on an in-house chip-testing facility - something that is normally done only by large semiconductor manufacturers. The design of chips may be just one arrow in Wipro's quiver of IT services - but by having its own captive test house, it was able to knock two months off the development process. It seems to be betting on this arrow turning out to be its agni asthra in the days to come, reeling in $30 million in business over the next three years.
The fact that Wipro shared such information with the author of the book is in itself an indicator that the company is now sufficiently self-assured to display its game plan for the future. For its competitors as much as for lay Indians, Steve Hamm's chronicle of Bangalore's tiger is a fascinating saga of home-grown success.
In 1999, five senior executives of Wipro - Ashok Soota, N. Krishna Kumar, S. Janakiraman, N.S. Parthasarathy and Kalyan Kumar Banerjee - left the company to start their own IT enterprise. They were joined by five others including Subroto Bagchi who had put in a decade with Wipro before leaving to work for the U.S. telecom products company Lucent. They co-founded MindTree and positioned themselves to develop business-enabling solutions and technologies. Their mission statement has an interesting phrase: They set to develop their solutions "in partnership with our customers, in a joyous environment for our people". Their corporate DNA, they agreed, would be "imagination, action and joy". The parent of this enterprise, rooted in the strong ethical business practices of their alma mater, Wipro, was apparent; but it seemed that they had felt an absence of fun and therefore made it a central plank of their new mission.
Seven years down that road, MindTree has become a Bangalore-based icon in its own right. It competes with dozens of similarly sized IT services, both home-grown and international, and is the youngest company in the world to be assessed at level 5 of the People Capability Maturity Model (PCMM), a certificate that is testament to its people-oriented processes. Its desire to be different in non-tangible ways is apparent in many of its human resource practices. Indeed, this is evident in even the architecture and ambience of its new campus on the road to Mysore, which glows with colourful and creative murals painted by dozens of spastic children.
Subroto Bagchi, a respected columnist of publications such as Business World, and now MindTree's Chief Operating Officer, has distilled the company's business experiences and lessons learned the hard way into The High Performance Entrepreneur, a highly readable, crisply written, treatise on the golden rules for success in today's corporate world. It should turn out to be inspirational reading for any new Indian entrepreneur, even as it serves - in some ways complementary to Hamm's book on Wipro - as another take on the business practices that are making an increasing number of Indian companies both admired partners and respected competitors.
"I always think of Mother Teresa as one of the great entrepreneurs of our times," writes Bagchi, and explains why: "She started with an angel investment of five rupees in 1948 from the Archbishop of Kolkata. By the turn of the century, her Missionaries of Charity had 602 homes in 125 countries." Like Gandhiji being thrown out of a first class compartment by a white conductor in South Africa, he adds, there is often a `push factor' that serves as what mathematicians call the necessary, but not sufficient, condition to launch a new movement or enterprise.
Once push became shove for MindTree's founders, the enterprise quickly developed its own work style: everyone in the company is free to question policy; Chairman Soota sends out a monthly electronic update called Snapshot and four times a year all MindTree Minds (everyone on the pay roll) meet for a session known as "What's on your mind?", where the heads of divisions are put on the mat by their own colleagues.
The company's first important assignment was to restructure the online reservation system for the U.S. car hire leader Avis. Luck - and their U.S. executive's early rising - won them a contract that by 2006 had grown to $16 million. The company's top achievers left jobs in multinationals with cushy lifestyles; at MindTree, everyone travels "coach" (economy class) and picks $50-a-night hotels when abroad. Bagchi turned this practice into a simple philosophy: The essence of ownership is postponed gratification.
At MindTree, integrity is a formal policy: an in-house publication called Integrity is given away to employees, competitors and customers. When considering the future, there is no room left for doubt and happenstance; each year they publish a clear goal for the next. MindTree's target for 2007-08 is $231 million in revenue, to be among the top 20 in the sector as regards profit after tax and return on investment, and to be among the world's top 20 most admired companies. It has also put on record its intention to give a significant portion of its profits to support primary education.
In print, some of this might sound too good to be true. This reviewer has one small advantage in evaluating the road map that MindTree has set for itself. He interacted with many of MindTree's founding minds for nearly a decade as a sarkari customer of Wipro's then nascent high-tech services. And he has watched MindTree grow from scratch and even attended some of the company's innovative human resource interactive sessions.
The real thing can always be spotted, if you know where to look. The reality of Indian path-breakers in business practices such as Wipro and MindTree might turn out to be more inspiring than the calm prose of two writers - one an experienced observer, the other, a key player - can conjure.
