point
Menu
Magazines
Browse by year:
A Hug(h)e Transformation
Pradeep Shankar
Wednesday, March 31, 2004
The macro-environment of the telecom industry is improving. The worst is over and we are seeing good signs of recovery,” Arun Kumar, President and Managing Director of Delhi-based Hughes Software Systems (HSS) appears quite confident during a trans-Pacific early morning phone interview from his hotel room in Washington, D.C.

He should know. For the last few weeks he has been crisscrossing continents, meeting up with customers to, as he puts it, “build relationships.” Over the years, Kumar has built a strong customer engagement model. “The senior management spend 25 per cent of the time in listening to customers—in giving them our mind share and demanding their mind share,” says Manoranjan Mohapatra, Executive Vice President and Chief Operating Officer.

Unlike during the slowdown, Kumar sees that this time his customers have a definitive plan to build new products, provide new offerings and add new features. “Time to market is becoming the driver once again,” he says.

But Mohapatra cautions against any inclination to perceive this as a telecom boom. In fact, he argues that the equipment vendors, who are being forced to cut costs, are not spending.
This is reflected in the decline in their R & D investments, Capex and Opex. “In order to make quick profits, OEMs have increased their outsourcing activity.”

The volatility that telecom organizations face today has forced them to adapt rapidly changing business and market conditions, with a outsourcing coming quite high on the list.

But the challenge for the telcos doesn’t end there. “While the uncertainty in the environment dictates that outsourcing is the preferred path, the journey cannot be smooth unless the partners selected share the same business goals. It is here that HSS stands out by providing expertise in bridging quality-gaps and cultural and process gaps,” avers Kumar.

It is this flurry of outsourcing activity that is helping HSS. Over the last few quarters, HSS has been continuing to grow its business with all its customers: Nokia, Ericsson, Lucent, Nortel, Motorola, Alcatel, NEC and Cisco.

If the client list of HSS looks like the who’s who of the telecom industry, it is primarily because of HSS’ focus on the telecom domain. In the last three quarters alone the company has signed on 45 new customers. However, Mohapatra hastens to add, “We are not counting the number of customers we are adding. Our intent is to grow with the existing customers. Apart from targeting OEMs strategy, we have identified about 100 tier 1 and tier 2 customers; out of which we may be working with only 10 per cent of them. Our intent is to expand on this base.”

Sprouting New Wings
Just a year ago things were pretty different. The depression in the global telecommunications market during the late 90s saw HSS down in the doldrums. What made it tougher for HSS was its focus being restricted to the original equipment manufacturers (OEM) segment—the depressed market conditions making it difficult for the management to make any future predictions.

If HSS had to survive the slowdown it had to diversify into newer areas. And these new areas had to be within the telecom space. “We did not want to lose the branding and positioning advantage we had, and the differentiation we could get because of that,” says Kumar. The telecom service provider space seemed to be a good bet. The company decided to limit its research and development (R&D) spend on new product development and shifted its focus to professional services.

According to senior officials, the focus on the telecom service provider segment is an attempt at “de-risking” its business by providing network infrastructure and applications, and taking on networking and business support systems.

The challenge now was to change the employee mindset and make them understand the changed strategy in the company’s business. “It wasn’t an easy task,” says Mohapatra. He concedes that mundane maintenance support activities were not respected as well within the organization.

“During the good days, we were taking pride in executing niche work in cutting-edge technologies. Suddenly switching over to legacy maintenance was not acceptable. It was predominantly a culture issue. But as we moved through the slowdown it was easy to change the mindset of entire organization. At the end of the day what that matters is how you create value to the customer, not whether you are doing a “sexy” or a not so “sexy” job,” recalls Mohapatra.

HSS set up two new divisions—Business and Operations Support Systems and the Communication Application Group. The next step was to aggressively strengthen its client list. Many Indian IT services companies like Wipro, TCS and HCL were already competing in the services space. Their focus was more on providing enterprise applications, a ‘fringe area’ according to Deepak Mittal, Head of BOSS at HSS. “The real play is in the core of the network,” he says.

HSS drew up an execution plan keeping in mind its strengths. The two new divisions leveraged the knowledge and expertise that the company had built up in the telecom domain and went into providing the core network phasing applications. It then leveraged its existing relationship with OEMs to target the service providers. The challenge for its sales team was to attune to the market dynamics that existed in different geographies.

The new strategy is working, especially in Africa, Middle East and the Asia-Pacific markets. “New operators are coming into play in these markets. Capital spending and equipment deployment is growing because of pure market conditions. At the same time, the subscriber base is growing as costs are declining, thus making it highly competitive and challenging for carriers to make margins. As they search for new revenue streams, there is enormous opportunity for us, especially in the area of system integration,” says Mohapatra.

In the U.S, where the service provider space is already well entrenched, HSS has adopted a direct approach. Though it has not signed on with any Tier-1 service provider, HSS is working on pilot projects with some of them. Mittal’s pitch to his potential customers is: “Wipro, TCS, Infosys are IT service companies doing telecom. We are a telecom company providing you services.”

The BPO Foray
In order to further de-risk its business and create newer opportunities, HSS decided to enter into the business process outsourcing (BPO) segment. “Our intent is to become an end-to-end telecom service provider,” says Kumar. About a year back, HSS began providing technical help desk and back-end services to its parent company- HNS.

Having felt the pulse of running a BPO business, HSS is now actively seeking customers for its BPO division. In the near future, it hopes to provide business support services and billing operations to major telcos across the world.

The Pressure Eases
The HSS strategy of prudent diversification is being reflected in the revenue and earnings growth. For the last six quarters the company has consistently shown growth. In the current fiscal year closing March 2004, the company expects a turnover of around $80 million. Kumar expects the company to cross $100 million in turnover in the next fiscal year.

Just 20 per cent of the company’s revenues come from its products business, with the rest from services. As its Chairman Pradman Kaul rightly puts it: “The magic of our transformation has been to grapple with market realities and in getting real; discover new strengths, new energies and renewed commitment to customer value creation. This is our first reason for confidence in our future growth.”

Even as it grappled through the tough times, HSS has been consistently investing in R&D in the areas of Wireless, Broadband, Next Generation Networks and Communication Applications. This has enabled the company to align closely with the current market demands and also create its own IPRs. HSS has filed a total of 23 patents in the area of wireless. The company is now expanding its research work towards innovating third generation (3G) technologies to be used in mobile phones for global market.

“The rapid proliferation of mobile technologies such as Wi-Fi and 3G has created tremendous opportunities within the telecom handset market. This space offers tremendous growth opportunities for HSS,” says Kumar. The magic of HSS transformation has just begun to unfold. With the business direction set and having delivered the turn-around, Arun Kumar can look forward to a relaxed Sunday tee-off—a luxury his competitors can ill afford this time of the year.
Twitter
Share on LinkedIn
facebook