Headstrong, Aiming For The Best
Date: Tuesday , November 03, 2009
The office of Sandeep Sahai, President and COO of Headstrong, is bustling with activity. The 46 year old entrepreneur turned leader embarks on his new gig as CEO of the company. So what’s next? There could be no better time to ask him than now. His unwavering focus is clear and evident in his spontaneous reply - making Headstrong an undisputed leader in the world, by concentrating on one thing: Financial Services Technology.
But why the financial services area? Isn’t the space already crowded with IT services players? Sahai is quick to read your mind. “For any business to be the cynosure of its customers, focusing on a niche segment is critical to attaining domain leadership,” he says. The BFSI sector continues to lead other industries in its ability and desire to implement complex technology solutions. The IT industry cannot ignore the simple fact that financial services companies were the earliest adopters of outsourcing and remain the largest spenders on technology. With so many regulatory changes continually happening, financial instruments and processes keep changing – hence the technology needs of the BFSI never stabilize. According to Gartner, the BFSI sector’s global spend was $176.8 billion for external IT services in 2007. The BFSI sector in the U.S. alone, the No. 1 market for Indian IT companies, spent $84.4 billion for external IT services.
The market is still huge and growing, and so are the players. Sahai is clearly quite confident of tapping into this growing pool of opportunities and making his firm the market leader. He is a believer of ‘absolute standards’ when it comes to leadership and excellence.
Originally founded in 1981 as James Martin & Company, Headstrong is a global consultancy firm focused on domain-led solutions in vertical niches. Its philosophy is to achieve a level of thought leadership and business knowledge in each chosen domain that makes the IT solution look almost incidental. Once the domain becomes the center of focus, the span of services necessarily needs to be ‘total’ - from business strategy to functional consulting to application development to maintenance to business process outsourcing. This approach has enabled Headstrong to help its clients achieve measurable results and integrate their businesses with their customers, suppliers, and employees to improve enterprise value.
Headstrong has grown rapidly over the years. From its early days of pure business consultancy to its present focus on end to end solutions, the firm has come a long way. With a 25-year track record of proven results, the company’s client base includes many of the world’s most respected companies (Headstrong’s tagline that 9 of the top 10 investment banks in the U.S. are clients is no exaggeration, we checked). Headquartered in North America, with delivery centers in India and the Philippines and offices across Europe and Asia-Pacific, Headstrong’s offerings are currently centered on the financial domains of 1) Derivatives, 2) Reference Data, 3) Asset and Wealth Management, 4) Prime Brokerage and Securities Financing, 5) Mortgages, and 6) Compliance and Risk Management.
Much has been said and discussed about the current economic gloom and its repercussions on the global IT industry. Longer sales cycles, delayed purchases, and more scrutiny from IT spending decision makers is just a small part of the problem. And yet, troubled customers are viewing IT as a way to transform their businesses by adopting leaner operating models. According to Peter Redshaw, Research Vice President, IAS banking and investment services, Gartner, companies in the BFSI sector are expected to cut their IT spends by up to 20 percent. Instead of viewing these cuts and squeezes in IT budgets as a liability, Headstrong’s current offerings are targeted to align with customer needs and reduce costs by increasing operational efficiency. The company achieves this by offering flexible, repeatable, and platform-based solutions (as opposed to custom-built manpower-based solutions alone). To this end, it recently acquired the mortgage processing leader, Lydian Data Services and asset management outsourcing firm iXPartners. Headstrong is now mentioned as one of the top service leaders in the ‘2008 Global Outsourcing 100 List’, and also ranks in the exclusive FinTech list of 100 top financial services companies in the world.
How Headstrong stands out
Now that Headstrong has gained global recognition and respectability under the reign of its current CEO, Arjun Malhotra, Sahai aims to scale this status by making Headstrong an ‘absolute leader’ in financial consulting.
Today, the IT services market is like going to a restaurant and having Indian Chinese. When you ask what they do, 90 percent of mid-tier companies rattle off that they specialize in manufacturing, healthcare, finance, and so on. When growth slows down in one segment, they add more verticals to their growing list of domains; the same way restaurants add more cuisines to their menu when they don’t have enough customers. The only way for small and mid-tier companies to survive with legitimacy is to specialize, to become the best in something. In other words, as Sahai says, you need to build a niche and protect it through continual innovation. It should be analogous to a Chinese restaurant that specializes in Cantonese cuisine – not just a forte, but a super-specialty.
Specialization, however, is not the only unique quality that sets Headstrong apart from the rest.
To be the best, you need to hire the best. At Headstrong, 30 percent of its 1,450 member India team are IITians, IIM graduates, or are from similar tier-I institutions. In order to keep up with customer demands Headstrong, like every other company, needs to expand rapidly and move higher up the value chain. But in Headstrong’s case, it becomes equally important to keep its staff intellectually challenged, given the top grade hiring profile. “I really want everyone in the company to perform at a level that makes them proud of what they have created or achieved, and secondarily makes them proud of the company they help create,” says Sahai.
Sahai brought out another interesting point. It’s not just hiring from the best institutions that matters. Hiring local talent is equally fundamental. For instance, imagine you need to construct a modern expressway in Delhi. You can easily give the contract to a top-notch foreign company and get it built. But when it comes to defining the route itself, can you entrust the job to the same top-notch overseas talent? Probably not. You would more likely need to hire a team with 30-50 percent Delhiites. Why? Because top talent is no substitute for local knowledge. The Delhi team would understand local traffic patterns, business needs, and site issues like no foreign company could.
The same philosophy works for IT. You have to be local in your local office. You need to have a decent percentage of local people in the delivery organization, not just in sales or the front offices. So, Headstrong’s philosophy is: hire not just the best people from the best schools but local people from the local industry who have ‘been-there-done-that’. If you’re focusing on derivatives, for instance, hire the best derivative traders, not just Java programmers from India who’ve ‘also worked in derivatives projects’. Earlier, in order to get an order from a client like Goldman Sachs, one would have to contact the CIO of the firm. To talk to the CIO, you needed to talk the techie’s language. But Headstrong’s strategy involves a paradigm shift. As a domain specialist, you need to know the business of the technology as much as the technology itself. You need to sell to the business leader more than to the CIO. Therefore, you hire local domain expertise and train them in technology rather than the other way round. That is what differentiates Headstrong from the rest.
Solutions for the Best
In the financial services market, products change every day. Companies are challenged with developing and implementing growth strategies, identifying innovative ways to attract and retain customers, effectively transforming their business, and managing the impact of these changes on the organization. In this fast-moving environment, achieving domain leadership is not easy. How do you constantly stay ahead of the market?
Headstrong achieves this by continually re-inventing itself. The company’s domain specialists are gurus in their trades. They are regular speakers and participants at trade conferences and industry forums, and stay abreast with the latest trends in their respective verticals. They are constantly analyzing how upcoming regulations and changes will impact business flows for their customers. This gives Headstrong a level of thought leadership that is almost unparalleled and enables it to provide advisory services to improve and transform business operations and technology strategies far beyond mere IT implementations.
Examples abound. Take for instance, the case of message connectivity. Different segments of the banking and electronic marketplace industry use different communication protocols and message or file formats while exchanging information. These formats and protocols are continually being updated to account for changes in the business process or technology upgrades. This presents companies with the task of constantly devoting time and resources to upgrade their connectivity infrastructure.
While generic technical approaches do exist for connectivity and message and data transformation, there are almost no solutions that combine generic methodologies with domain-specific connectivity for different industry segments like equities, prime services, and derivatives. Most connectivity solutions are either pure technical answers or are specific to very narrow markets. There are no solutions that offer a pre-build connectivity layer across market segments. Headstrong cracked this problem by coming up with a single framework to manage the entire connectivity process across platforms and across asset classes. The framework, christened iceFish, supports most financial formats – like FIX, SWIFT, FIXML, and FpML – as well as the standard formats like Excel, CSV, Fixed Length, and XML. It supports multiple communication methods – messaging, FTP, sockets, TCP and IP, email, and databases as well as proprietary connectivity formats – ensuring that one can connect with most financial entities across asset classes.
A solution like this demonstrates deep industry expertise. Headstrong drew upon its competence in different asset classes across verticals to engineer a proprietary solution that helps its customers get away from the cycle of custom-developed connectors every time an upgrade was required. Initial market feedback on iceFish has in fact been so positive that Headstrong has ‘productized’ the solution. As I write this article, two top-tier investment banks are deploying iceFish to connect their derivatives post-trade processing platforms to different industry utilities.
Challenges: The Tough get Going When the Going gets Tough
A $75 million company in 2003, Headstrong’s model of specialization in the financial industry has yielded sustained year-on-year growth in earnings, profitability, and market recognition. The company recorded revenue of $180 million in 2008. But high growth brings its own set of challenges.
On the one hand, the transition from a small company to a large one brings changes to the business model. More importantly, it presents challenges to the operating model. You need to centralize processes, knowledge management, and business operations among other things. You need to maintain a culture of performance and entrepreneurship.
On the other hand, high growth sets expectations for even higher growth. The overall market for IT and KPO is still expanding. Headstrong’s challenge is to outpace industry growth and become a $500 million company in the next three years. Clients always want to consolidate vendors and work with the biggest companies. So Headstrong needs to balance its specialization focus by quickly getting into the ‘big company’ club. Global recognition and respectability is already there, but what the firm wants now is sustainability and a workforce that is always ready to think out of the box and innovate.
Employee Programs: Keeping them Motivated
Hiring the best and hiring locally may take you in the right direction, but that alone won’t take you to the pinnacle you are aiming at. Retaining employees and keeping them motivated is equally vital to building a successful organization.
A stand-out aspect of Headstrong’s culture is its strong focus on meritocracy and performance orientation. Every Thursday, Headstrong publishes a performance report of all its teams. It is no secret within the organization as to how the Bangalore or Chicago office is doing. There is no debate on whether a particular office, leader, or employee is doing well or not – everybody knows how well everybody is doing. Transparency is the key. In a way, this breaks down ‘power centers’ – it is hard to play favorites or have godfathers in the company with so much transparency. Sahai says, “We don’t want to build the best offshore company. We don’t want to build the best onshore company. We just want to build the best consulting company globally when it comes to consulting for financial services.”
Striving to create a work environment that is challenging but satisfying, and which provides ample opportunities and rewards to strengthen and expand employees’ careers is another unique aspect of the company. The company has various institutionalized programs and activities to ensure retention of its employees. Whether it is a company-sponsored adventure trip to the Corbett National Park, or a gym and crèche at its India development center, there is enough to keep employees stress-free, comfortable, and having fun at work. HeadsUP, the company’s Indian center’s newsletter, focuses on keeping employees informed of various business related news, major events, as well as travel experiences shared by colleagues when onsite.
Headstrong employees are not to be left behind when it comes to community service and joining relief and rehabilitation efforts during times of grave challenges. During the wrath of typhoons, Ondoy and Pepeng in the Philippines, the management and employees put up a disaster relief fund for people whose homes and properties were damaged by the floods. This was just one element of the company’s ‘2.Outreach program’, developed at its Manila center, to engage its 650-strong workforce in community-conscious programs. Or take for instance, the ‘tree planting activity’ where Headstrong adopted 14 trees for a year and a half, providing not just fertilizers and protection, but tender care and continual attention.
‘Fun@Work’ apart, the company invests in serious efforts when it comes to competence-building for its employees. This is only to be expected, given that the company’s USP lies in its domain capabilities. The company sponsors educational degrees and certifications like CFA (Chartered Financial Analyst) and FRM (Financial Risk Manager) for employees, and has tie-ups with a number of educational institutions in India and overseas, including IIM Bangalore, the New York Institute of Finance and the Global Association of Risk Professionals (GARP). Competence building is both at the functional as well as technical level and is driven by each competence vertical separately. For example, the quality assurance group at Headstrong recently nominated a number of employees to programs like ISTQB Foundation and Advanced course, NCFM, and CSTE among others.
Aiming for the Best
With a deep commitment to its focus on financial services, Headstrong is investing aggressively to extend its footprint in its chosen verticals. Constant innovation, building a strong and expert team, and having the most ambitious and forward looking leadership have all made the firm a natural choice for its customers. As one of its clients, the managing director at a specialized insurance company in Hong Kong sums it up, “The company’s CRM project was more than just a technology implementation. It was a business transformation. Like any transformation, change was constant. What differentiated this project from most was that our implementation partner Headstrong understood and managed that change successfully. It was Headstrong’s management, insights, and assistance that proved instrumental in delivering our integrated CRM solution successfully.” And, nothing carries more value than a happy and satisfied customer’s praise for the vendor.
When things were not looking so bright for the company in 2003, after the merger with TechSpan, an IT consultancy services firm, it was leaders like Sahai and Malhotra who took over the affairs of the firm, steering it out of troubled waters, and finally bringing it to its current state of success. Sahai says modestly, “It is the trust that employees and customers alike have in the leadership that has gotten the company so far. But it’s not leaders alone who shape the path of success. The sales, delivery, recruiting, and support teams are equally responsible for playing a key role in shaping the company’s strategy and taking it to its current position in the market.”
With the same leadership zest, Sahai, a Dosco, and an alumnus of BHU and IIM Calcutta, is all set to lead Headstrong to greater heights. Sahai has 19 years of distributed consulting experience. Having started and grown companies in the U.S., Europe, and India, he is also a frequent speaker at industry conferences on offshore outsourcing as a strategic tool for IT managers. “The older generation did a dramatic thing for us. They brought India respectability across the world. They built big companies, professionally-run companies. My generation now wants Indian companies to be world leaders - we can drive the world, and that keeps us excited. All we need is an unwavering belief in each of us that we can be the best. As CEO, that would be my biggest driver - to be the best, by being different. I will try to bring that zeal to all our staff. I am looking to prove that the next generation can provide that shift,” says Sahai.
With a strong leadership, niche focus, and a mindset to continuously innovate, Headstrong will undoubtedly become what Sahai has dreamt of: best in the world.
Founder: Dr. James Martin
CEO designate: Sandeep Sahai
HeadQuarters: Washington DC
Other offices: Across Europe & Asia Pacific
Vertical: Financial Services