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July - 2004 - issue > Cover Story
Syntel Supremo Bharat Desai
Karthik Sundaram
Wednesday, July 9, 2008
There is a picture of him shaking hands with the Pope, proof of his globetrotting experiences. On his desk rests a sculptured twirl of brass, proof of appreciation from his alma mater, the Indian Institute of Technology in Mumbai. And last week, he plucked his vice president of marketing, Jonathan James, out of his comfortable Cary, NC residence and is shipping him, family and home, to India for a fairly long stint—irrefutable proof that Bharat Desai doesn’t just claim that he is building Syntel into a global corporation, but is executing it quietly.

“From this summer, we are recruiting graduates from U.S. universities and will have them work from one of our global delivery centers in India,” says James, “where they can truly learn to work in a globally-distributed model. There are no borders at Syntel and fresh graduates who can grasp this seamless culture will be immensely rich talent for any company.”

BHARAT DESAI. FOUNDER, CHAIRMAN AND CEO, SYNTEL. “Experience is a valuable tool if you remember it,” smiles the CEO. “When we began Syntel 24 years ago as a staffing operation, I remember how hard we had to knock on customers’ doors to get our first client. That taught me some good lessons—you do whatever it takes to keep your clients happy, and they will stay with you. Be flexible. Clients change according to their markets. And if you can change with your clients, there is no reason for them to go away. Finally, honesty always pays. Clients are human too, and will accommodate lapses only if you are upfront about them.”

Syntel’s client list is testament to Desai’s execution. Federal Express, Humana, HCA, JPMorgan Chase, the Big Three in Detroit, Target. Perhaps the most compelling element of familiarity with Desai’s company is its flexibility. “There is a fundamental change taking place in the services industry which is going to redefine the economics of the industry itself,” he says. “It began with purchasing services locally—face-to-face. But that has changed dramatically with the Internet. Now a company based in one nook of the world can establish a full business presence in another corner and service a local client—seamlessly. This very redefinition of supply and demand is now throwing open closed-door markets, breaking monopolies, and demanding newer talent and mindsets in people.” Syntel is constantly reinventing itself in tune to the market demands. “From the much-quoted (laughs) $2000 garage-startup IT staffing outfit, we are now a flexible, domain-deep services partner for our customers.” The fundamental shift, continues Desai, will eventually lead to services providers undertaking complete customer application lifecycle—deployment, customization, updates and maintenance, and so on—in the offshore/onsite business services mix. In fact, Syntel recently announced an exciting partnership with the Government of Maharashtra to build a new 40-acre technology campus in Pune, India that will eventually support more than 9,000 Syntel employees. Phase I is scheduled for completion in July 2005.

Evidence of maturity can also be seen in the number of new countries and companies competing for a piece of this growing pie. More importantly, the processes and organizational structures service providers deploy are being refined as more sophisticated projects and processes are moving offshore. “In the future, as companies become comfortable using offshore resources, they may move toward a hybrid global sourcing model, where critical IT programs are resourced from multiple offshore firms located in different regions of the world,” says Tom Murphy, an analyst with IDC’s IT Advisor research program.

As large corporations internalize offshore outsourcing as business-as-usual, observes Desai, the next in line for change of mindset will be product development companies. “Lets step back and ask what drives a product company’s survival? Is it the core technology? No, it is the unwavering focus on the market, and the shortest time-to-market development path. Are markets static? No. Is a shorter time-to-market a given, from simply setting up an offshore unit? Not necessarily,” comments the CEO. “Setting up an offshore development team is not their core competence. They would be better off working with a partner like us.” Product engineers will then have the flexibility to slice markets and define their product architecture, and partners like Syntel would be their virtual development team. “With us, they can change their code and design on an hourly basis—we understand demanding and finicky customers!” And given Syntel’s expertise in the on-site client facing presence backed by offshore development strengths, product companies can use their shrinking resources in building up their marketing, client-side implementation and so on, which will drive revenues.” For a $5m seeded startup, it is not a simple issue to fly into India and put together an offshore team. Trust me,” he laughs. Over the last four quarters, Syntel has begun laying the foundations for this product development support business and the company has optimistic plans for this revenue stream.

The third evolution waiting in the wings, Desai says, is the convergence of IT Outsourcing (ITO) and Business Process Outsourcing (BPO). “Today, clients are sourcing out technology maintenance to company A, and the business process riding on that technology to company B, which leads to a great deal of pain in the process.” The evolution will lean towards converging both the ITO and BPO to a single entity, which, in turn will handle the process in a completely different manner. “Once the convergence is in place, the pricing in the industry will change,” adds James. An increasing number of outsourcing projects are executed on a fixed cost basis, with defined cost/timelines for development projects and agreed-upon Service Levels for maintenance engagements. Syntel leads the industry in this category, with more than 50% of the company revenues coming from fixed-price work. But with the convergence of ITO and BPO, service providers will now be required to truly partner the client in their business, and the outsourcing will be reviewed on a “per transaction” basis. “This dramatic shift will transform the previous fixed cost into a variable cost, as the service provider will now play a role in the business revenues of the client company,” opines Desai, “and that is very interesting for us.” Business services will move from just “services” to “services-on-demand,” where the service offer will be tied in to the client’s own profitability. “For example, in an insurance claim, one company runs the infrastructure that opens a window for the claim to be entered, another runs the processing and finally a third party applies human intelligence to make an adjudication on the claim,” notes Desai. “The future will collapse these numerous partners into one entity, generate one SLA, and one cost-per-transaction, where the insurance company pays the service provider a fixed fee for every transaction. Now, how profitable the service provider can be depends on how nimble they are in executing this transaction and engendering more orders from the client. Puts a different flavor to the easy dollars-per-seat or hour model, doesn’t it?” he smiles.

Desai is driving domain expertise in three distinct verticals—financial services, healthcare, and insurance, for which Syntel is establishing innovation labs where constant market feedback will influence development of specific business solutions. This will help Syntel’s customers stay ahead of the game. “The technology expertise is a given today. We are moving on from there to think with the customer and be proactive in our understanding of their market needs to create apt answers.” What Desai leaves unsaid is the intimacy Syntel shares with its customers.

Over the last decade and more, Syntel has been extremely successful in retaining many of the Global 2000 clients it has won. While the company regards a +90% repeat/referral rate as a good start, there is always room for improvement. “Starting this summer, we are looking to add an increased level of formality to our customer satisfaction data gathering. We are instigating a Customer Satisfaction Survey by impartial third party agencies that would evaluate satisfaction levels at various Syntel touch points along the brand continuum,” says James, “and customers would receive blind survey reports for their internal evaluation.”

It is also a strategy to ensure Syntel remains on edge, while reinventing service offerings as customers demand change. “True, global players entering the service market bring a change in the dynamics, but our customer intimacy is a strength not many of these players can bring to the table,” asserts Desai. “Our defining culture at Syntel has been to delight customers, and now with the formal measuring tools we plan to establish, Syntel intends to internalize evolution in step with customer evolution.” Even though the dynamics would change, it remains to be seen, says the Syntel head, in how nimble these large corporations could be and how personal their service offerings would be. “After all, IT services is not their core business.”

A service contract, unlike a hardware or software product purchase, is defined by discrete objectives and is full of continuums, adds James. It is much more of a relationship-built approach. “In this business, a client will tend to lean towards service rather than pricing, which then opens up new avenues for a service provider. If the service is satisfactory, a client is willing to discuss new projects.” Large corporations today are reducing the number of vendors they align with, selecting preferred partners who are enabled to conduct business within the client’s environment. Syntel calls these “hunting licenses” and the company has made great progress in signing 57 of these preferred partnerships with Global 2000 clients. The objective, reveals Desai, is to expand inwards into a client base by continually providing new value-added technology solutions within the client, and then widen the client base itself.

Moving from the price to value proposition is high on the Desai’s to-do list. “In contrast to the U.S. product companies that incubate more product companies, which in turn will complement the parent product offer, the services industry dynamics have spawned a different set of incubation trends. At Syntel, as one example, we have built deep domain expertise in healthcare financials. Now we would have developed numerous components across our work on countless IT engagements. I see an emerging trend where the service company can put these components together and build intellectual property (IP) around them, which in turn could be value-priced for another client,” he predicts. “I see this growing trend leading to pure product incubation in a few years.” One such space is the open source, says Desai. “In a world where the source code is open, there will be need for customization. We see this evolution become very interesting when the customization will demand support and maintenance.”

A global company like Syntel, he says, demands a different set of branding tools. “This is possibly the only industry where almost every employee of Syntel is customer-facing in his or her career. And that demands that every employee is our brand ambassador. How do you execute that?” he asks. “For one, we predict where the next demand for new skill sets is going to arise from, and we plan for that—attracting talent before the market is ready for it.” And the fact that fresh talent is thus able to work on latest technologies right from the early days is a compelling motivation for employees.”

As a growing company, Desai says, Syntel has even greater opportunity in generating wealth for its three stakeholders—customers, employees, and shareholders. “But beyond this, I think the competitive differentiator we possess is the belief that we can do anything for a customer.”

In the 24 years of its organic growth, the company has definitely convinced its clients of that belief. “We have reinvented ourselves three times in the past—quite like changing airplane engines during flight—which has been difficult not just for us, but for our customer: we were one company to them, and suddenly we became another company. But they have stayed with us. Why? You can’t beat customer delight,” firmly reasserts the Syntel CEO.
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