It's a Season of Change

If morning indeed shows the day, the new decade has in store lots of change for the Indian IT industry. For a start, it began with leadership changes in 4 companies2 Indian companies announced top management changes and 2 non-Indian companies announced changes in Indias leadership.

The firstand by far the least significant onewas the appointment of Aruna Jayanthi as the CEO of Capgemini India, while the 2 seniormost executives in India, Salil Parekh and Baru Rao, moved to global roles outside India. Aruna, who headed the global outsourcing delivery out of India, was a logical choice to head the Indian business, though she is still not responsible for the local markets in her new role. At least, not yet.

The change in Capgemini, though first in chronological order as it was announced on January 10, was more of a regular rejig and may not result in a big change in the way Capgemini India is run. But the rest 3 leadership changeswhich got announced between January 20 and 28are fairly disruptive; things will not be business as usual after these changes.

The first was the appointment of Avinash Vashistha as the CMD of Accentue India, in place of Harsh Manglik. While Mangliks stepping down was expected, what surprised many was the unconventional choice of Vashistha to replace him.

Manglik was not really too hands-on on the India business. While the Indian domestic outsourcing market boomed with IBM and later Indian companies Wipro and TCS signing number of total outsourcing deals, Accenture watched from the sidelines. And this, despite signing 2 of the earliest outsourcing deals in 2001 and 2004 with Indo Rama and Dabur, respectively. The 2001 Indo Rama deal was probably the first outsourcing deal in India, but Accenture failed to leverage on the early mover advantage. In this period though, its global delivery out of India virtually grew from zero to become its largest location. While that was acknowledged when Manglik became the first chairman of industry body Nasscom to come from a truly non-Indian company, his tenure became controversial when he kept a silence in the aftermath of the Border Security Bill in the US that had discriminatory provisions against Indian companies. For the first time in Nasscoms history, many members openly questioned the stance of the chairmans office.

The appointment of Vashistha was surprising on several counts. He is not a typical industry person, having spent the last 10 years in primarily outsourcing/offshoring advisory roles. He was a co-founder with his brother Atul Vashistha, of NeoIT, an offshoring/outsourcing advisory firm set up in 1999. He left that to start his own firm, Tholons, in 2006, which apart from outsourcing/offshoring advisory, advised PE firms on investment in this industry. Accentures challengeas he himself admitted in a telecon with Dataquest after the announcement camewas in growing the domestic opportunity. They have done a tremendous job in their global delivery out of India, he said. He said his prime job would be to grow the India market opportunity. The fact is that he has never done it. And that is what the surprise is about.

But those who know him well also say that he is an extremely good strategic thinker and is great in recognizing talent and recruiting themboth the skills that would come in handy in building the India business of Accenture almost from scratch. At NeoIT, he was seen as playing second fiddle to his brother because of he is soft-spoken and likes to keep a low profile. But when he founded Tholons, in less than 5 years he established it as one of the top consulting firms in the area. What Accenture needs is a strategic direction. Vashistha is the right person to provide that.

The Shocking Change: And Beyond the Shock

The Accenture change may have prompted some to discuss its choice of the new top man but the change itself was by no means unexpected. But what was a shock to many is the way in which Wipro announced its leadership change. Along with the results of a not-so-good quarter, Wipro announced that it has appointed TK Kurien, who earlier led its healthcare business, consulting business and BPO as the new CEO of IT business and that the 2 joint CEOs, Suresh Vaswani and Girish Paranjpe, who had taken over in April 2008, have stepped down.

So it was an end to an experiment of having 2 CEOs, which had worked quite well during the slowdown time, when things were more internal focused. As markets picked up, there was need to take quick decisions and make quick moves, which was becoming difficult with this model. That slowed down Wipros growth as compared to Infosys and TCS. In the last quarter, the difference became even more apparent. It is reflected in the stock performance. In the last one year (ref date: January 28, 2011), while the Infosys stock jumped by about 28%, HCL Technologies stock jumped 42%, TCS jumped more than 60%. In the same period, Wipro stock added just 9% to its value.

The analysts agree that this is what pushed Wipro chairman Azim Premji to act.

While that may be not be entirely untrue, it is at best a technical reason. There were other ways of making the change happen, say Wipro insiders, many of whom, like Vaswani and Paranjpe, have spent a lifetime in Wipro. So, it was a big jolt for them. Kurien, the new CEO, despite spending more than a decade in Wipro, is still seen as an outsider, as he came to Wipro from GE.

Though today, few see it as a positive mandate for Kurienrather than a negative mandate for the co-CEO structure/performance of Paranjpe-Vaswani duoin the long run, it may well be remembered as the new beginning of Wipro. Here is why.

Wipro, like most top-tier Indian IT companies, may not be lacking in vision. Neither is it lacking in the ability to quickly take tactical decisions and move. In fact, among the top 3 Indian IT companies, Wipro may be the best in moving tactically. Take their Indian businesses for example. While Infosys domestic business has failed to take off, TCS has remained confined to the government/PSU banking sector. It is Wipro, which has transformed from a network integrator to challenge IBM as a total outsourcing player in the enterprise market.

However, between vision and tactics remains a big connector: strategy and its organization-wide execution. TCS is clearly ahead of Infosys and Wipro in this regardthanks to the management depth of the Tatas. While today most of the media and analysts are busy comparing the numbers of the three, Infosys is not too different from Wipro on this count. Both these companies need disruptive change to sustain the growth.

Kurien has the ability to bring about that change in Wipro. He has done that change in Wipro BPO, and successfully. Soon after he took over as the CEO of Wipro BPO from high profile Raman Roy, this writer met him to ask about his challenge and priorities. And this is what he said then:Yes, we have grown fast and have done that by maintaining highest quality standards, but we are not very efficiently managed.

At this stage of our growth, we cannot keep growing in a fashion where each of the new processes gets taken one at a time. That means you are starting from scratch every time and are not using the organizational learning very effectively. That is not the most efficient way to grow, he said.

At that time, we called it disruptive thinking. But he delivered on what he had promised, as he transformed Wipro BPO from a call center company with 83% of its business coming from voice business to an a broad-based BPO company where 40% of the deals last year were integrated IT-BPO deals. While he moved to other parts of the business after 2 years, he built the new platform for growth.

Today, Wipro as a company needs something like that. Even his critics say Kurien can do that. He is a tough manager, in the GE-mould. He can take no-nonsense decisions, can be tough when the situation demands. Not too many insiders in Wipro can do that.

And the Exit of the Patriarch

No sooner did you digest the shock announcement from Wipro, than you heard another: the exit of Ashok Soota from Mindtree, a company he co-founded in 1999 with 8 others. Soota, incidentally, headed Wipro before that. While the day-to-day operations of Mindtree would not be affected so much, many investors are questioning if the vision of Soota would be missed. It is too early to take a call on that one, especially as the company has not yet articulated its plans post-Soota.

The leadership changes in multiple companies, accompanied with the biggest merger among 2 Indian companies in the form of iGates acquisition of Patni means it is truly disruptive change for the Indian IT industry.

Shyamanuja Das

shyamanujad@cybermedia.co.in