LeaderTalk: In Conversation with Dharmender Kapoor, Former CEO & MD, Birlasoft

1. Please share your thoughts on how the IT Services landscape has changed in the last 18 – 24 months. And, how’s the next slot going to look like. Any massive changes that you foresee? If yes, how are you addressing them at Birlasoft?

In the last 18 – 24 months, we have been experiencing disruptions in client’s businesses (BFSI, Energy, Lifesciences, Manufacturing, etc.), accentuated by digital technologies. In turn, clients’ expectations from us have also changed significantly. “Digital”, as a pivotal block, now features in every conversation we have. To be sure, we have gone much beyond the hype and these applications are now mainstream. I will give you an example. Earlier in a Cloud environment, there were great concerns about security but the mindset has undergone a major shift. Due to the kind of investments that we are witnessing, particularly by the likes of Microsoft Azure and Amazon Web Services in building secured infrastructure, the apprehensions have been allayed and a belief that the Cloud environment is more secure than legacy systems is increasingly gaining currency.

ERP, till a few years back, was imagined to be dead. However, in the last 18 – 24 months, it has been resurrected as Intelligent ERP which relooks at the core processes by leveraging multiple technologies that work around it. In addition, agile solutions are “smarter” today and are defining how the next few years will be. Twenty-five years back, it was about computerization of manual systems which I will not even call automation. With time, process output was optimized through better workflow management including sophisticated access controls, leading to higher overall productivity and more accurate systems audit. In the late 90s, the concept of BPR or Business Process Reengineering reigned supremely. The underlying philosophy being, how do you optimize after you computerize? It also coincided with the ERP boom In the early 2000s and a new segment was created – decision-making systems, leveraging data residing in data warehouses. In the last two decades, business processes combining technology, have pushed ahead on the maturity curve. The next decade is going to be about transforming the business model. The aggregator model (Uber, Amazon, etc.) will proliferate as the big disruptive idea. Aggregators, between themselves, will be vying for increased market share. Most leaders today are thinking of transforming their business model to align with technology and fulfill the rites of passage to be called Digital Business. When a business moves to a cloud environment, there’s a fundamental change and not merely a lift-and-shift kind of approach. This helps break down barriers, best practices become more easily shareable, leading to friction-less integration & optimization of output. Today, technology plays a pivotal role – a far cry from its erstwhile avatar as an enabler. In the next decade, IT will radically change existing business models, and we’ve not even touched the proverbial tip of the iceberg. At Birlasoft, 40% of the revenue is from digital business. It is also influenced by significant business model changes at the clients’end and their readiness. For us, the time to close a contract has been reduced by as much as one-third of the time taken earlier. Technology enables us to examine the contract at double-quick time to look out for burn rates (in the contract), keep an eye on the possible speed breakers and fundamentally redefine asset utilization. Bringing in safety in operations is yet another paradigm. We have extensively used technology to reduce product life-cycles which leads to faster and better delivery, meeting the SLAs at greatly reduced costs. We are increasingly following an outcome-based pricing approach where we claim a certain percentage of the client’s additional growth/gains, effected due to our expertise. This is a radical change even in the prevalent outcome-based models. In every sense, we are now partners to our clients and have a much higher stake in their growth story. Much more skin in the game, so to speak.

2. Your thoughts on Productization of services. Opportunities and challenges – can you please do a deep-dive?

Productization, we believe, is the next step after standardization. Every innovation diminishes in its novelty factor with the passage of time. Soon, me-too products flood the market and a new standard is set. The first iPhone is a classic example. Many brands followed suit offering similar features which became the industry-wide standard. A Product Life Cycle will typically look like this – first innovate, then differentiate, standardize and finally, productize. In services, some areas may have undergone a high level of process maturity and standardization and are offered (as a product) as part of the overall offering. Whether IT Services companies will get into products seriously and will Birlasoft ever be a product company, are fundamentally different questions. Essentially the two DNAs of products and services are different. The IBMs and CAs of the world have forayed into products but the reactions from the markets have been mixed. Multiple service companies have forayed into products but the reactions from the markets have been mixed. Even though IT Services companies would continue to leverage reusable software components in delivery but for them to sell licensed products even in the future may be very difficult.

3. Can you please share your thoughts/learnings from the KPIT merger? The value-add to your extensive portfolio and how’s the integration taking place – culture and competency?

The KPIT business, a horizontal tech company, is strong in ERP. Birlasoft complements it by bringing digital competencies to the table and has acquired expertise, particularly in Manufacturing and BFSI verticals. The merger has created a Matrix-like structure focused on 4 verticals and an equal number of horizontals. For the next decade, we have to ensure the matrix functions optimally. The vertical business leads with deep domain knowledge should be able to communicate with the client with fluency and offer horizontal solutions that are technology agnostic. Similarly, the horizontal business should be able to dig deep and gather a better understanding of clients’ business from a vertical standpoint and architect solutions accordingly. We knew at the outset, the significance of integrating the two structures when every logic pointed us in that direction but we were certainly not oblivious to the underlying challenges. That’s why to start with, we ensured that the client-facing teams were strengthened and that they were confident about the matrix offerings. Concurrently, we set up an Account Management discipline that was equipped to cross-sell.

The other strategic thinking that we actioned, is brand positioning. What is it that we are very good at and what needs to be done to position ourselves accordingly? We cannot be everything to everyone. Even sometime back, 48% of revenue came through our manufacturing vertical related services. Earlier our revenue from Manufacturing and adjacent verticals was spread across thin but after the consolidation of similar verticals into Manufacturing it is now contributing to around 48% of our revenues. It now stands at a whopping 65%. We want to create a point of differentiation through this and we firmly believe that we have built the credentials over time. Towards this, we have to position ourselves in a few areas and ensure that we don’t spread ourselves too thin.

To make our people believe in this philosophy has not been easy. We continue in our efforts to render the talent future-ready and ensure they stay motivated. We are not in the business of selling software – we are in the business of getting the best out of our people. We want to create an environment where our talent puts heart and soul to deliver best-in-class solutions for our clients. They may not always have the right answers but know how to seek them. The values we bring in will ensure that the organization remains integrated, engaged, is dependable and a worthy challenger.

As an engaging enterprise, the focus is on two levels. One is about constantly engaging with the client, and two, engaging with our own people who serve them. As a dependable organization, our reputation in the market should be robust enough for clients to come seeking our partnership. It’ll make the job of our sales team a lot easier and in turn, we won’t require a very large sales set-up. Finally, as a challenger, we have the capabilities to compete with the likes of TCS & Infosys. Sure, we aren’t as big in size but in our chosen blue ocean, we can do better than them. We are willing to disrupt the status quo and tell our clients, “Please be open to the fact that we will be challenging your architecture and we are unequivocally open to 2-way communication.” In fact, we always welcome transparent and open feedback. As I said, it’s not easy and these values will have to be communicated multiple times to be truly ingrained in our DNA.

To sum up, after the merger, we have been focusing on three things. Aligning the org structure, bringing in account management as a discipline and finally, consolidating the manufacturing vertical. I am happy with the progress made to date. We aspire to be a 1 billion-dollar company in the next few years and further consolidate the BFSI vertical services as the next big step forward.

4. The ER&D Space in India. Can we get there – the PM’s vision of a Make in India. Please, can you chart out the way ahead?

For the nation, it’s critical to get the Make in India piece right. This will help us differentiate and improve on our innovation index. For this, organizations have to focus heavily on R&D and build a mindset which is emphatic on creating IP and not merely remain contented with me-too ideas. As I mentioned earlier, the life-cycle of innovation and how it becomes a standard. One can’t rest on laurels for long. R&D investments are heavy and don’t always yield the desired results in the short-run. Notwithstanding these challenges, leaders have to think research in order to create differentiation and reach their sweet spots. Of course, this won’t be easy and as a nation, we should remain focused on creating patents. And, talent needs to be nurtured in that direction. Especially the pipeline – colleges & universities of higher learning.

5. Working in a Matrix Structure in a very large Services company. How does one do that – please share your best practices? Also, if you can tie up the talent angle along with it? Resolving challenges of dotted line reporting and keeping the motivation high.

We need to map functions with individual capabilities. To service a client, essentially one requires 4 things – relationship building capabilities, domain depth, tech capabilities and commercial acumen. We need to create a structure where roles and responsibilities are clearly defined. We cannot be found deficient in any of these criteria so capabilities will have to be mapped accordingly. They will all add up to create the big picture eventually. Clearly, it’s a chain of activities and at different times, diverse sets of people will function with overlaps.

Talent in both horizontal and vertical functions will have to be made aware of their roles & responsibilities which will drive ownership and accountability. And, the common organizational goal must remain supreme at all times. There will be interdependencies but they have to be clearly defined. This will lead to a win-win situation which will create a wider room for collaboration. It’s also about knowing who is your end customer. Is it the end client or an internal stakeholder? And, be willing to always ask, “What is the nature of value which I have created for my end customer?"

6. Any specific asks you have from the government from a policy standpoint?

To reiterate, if we can get the Make in India piece right, it will reshape our destiny. Domestic demand will usher in a whole new level of opportunities. But this is not going to happen on its own. The government needs to relook at our education system in India and ensure that the quality of education is greatly enhanced, including the teachers’ capabilities. The quality of talent needs to greatly improve. Secondly, how do we move the needle substantially to be a lot more innovative? Also, smaller and mid-sized firms need more encouragement. They are far more agile, and definitive governmental support will help them build scale. They can actually function much faster than large companies. Thirdly, many innovative startups get acquired by the giants and eventually get killed, leading to stymied innovation. The government needs to find out a way to save them when in dire need of funds.

7. Your leadership mantra & future pivots, please?

I am a firm believer in the adage, "There is always a way." It’s true for business and life. At Birlasoft, I want to nurture an environment where people find the courage to seek a solution to every problem. The courage to discover. I can be challenged by much bigger players but that should not impede my progress to be better than them.

The challenger mindset – we are small enough to care but large enough to dare. We want to empower our people accordingly where they have the courage to take risks and know fully well that failures will not go against them.

Future Pivots: Grow in the areas of Manufacturing, BFSI, Lifesciences, Energy & Utility. And, not spread ourselves too thin.

Interviewed by Soumitra Dasgupta, NASSCOM