‘For the last two years, all I have been doing is shifting the business. First, I fixed the Indian market. Now I am going into the global market’ – Hemant Bharat Ram, CEO, DCM DataSystems

When
Hemant Bharat Ram, CEO, DCM Data Systems, took over as CEO from Veer Sagar in February
1997, the seeds for the restructuring of DCM Data Systems had already taken shape during
his five-year tenure as Executive Director of the company. So with a clear picture in his
mind, Bharat Ram, son of Dr Vinay Bharat Ram of the DCM Group, took over the reins of the
infotech division of the Group. With margins dwindling in the PC business, and business
all about making profits, Hemant decided enough was enough and the rest followed. After
completing his Bachelor of Science in Math and Computers and later Masters in Business
Administration from the Carnegie Mellon University, Bharat Ram joined DCM DS as the Head
of the Software Group. In that capacity, he was instrumental in developing a plant
automation software for sugar industries. Excerpts from an interview follow:

How would you
describe your primary concern as CEO of DCM DataSystems?

For me, today, it is to realign the business to where the money is. The money clearly is
in services. Everybody pays lip service to services. Hardware has become too standardized
and the customer too insensitive to brand and technology, and well educated to
differentiate on the basis of brand. The market is commoditized, so where do you go?

My view is that products or services must have something in them that the customer can’t
figure out. If customers are able to figure out everything, then they wouldn’t need me.
What is happening is that there are many service areas, which the customer does not really
understand and that is why you can get paid for it.

Which are the IT
services markets that you are focusing on?

The service market can be divided in a number of ways. For example, the services market
for SOHO does not exist. And we are not in the SOHO market. The other markets left are
government and corporate, and both of these need services. So we said, these are the two
sectors that we will focus on, but currently we are mainly focused on the government.
Services can also comprise purely hardware maintenance, system administration, network
management, facility management and outsourcing. These are what we call horizontal
services-not industry-specific services.

You could also call
them support services…

…No, you could also have support services, which are vertical or industry-specific. What
we have consciously decided is to stay away from industry-specific solutions. The reason
being that industry-specific solutions are risky, since they are directly proportional to
how well that industry does. Whereas with cross-industry solutions, we are hedged-if one
industry goes ‘phut’ you always have other parts of the market which would be doing
reasonably well.

Strategically, we are picking up cross-industry solutions and focusing ourselves on that
part of the market. We have picked up several solutions in the area of network management,
system administration and workflow.

But, will you
continue to push PCs?

Oh yes. Earlier, we were defined as a hardware company. Today, we are defined broadly as
an IT company, which also happens to sell hardware. If my customer wants hardware, I am
not going to say no. But I am not going out of my way…

Does that mean DCM
brand of PCs?

DCM or any other. We also sell IBM PCs. I am neutral. I really don’t care what I sell. As
far as I am concerned, my product margins are too thin for me to care. The important thing
is that the hardware business allows me to generate more services, acting as a catalyst
for services. So I am not averse to hardware business.

And those sales are
primarily to the government segment?

The corporate market is not doing well, with basic infrastructure industries all ‘phut’.

Are you also hit by
the current industrial recession?

No, not much, since basically we operate in government segment. The government spending
has declined, but much more slowly.

The DQ Top 20
survey indicates a continuous drop in government spending, especially over the last three
years. Or is it just a shift in the government share?

See, it won’t be a decline. What is happening is that the pie is increasing. The rate of
growth of the government segment may not have been as fast as the rest of the market. What
is growing the fastest is the SOHO segment. Corporate was growing really fast and then got
arrested. Now, they don’t have any cash.

Coming back to your
services focus. What are the main offerings?

The stock service is maintenance, which is easy to do and is like your atta-dal. But
because of the introduction of certain mission-critical applications, services has become
very important. Now it has gone beyond hardware. If the network is down or if the database
gets corrupted, then you have had it. So it involves, backup, storage systems, recovery,
data management, network performance and a huge host of services.

Now network performance has become an issue, so how do you keep adding routers and hubs
and maintain an efficient architecture? The problem is that people know it’s important,
but are having a tough time investing in it because they do not have any money. Look at
cellular operators, they should be going in for the heaviest usage of IT, but they are
dying, because they do not have any money. Look at their inter-network reconciliation,
like billing systems, it’s in a mess today. None of these guys know what their actual
billing is.

So there is a huge service opportunity in India. But then, the point is that the economy
also needs to ‘chug’ along. So we are currently focusing on services in the government
segments, like banks and financial institutions, because I know their money never dries
up. It’s always the safest market to be in. It’s very nice for me that a lot of people are
allergic to the government segment as that reduces my competition. Plus, you really need
to know how to run that business, there is so much paper work, delays, it’s not easy and a
lot of people give up.

So are you saying
that you are more profitable than other IT companies?

If you look at the shake out-ICIM, Olivetti, PCL, Unicorp have gone and Microland too is
half gone. What really hit these guys was that their major sales were from the corporate
segment. In the government segment, the money may come late, but it will come. In the
corporate segment, if the company goes ‘bust’, they will first put you off endlessly and
finally never pay. And in India, there is no way to recover such money.

No Indian IT company ever does a credit check. So what we do, if we sell in the corporate
market, is that we check the annual reports of the company and make sure that the company
is making some amount of profits. The sales incentives are also confused in the IT
industry. You can’t give the sales person a revenue target. A revenue target means get a
sale at any cost. Promise the moon-who cares about the margins on the product, just book
the orders.

We have remained small, but I have noticed that by default we keep moving up your rankings
[DQ Top 20]. Because everybody on top of us keeps falling down-they go bust. So anyway we
do not need to try hard because others ensure that we move up. Right now, honestly, it’s
almost like ‘as long as you are there.’

How do you draw the
line between systems integration and support services?

We are providing after-sales support. System integration is a tough business, you have to
be really sure about what you are recommending. And I am not going to recommend to the
customer as to what he should buy, nor am I going to integrate it, unless it’s absolutely
necessary.

The flip side of this situation is that, ‘I did not create that mess, so I am not to be
blamed.’ What we do is that we survey the site thoroughly. We know what commitments we are
making. If we cannot do it, we will say it up-front. I will bid only if I can clean up the
mess. So I feel that the after-sales part of the business is usually easier in terms of
creating customer satisfaction. You are not the first person to have created the mess. You
have an existing system and you are helping them with it. And then you can choose whether
to help or not help.

Other than hardware
maintenance, what are the other services that you provide?

The government does not go in for value-add services. It is basically third-party
maintenance. My guess is that they will start going for it sooner or later. But their
dependence on computing has not come to a point, where if it stops they will cry. But in
the corporate markets, that has happened. The problem with the corporate market is that
they have no money. The corporate market is very fertile for maintenance and services. My
only hope is that the economy improves a little bit. That is where the money is because
lot of guys do not know how to do this [provide value-added services].

What are the global
initiatives that you have undertaken?

Basically, I am only looking at the US. We have an office there and our software business
is already operational. We have found that customers for whom we are doing software
development also require support services. You go to the ‘bay area’. Any company in that
area is a technology company, having at least 300-400 computers. So they also need support
services like maintenance. I can clearly see a service opportunity. For example, a lot of
companies in that area are doing PCB design or system design using CAD/CAM software on Sun
Workstations. So they have huge networks of Sun machines with massive requirements of data
backup, design history, version control and network optimization. It is a fertile open
ground. For the last two years, all I have been doing is shifting the business. First I
fixed the Indian market, now I am going into the global market.

Are you operating
in multiple locations in the US?

If I just concentrate on the Silicon Valley, there are more than 2,000 companies over
there. I don’t think I can service even half of them. There is no point in dispersing
resources.

Is facilities
management an opportunity area in India?

Frankly, the biggest problem with facilities management is politics in the organization.
This means a tremendous amount of power loss for the guys who are dealing with IT.
Unfortunately, our CEOs are not educated about IT and they don’t have the guts to
downsize. The problem from the industry is that there is not enough experience. Secondly
in the US, if I was to take a facility management contract and the data gets corrupted, I
will be responsible. That means a business loss. In the US, there is liability insurance,
which the contract will carry and I am insured against loss. This is not available in the
country.

What is the
contribution of after-sales services, systems sales and software exports in your total
revenue?

Software exports accounts for 50%. Of the balance left, hardware sales account for 75% and
after-sales services is 25%. Now this will change, but the problem with after-sales
services is that it is not heavy on revenue, but is heavy on margins. It is bottomline
focused and I don’t see service revenues growing at a fast pace.

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