'Irrational exuberance nearly destroyed us'

K Chandra, chairman and CEO, Mascon

An alumnus from the IIT Madras, batch of 1989, K Chandra started his career,
after completing his MBA from Rutgers University, New York, in a non-IT setup-US-based
ABB Lummus Crest-as a chemical process engineer. Over a period of two decades
he became head of India and China strategy, and finally, managing director of
ABB Lummus Crest's India operations. Then in the avtaar of vice chairman and
managing director of Bharat Technologies, a management consultancy outfit, he
was instrumental in the takeover of three sick companies, and their subsequent
rehabilitation. Also, Chandra was one of the founders of Mascon Global. The
company was going through bad times when Chandra joined it as chairman and CEO,
and has since helped in getting Mascon out of the falling growth rates. Chandra
spoke to Yograj Varma, Associate Editor, about how Mascon went through bad
times, and how it is now on a firm growth path.

What went wrong in the past few years? While others have seen phenomenal
growth, Mascon has been on the downslide since 2001-02.

We had a great time till 1999-00. Growth was phenomenal. And I guess because
of such heady growth rates, we got into a state of irrational exuberance, and
got blind sighted. While others were bringing their back-offices into India,
Mascon was building the same in America. We were looking at near-shore with
operations in Mexico. Also, at the same time, we tried moving into high end
consulting, thanks to the Kellogg School of Management. Result: enormous
overheads. I personally think that extraordinarily fast growth, without funding,
is a very dangerous thing. Mascon planned to raise about $50 mn, no thanks to
the meltdown, that could not happen. In retrospect, it seems that everything was
against the company at that point. Mascon was hit, badly. It was a very
difficult period-2001 to 2004, but, unlike a few others like Silverline, Mars,
and DSQ, we not only survived but have rebuilt our team, and are now back in the
race.

What's your current game plan?

I am seeking to build 'differentiation'. I am trying to follow a
slightly different model that would give us an edge in five or six major areas
where we can be a force to reckon with. Even today, while Indian IT might have
moved from the Y2K days to AMO (application and maintenance offshoring), I think
the play is still about labor arbitrage. Even the large companies which started
out with body shopping have created collateral to show that they are basically
on the high end of the value chain, but if you look at 90% of the business,
again the rethink is back to labor arbitrage.

I think one company which is different is TCS because a lot of the work done
there is in development space in defense, automobiles, etc. They are doing lot
of work in India and, more importantly, they are delivering projects, which is
far more difficult than doing an AMO labor arbitrage. And we have a similar
strategy. If you look at our history, we would have delivered over thousand
projects and have never been sued.

How different is it from the verticalization strategy being followed by
almost all the companies?

It's both horizontal and vertical. We need to go up the value chain on the
horizontal level, and we need to go up the organizational value chain if we are
going vertical. Unless you understand the technology and the changes that are
going to take place in technology, you can't make it. I personally feel that
is where Mascon is today. At this point, we don't have a great deal of
vertical capabilities, although Mascon was created on the discreet manufacturing
platform. We are ramping up our capabilities in various verticals.

Which areas are you focusing on?

Our telecom practice is approximately 15%, and that is something which will
grow. Within telecom, we work on embedded systems. Also, it is more on the
R&D outsourcing side and not purely telecom. Next in line is embedded
systems, where we are focusing on the automobile segment. Also, our traditional
strength in discreet manufacturing will continue. The other area I am excited
about is process.

For instance, if you look at a typical petrochemical refinery, it is a very
complex set of algorithms that run the entire thing. It is one industry where IT
support has not been the highest. Traditionally, a very conservative industry,
which has never seen this kind of work. We are upbeat about the ramping
capacities and capabilities in these areas.