‘Our name has changed, not the focus’

SignalTree Solutions has survived several name changes  since its
inception in 1982. Launched as Metamor Global
Solutions, the company started functioning as a global sourcing division of
PSINet sometime in 1999. Recently, fresh infusion of capital from Arlington
Capital Partners enabled it to establish an independent identity.

The company offers service solutions in application outsourcing, total IT
management and e-business solutions. It has offshore centers in India and
technology centers in the US. With a stable base of select clients, the company
hopes to make a kill during the downturn, anticipating more outsourced jobs. And
things couldn’t have looked better for the company, given the increased
availability of quality manpower (due to layoffs globally) and the consequent
rationalization of salary packages. Cyber News Service caught up with the
company’s long-time chairman and CEO, Russ Cappellino to find out more about
the company’s strategy. Excerpts:

Has the name change in any way diluted your business focus?

Name changes have done little to change our direction. The organization’s
focus has always been on forming strategic relationships with customers. And
customers don’t look at name changes. However, we did feel the need to
preserve our business due to our unfortunate experience with PSINet especially
when its shares fell from $60 to 25 cents. Even in those days we never really
integrated ourselves with PSINet and continued to focus on our strategy to
leverage our offshore components as well as integrate people from India in the
US at our customers’ sites. We had to find a differentiation strategy in order
to compete. We designed our strategy in a manner wherein we became a part of the
fabric at our customer’s organization. That’s why our customers love us and
continue to have business relationships with us. We have customer testimonials
to stand by us.

Will the economic slowdown affect your business model in any way,
particularly since you are focussed on the outsourcing market?

As a matter of fact, we believe that this is really the right time for us to
exploit our business model. There may be a slowdown in pressure but IT
executives in corporations still have IT requirements to fulfil through a
different cost model. We can cater to that by leveraging our offshore
development component. We selectively choose our customers. What we look for in
our customers is a chance to grow with them and become strategic partners. We do
not necessarily lead because of our technology but we lead because our people
who are good at listening to customer’s problems solve them with technology.

How about your customers themselves who would be affected by the slowdown
and may not be able to grow?

I think their IT budgets are very large. Although they may face a 20-30% cut
in the budget, they still have to get their IT projects rolling if they want to
achieve their growth targets. In order to do that they have to look at new
models. As a customer myself about 20 years ago when I was part of senior
management team I know the tremendous pressures I worked under to cut costs
during hard times. In those days I had to justify why outsourcing was a better
model. Today it is much easier to outsource the requirements because of the
accomplishments of Indians in the outsourcing model.

Are you any way looking at downsizing the manpower strength of your

We are in fact looking at increasing our manpower. We just put up 10 national
sales managers and expanded the budget by $4 million on the sales side just
because the market opportunity right now is greater for our business. We don’t
want to reach a slowdown. We will manage carefully and it has always been
evident in our business practices that we have displayed fiscal responsibility
and brought shareholders value. We have put forth these propositions to our
prospective investors and they recognize the fact that we have been good

These strategies are aimed at making a kill in the short run. What are
your strategies for the long run?

Our long-term strategy has not changed since June 1995. We have deliberately
chosen clients that would allow us to grow. We want to be able to create
multiple capabilities for our customers. Here is a good example of how: We might
start a relationship in the US at our offsite center in the US but then we ship
that work to our offshore center in India to accrue cost-savings to our
customers, with the same level of accuracy and quality.

That was a workable model in a scenario when India happened to be the only
place betting on price points. But hasn’t the situation changed today with the
emergence of China, Russia and Vietnam?

The difference with these countries is that they don’t adapt to the US
conditions as well as Indians do. When we place Indians at our clients’ site,
our clients don’t allow us to move out our employees. And 98% of our employees
in the US are from India. Although we have seen employees from China, Russia and
even Ireland we have noticed that there isn’t the same level of adaptability.
You have to remember that it’s not technology that we sell. We sell our
ability to solve other people’s problems.

Why should we change a model that works?

We might yield to some changes due to pressures but we are not sure whether
we will get a complete package like we get in India from China or Russia now.

So when countries like China and Russia start offering a more
comprehensive package, do you see them being included as a base?

This model was put in place not overnight but since 1982. It’s easy to find
people who do development. But can one take up a mission-critical system support
and know what process and procedures to put in place? That’s the most
difficult component in an IT environment. If you know how to do that, everything
else is easy. Now I am not saying that someday China or for that matter
Philippines will not offer similar opportunities. But I am not prepared to
change a model that has been proven for the last 19 years.

Providing support services is really the low-end of the work. Aren’t you
looking at moving up the value chain by taking up development?

If you get to do the long-term maintenance and support for mission-critical
systems then you get to do development along with that. Our objective is not to
go after development but maintenance and support in the first place. And we
really don’t look at this as the low-end work.

How many employees do you have in India? Apart from your facilities in
Delhi and Hyderabad, do you foresee any expansion?

Currently we have 550 employees in India and two resource facilities in Delhi
and Hyderabad. Since we are in a networked environment, we are able to share the
resources of both the facilities. We shall expand commensurate with the needs of
the organization. Maybe by 2002 we will set up another facility.

Asim Raina and Balaka
Baruah Aggarwal
Cyber News Service, New Delhi

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