‘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

organization?

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

managers.

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