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Follow UsSpeculations are rife that the promoters in
Computer Services, India's largest tier two IT services firm, have
finally and approached various Indian and non-Indian strategic
investors for selling of f of controlling stake in the company.
While media reports have named many Indian and non-Indian companies, at
least one company sources have confirmed to Dataquest that they are in
talks with Patni for buying a stake. The company, however, did not
confirm how much stake is being sold and who approached whom.
And the company happens to be a well-known Japanese firm, with
interests in various aspects of IT business. And we are not too
surprised.
Patni is arguably the most successful Indian IT services firm in the
Japanese market. Many of its divisionsespecially the product
engineering divisionhas many large clients that are Japanese. And it
has a strong reason. Unlike most other Indian IT services firms that
have entered engineering services business, Patni does not do much
business in the aerospace, plant automation and mechanical design
services for automotive companies. On the other hand, its focus areas
include medical electronics, semiconductors, consumer
electronics, and high tech, especially storage. And these are all areas
that Japanese companies are significant players in.
In fact, the Japanese company that confirmed to us the talks with Patni
is also into high tech but we could not ascertain whether it is a major
client of Patni and who approached whom.
Patni's success is the Japanese market is not the only reason to
believe that some Japanese companies are interested in Patni. CEO Jeya
Kumar too is a veteran Japanese hand, having served as the Senior VP of
Sun Microsystems, in charge of the company's services business in
Japan. And that is what Japanese companies would even pay a premium for!
Whether Patni goes to a Japanese company or an Indian one, one thing is
for sure. It needs ownership stability to drive next phase of growth.
CEO Jeya Kumar has done a great job of giving a strategic direction to
the company in less than one year, and as many would add, despite all
odds.
Patni, which was in the headlines for all the wrong reasons in 2008,
has since seen a revival. Today, most top analyst firms have assigned a
BUY rating on the stock. Some front line firms like RBS even term it as
their favorites stock in the IT sector.
The Story of Change
Kumar says he just leveraged the multiple strengths of Patni that he
inherited and tried to close a few gaps. That of course sounds
astonishingly simple. But that is precisely what he did.
For one, he realized that Patni's problem was not at all with execution
and tactics. If anything, it had its small differentiations and even
crown jewels. The problem actually was that of vision.
For example, we did not understand Y2K, says Kumar. We looked at
purely as a project opportunity. We did not look at it as a road to the
CIO. So, we never could leverage the next opportunities that came after
thatlike ERP he admits.
Fixing the problem of a lack of vision in a company that is in the
media for all the wrong reasons, is not the easiest of things to start
with. While still working on that, his short-term strategy was to work
around the issue, rather than trying to solve that in a few months. He
did the next best thing that was possible to do in the short run. He
decided to show the world that he was serious about it and working on
it.
The manifestation of that strategy was hiring/restructuring of senior
management in all the frontline business positions. Soon after Kumar
took over, the company hired Manish Soman as EVP and chief of
operations. Patni followed that with a complete revamp of its
geographical positions. While Naresh K Lakhanpal was appointed as
president, Patni Americas, V Mathivanan was appointed president APAC.
The newly created SAARC region with large focus on the domestic market
was given to Deepak Khosla, earlier the head of APAC. Kumar followed it
up with hiring of Vijay Mehra, the then CIO of Essar Group as EVP and
Head of Business Verticals, Earlier this year came the announcement of
Derek Kemp as President - EMEA region.
While the appointments came one after another and got everyone's
attentionin fact, the idea of this story too started from therethere
was a method to the madness. The delivery capability of the company was
never in question; it was the frontline that needed a facelift. So, all
the changes that happened were in the frontline positionsverticals or
geographies and not in horizontals. All the horizontal headsVijay
Khare ( Delivery) Ajay Chamania (product engineering), Satish Joshi
(Technology) and Sanjiv Kapur (BPO) and Sunil Chitale continue with
their responsibilities.
The Differentiations
While he is blunt in admitting that the company lacked a clear vision,
Kumar is equally unequivocal in acknowledging the strength that he
inherited. And his actions speak the same language. While the nature of
changes in leadership team changing the entire frontline management in
less than a year while keeping the entire delivery team intactshows
that strategy, he did more than just that.
One thing that distinguishes us from most of the crowd is that we are
not too much into banking and financial services, says Kumar, adding
that insurance is, however, a different story. Patni has always been a
major player in insurance. Now, it is working to translate that
strength to scale up BPO business in that area. Insurance is probably
the most suitable vertical to have an integrated IT-BPO play, anywhere
in the world.
Product engineering is another such strength. Few Indian IT companies
can claim to derive such a high share of their revenue as Patni does.
We do embedded work for almost every storage company in the
world, says Kumar, while identifying the company's specializations
within the broad engineering space. But all the organizational changes
meant that when the whole industry under the aegis of NASSCOM was
gung-ho about
services, the only serious player missing from the action was
Patni. Kumar admits that and promises that would be one of his next
tasks. You will hear a lot more from us about this area, he says.
Interestingly, another key differentiation of Patni, is also not
completely isolated from this strength: its presence in Japanese
market. In all the engineering areas that Patni specializes inand
unlike say, aerospaceJapanese companies are major players globally.
That has translated into a fairly strong presence in Japan.
We Indian companies have not gone too much into non-English speaking
markets so far. But some of the world's biggest markets lie there,
says Kumar. He points to Japan as an example. It is the world's second
largest market and it is hardly leveraged, he says.
But his enthusiasm is not restricted to Japan. He has plans ready for
continental Europe. While most Indian companies have presence in
Europe, it is restricted to markets such as UK and the
Netherlandswhere you can do business the same way as you do in the US
and in English.
Germany and France are big markets but few Indian companies have
managed to get any business from there. We must acknowledge that an
Indian brand is very difficult to sell there. They are seen as
companies that take away jobs, Kumar says.
Even an acquisition does not always work there, unless it is a very
large one, he says. He is ready to work with local companies as a
sub-contractorsomething that few Indian companies would be comfortable
with but Cognizant has successfully demonstrated the validity of
Kumar's argument. The company works closely with T Systems.
Of course, that may change, in the case of a Japanese owner. But that
would be a change for better.
Will Patni Remain An Indian Company?
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