Mahindra's IT business in fast-forward mode

Last Updated: Tue, Aug 28, 2012 04:42 hrs

Chander Prakash Gurnani's appointment as the managing director of Tech Mahindra may have been announced just a fortnight back, making him a shoo-in for the CEO's post at the Tech Mahindra-Mahindra Satyam combine, but the company veteran hardly has the time to celebrate the good news.

He is crisscrossing the world these days (he spoke to Business Standard from Brazil) in order to achieve what he calls Mission 2015 that aims to double the combined entity's turnover to $5 billion in three years from $2.4 billion today. Mission 2015 was not a decision taken overnight by the man of the moment. Initially planned in February, the idea was given shape in April at a meeting of 120 executives drawn from both the companies. Significantly, some key customers were also a part of the brainstorming on the aspirations of the company, the mission statement and the strategy.

"The target perhaps seems a bit audacious, given the global headwinds, but all the 120 leaders are committed to this goal and say they will make it," Gurnani says, in his first interview to a newspaper after becoming the CEO-designate of the combined entity.

The urgency is evident from the fact that the company has already rolled out the plan to take the merged entity (Gurnani is non-committal about its name, though sources say the Satyam name will be discontinued) to the next level, even before the approval from the Bombay and the Andhra Pradesh high courts for the merger.

Mission 2015
Gurnani says while the Mahindra group is already number one in telecom IT services, it wants to become bigger in this segment along with the manufacturing vertical. "We would like to retain our glory in banking, financial services and insurance and healthcare and emerge as challengers in other segments. We also realised that we need to keep on investing in business as we will grow in new markets and regions," he adds.

To achieve this, the company has been divided into four segments. The first is called business momentum and will focus on the exiting businesses and customers. "From a growth lever perspective, I think this will be significant. I am aware that our average revenue per account is not the best. Our focus will be to strengthen this so that we can cross-sell, up-sell and bring more value to our customers," he says. This unit is expected to have three leaders.

Gurnani also agrees that while the company is pursuing some large deals (new clients), the potential of mining the existing client base for a larger chunk of work will be a focus area. At present, the company does not have clients in the $100-million category. This is a priority as despite clearing the mess left behind by Satyam, the company has been unable to get back into the big league (over $100 million deals) and is only executing deals of up to $50 million. While analysts remain bullish on both companies, given their strong deal pipelines and multiple margin levers at their disposal, they believe Mahindra Satyam's future growth hinges on its ability to bag bigger contracts.

Citigroup Global Market research analysts Surendra Goyal and Rishi Iyer say: "The company has launched a supersizing initiative, wherein 80 of the top 100 clients have been hand-picked for service line bombarding. Management expects this to be a huge vehicle of growth, with existing clients accounting for around 95 per cent of the FY13 revenues."

The second segment, headed by a CEO, will focus on new business solutions and platform. This will focus on developing new platform-based solutions, such as mobile apps and setting up new services.

The third will focus on mergers and acquisitions. Gurnani explains eight to 10 per cent of the $5-billion target by 2015 will come from inorganic growth. For this, the company will appoint two senior executives - while one will be involved at the corporate level to look at M&A opportunities, the other will drive the portfolio.

The fourth segment is to incubate start-ups. Here, the company has already announced its tie-up with Soft Bank to set up a $50-million fund that will invest in promising new technology firms. This will be headed by a chief innovation officer, who will focus on incubating start-ups.

The company has also already identified five key horizontals for growth - network, mobility, analytics, cloud-based solutions and security - also called NMACS. "To give an instance, in analytics, we already have a platform called iDesign, which we intend to take aggressively to customers. In the cloud segment, we have delivered to one of our telecom customers, switch over the cloud," says Gurnani.

At present, half the company's revenue comes from ADM type of work, a little over 30 per cent of its revenue is derived from engineering and manufacturing services, and of the rest, a major chunk comes from NMACS.

"The combined entity would have an established franchise in two of the fastest-growing domains currently - cloud computing and enterprise mobility. Mahindra Satyam's footprint in enterprise services would complement the deep expertise of Tech Mahindra in telecom vertical, to develop a formidable presence in the enterprise mobility space. Both Mahindra Satyam and Tech Mahindra have sizeable presence in Cloud Computing," say Hitesh Shah and Abhishek Gupta of IDFC Institutional Securities in their report.

New geographies & services
Gurnani says that the two terms that his team will continue to talk about going ahead will be new offering and markets. "We also recently announced setting up of a centre in the US for Wells Fargo. We are setting up business centres in different geographies. We will soon announce the opening of a centre in Netherlands. We recently set up a centre in Belgium," he adds.

He gives the instance of the company's relationship with the FIFA World Cup and how the company is using this to leverage its position in Latin America. "We already have a centre in Brazil, we are further enhancing it. We will set up a centre in Peru. But, more importantly, my team in these markets will be local guys. Similarly, you will see growth coming for us from Saudi Arabia, Eastern Europe as well as the traditional markets," he explains.

These days, almost a third of Gurnani's time is spent in mentoring future leaders of the combined entity. This is a key focus area, as he wants Mahindra's IT business to become one of the best places to work in.

Being the IT provider for the FIFA World Cup in 2010 and also for the upcoming 2014 one, Gurnani has imbibed football into his leadership building initiative. Internally, the company has 25 task forces, each of which is headed by a young future leader, who, in turn, gets coached and mentored by senior executives.

"Many of us in the leadership realise that success and failure depend on the success of young leaders. We had a shadow board, and all of these members were young leaders who were involved in all the decisions that the board took so far. When you see a game of soccer, you feel that the coach is responsible for the strategy and during the game, they are as animated as the players. But, it is an 18- or 19-year-old who scores a goal. In our case, the youngster is in the age group of 30 years," he says.

Gurnani is worried about the "snakes-and-ladders situation" in the global economy, which is a big uncertainty. The other thing that bothers him is the capacity to have local skills managing the business in those regions.

But he hastens to add there is no option but to be prepared for all eventualities. The CEO-designate, at least, has equipped himself well for meeting the challenges ahead. "Even as I was fire-fighting at Satyam, I was also attending the Harvard Executive Leadership programme. I am conscious of the potential and the aspirations of over 75,000 employees," he signs off.

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