One of Sapient Corporation's first employees when it was set up in 1991, the nimble-footed COO and executive vice president Sheeroy D Desai has aggressively pushed his company to quickly adopt the offshoring model (faster than most competitors) by shifting over half of its staff into India.
An electrical engineer from MIT, Desai spoke to Surajeet Das Gupta on the changing face of global outsourcing and the increasing aggression of Indian IT majors in the global market. Excerpts:
Indian IT companies are starting to bag large deals such as the ABN-Amro outsourcing project. Will the battle with global IT majors hot up now?
The era of large single deals is over -- clients are going for the best in different areas and for multi sourcing, and this is a big step forward for Indian firms. Had the ABN AMRO deal been a single-source project, they would have not gone anywhere near an Indian IT company because of their small size and scale.
Many Indian IT firms are growing aggressively and some will emerge as global giants. We might see combinations coming up between global IT firms and Indian IT services companies.
Why hasn't it happened so far?
Because of the peculiar situation where the market cap of global IT firms are stagnating, while those of Indian firms are going up. So, global companies that could have bought Indian companies, say, two or three years ago, now find them too expensive, and Indian companies which never thought of being able to buy global companies now feel that they can. However, it has to happen if global companies want to survive and create an offshore model.
How painful has it been for companies like yours to shift strategy and go for offshoring?
It was extremely difficult for us, but we made a commitment to go for the distributive model and executed it in just two years. We saw revenues come down, we had to reduce our headcount in North America and while we did that, we were making major investments in India. It was disruptive.
It hits you from all sides: your revenues went down, you had to take on restructuring costs as you reduced people and, at the same time, you were increasing investments in India to build new capability. But now our revenues are growing, our profitability has gone up, and we are picking market share.
Other global players face the same challenge, but they believe they can do it more slowly and without large layoffs and so on.
What is the right model for offshoring? How many people do you need to shift to countries like India to become competitive?
That's a tricky question. We believe there is no point in fighting market forces at all. Today, 55 per cent of our bill-able staff is based in India and we have been roughly in this equilibrium for most part of this year. I think we have reached some kind of a stable state.
Having said that, the market could move in one direction or the other, and we are well-positioned to move with the market. Also, keep in mind that we do government business in North America, which involves close to 150 people -- there is no offshore modeling there and the Indian companies don't play in that space at all.
Will global companies be dependent only on India in their offshoring strategy?
Companies will experiment with other locations outside India, too. We are conducting a study to look at which other markets could be interesting from an offshoring perspective, and we can look at markets in South America, South Africa and so on.
We clearly want to concentrate on China, but its attraction does not come from the offshoring aspect, it comes from the size of the domestic market -- it is still more expensive than India and the number of English-speaking people is limited.
How do you see the growth of Sapient in India? Do you see yourself in the global top five, ever?
We have grown from nothing in 2002, to 1,500 people -- we have virtually doubled staff in a year and we expect our growth trajectory to continue. Being in the top five is not important to us, though we do not want to be only a niche player. We want to be viewed as an innovator.
We have a history of innovation -- we started with a value proposition by offering fixed prices, everyone else used the taxi meter billing way. So if you took longer, you got paid more. But now fixed pricing has become the industry norm.
Do you compete a lot more with Indian IT firms now?
Surely, they are becoming a larger force, and they are growing faster than the overall industry. Ignoring them would be foolish. But are we running into them on every single deal?
The answer is, no. The projects that we are involved in are more complex, and we don't see clients taking Indian companies for solutions that are complex.