'If businesses focus on core, outsourcing will stay'

Having spent the first 90 days meeting employees and key clients, Jeya Kumar, new CEO of Patni Computer Systems, is clearly in control. While he acknowledges concerns due to the current slowdown, he has started restructuring the company. He details the growth plans in a chat with Business Standard's Shivani Shinde. Edited excerpts:

Patni has been surrounded by many rumours, especially related to management-level changes. Have these impacted business?

Quite honestly, No. Narendra (Patni) and I have been to a lot of customers. These are customers he has known for years and have helped build this company. The clear sign is that he has handed over the reigns.

This is an evolution and happens with every business organisation. A strength of the transition is seen by the continuity in the business. When I was asked to join, I had said that I would take over only if the board was unanimous about this decision. And it was.

How do you plan to restructure Patni? What changes are you introducing?

Patni was one of the first few companies that spoke about verticalisation, in 2002, and it got implemented in 2004. We are now looking at what other sub-verticals (segments within larger sectors) we need to build and grow. Hence, we are looking at portfolio extension. We have increased our reach as well.

In some regions, we are also looking at different business models. For instance, in Japan, for the next phase of growth we are looking at working with partners and are already in active discussions. We are also looking at opening offices in Singapore and Hong Kong. In the Philippines, we are planning a delivery centre.

Patni has always operated offshore and onsite. But now, we are looking at a four-layer approach. We have set up a local development centre at Bloomington in the US.

We have opened a near-shore centre in Mexico. So, at least for the US, we have a four-layer approach. For Europe, we are fine, since the business is more UK and Germany-based. We also have an APAC focus.

We are also looking closely at the product engineering services segment and plan to have vertical focus in this. For instance, we are very strong in the storage and medical products space. I am building an A-team to take care of these segments. There are a few appointments to be made. By the end of June or mid-July, this should be in place.

What will be your target for the next two-three years?

One of the things that employees are happy about is that they have never lost a client.

For the next stage, we want to focus on intellectual property. Internally, there is a huge initiative to set up Patni labs or Patni innovation centre (yet to decide on the name).

The future of outsourcing is how to create more products and solutions that give zero or marginal cost of delivery for your customers.

In our BPO business, we will focus on adding technology rather than people. For IMS and ITO, we want to be more IT-based and less capital intensive. We are talking to some global partners, hosted players with whom we can partner and develop a joint go-to-market strategy.

What about acquisitions?

Inorganic growth should be an option but not a strategy. My first focus is to drive organic growth. That has limitation in this current market.

Internally, we are completing our portfolio assessment and will then make a decision. That will take another quarter.

What are your clients telling you in this slowing economy?

What our clients have been saying is very promising. It means no further decline. That's what I have said earlier, too, that after this quarter, we do see a slight uptick in growth. Clients are now looking at portfolio and project consolidation.

Along with industry consolidation, there has been some vendor consolidation as well. We are getting invited to bids for accounts, which was not there before. And most of these accounts are single-vendor ones.

Vendors are also looking at centralising their systems. From a growth perspective, we have seen the drop. From here, it would be stable but flat growth. It is going to take a while for the industry to see the same 30-40 per cent growth. It will be in single digits of five per cent for some time.

Do you believe US protectionist rhetoric will impact outsourcing?

As long as businesses focus on their core, outsourcing will stay. Offshoring is a different story. Offshoring is about the rate of savings a customer expects. If the rate of savings does not happen, then a new business model will have to evolve.

Currently, the 'O' in ITO, BPO and KPO, etc, means outsourcing, but depending on the length and depth of this recession, that 'O' must be (made) optimisation.