In an industry in which the youth of a Bill Gates or Steve Jobs gets highlighted and hyped, people sometimes forget that there are many people who have spent decades in the industry to build successful global operations. Age is not a handicap, as S. Ramadorai, chief executive officer of Tata Consultancy Services, has shown. In the five years he has been at the helm of India’s largest software company, he has proved that creating the most valuable software company in the country has nothing to do with being young. His pioneering status in the industry – he came in at a time when very few in the country knew or appreciated what IT was all about – has helped him maintain TCS’s lead in India’s IT revolution.

Mr Ramadorai has experienced first-hand the turbulent evolution and growth of the industry. It is this unique advantage, coupled with his keen intellect, that gives him the daring to dream big. To think of taking his Rs.3,000-crore-plus company to the top of the global IT consulting business. A dream that makes him bold enough to talk about big plans, even as the industry globally goes through one of its worst periods in recent years.

So what does he have on his mind as he steers TCS through its well planned path to the top? To find out, K. A. Anantharam and Christabelle Noronha spent over an hour with him, despite the pressures on his time, at his well-appointed residence. Excerpts from the interview:

On the impact of the US economic slowdown on TCS’s operations
I do agree that a major part of our revenues come from the US. But today’s business scenario, in terms of geographical distribution, will always be skewed in favour of the US. The reason very clearly is the huge market size and the amount of money that is spent on technology and technology-based deployment in institutions in that country.

But we have always had a proactive risk mitigation strategy of spreading our portfolio across multiple geographies. Today TCS has a geographical spread which, in addition to the US, spans across Canada, the UK, the Asia-Pacific region and the domestic market. We are moving fast to occupy important openings in South America, South Africa and the Middle East. We will continue to focus on opportunity-based assignments, where we will offer clients a basket of development, e-initiatives and performance management services.

We have long-term sustainable contracts with our customers in the US. These contracts are a combination of development, maintenance, re-engineering, e-enabling, performance management and quality services, which will ensure that we work with them on an ongoing basis.

The strong bond we have built with our customers through our dedicated relationship managers, is expected to yield us substantial repeat business. So strong are our bonds that with most of these long-standing customers, we participate in technology roadmaps, technology advice and quantify our value proposition by going beyond the assignment we have been retained for. We may also leverage our relationship with such customers to generate business in areas where we need not have the core competency.

On the slowdown in the industry and the TCS plan to combat this
True, the general slowdown will affect the industry. But when values are not the same, the option customers look for at such times is "how to get the best mileage from the reduced budgets". One is very clearly to work with organisations like us who have the capacity to bring back work to India – and we have worked on this model with several customers.

The offshore experience most customers have had with us, the high-quality infrastructure and the centres which have been assessed at level 5 of SEI CMM, are all positive indicators. We will leverage our reputation to bring back more offshore work into India, which will benefit the customer, in terms of value proposition – including the cost of getting the job done.

But if there is a major slowdown it affects everybody. And, to that extent, TCS will be no exception. The key is how you hedge against the economic slowdown, what kind of exposure you have in the affected areas, for instance in dotcoms, where somebody who has great exposure will have a major problem. Fortunately for TCS, we do not have a major exposure to dotcoms.

We are also working hard to increase our penetration of the domestic market. We have always held that it is our responsibility to bring back the technology and experience gained outside and deploy it in the Indian context. We are very visible in the domestic market in terms of engagements, number of people deployed and ability to handle very big and complex engagements. We will obviously leverage our strengths in these areas to get more out of the domestic markets.

On the massive recruitment plans TCS has in the face of a slowdown
First, let me clarify something. When we say that we are going to recruit 4,000 persons, it does not mean that we are going to go out and do it today. This is our plan for the year based on the business currently contracted, business anticipated by our marketing team and the attrition that generally occurs in this industry.

We will recruit these numbers from multiple channels during the course of the year. Obviously, the numbers can be revised on the basis of business and economic conditions as we go along. No planning exercise is static, where you just freeze it and then keep moving irrespective of the economic conditions or what is happening in the marketplace. All of us, as prudent businessmen, must be sensitive to the happenings in the marketplace.

We generally recruit people through a campus-wide recruitment process. We need a set of good people who, after passing the stringent selection criteria set by TCS, can be trained. We also recruit experienced professionals because we need to build domain capabilities, project management capabilities, industry-experience capabilities and certain geography capabilities.

On change management
We are in an industry where technology very frequently changes every 18 months. Fortunately, TCS, as on organisation, has the capacity to absorb technology changes in terms of training our people in these newer technologies. So there is a well-ingrained process of managing change in terms of technology management and how it is absorbed in the institution itself.

The other aspect of change management is how we build project management skills in today’s context. Here again, we have an institutionalised system of getting people to quickly build capabilities in new domains and with quality.

The curriculum development, to address the new requirements that these changes bring about, comes to us through a number of ways. First is through our client base. As they make changes and introduce new products and services, we build change capabilities through a continuous dialogue with them. It is here that long-term client relationships matter most.

The second is our interaction programme with academic institutions in the US, Europe and India in a research dimension. The third is our integration with technology companies. Then, our own research through our independent think-tank within the company and our research centre in Pune contribute to the process. Add to this our connections with research agencies like the Gartner Group.

It is a combination of all these factors that determines our set of priorities with respect to investments, training, continuing education, asset building, marketing, and research and development.

So change is not something that worries us, because that’s the industry in which we live, that’s the way we practice. We can very quickly adopt new ways of building software. We can quickly integrate new technology into existing applications. That’s our business.

On people-retention policies
I think retention comes under two categories, first the monetary form, which includes salary, perks, benefits, equity options, etc, and the second, which is the non-monetary means of keeping people in the organisation.

Let me first address the non-monetary option. In this profession it has been proven beyond doubt, and it has been seen within our organisation as well, that motivation comes from teams and how you can work together. The level of excitement that is created in terms of engagements, in terms of learning together and in terms of what the organisation invests in your professional career and development plays a vital role in the motivation process.

At TCS, we give a lot of importance to improving the professional capabilities of individuals through training, continuing education, projects by geographies, advanced HR practices, leadership training, and non-monetary recognition. We give a lot of importance to the human resource side of the organisation and see a very clear relation between the level of motivation and level of attrition in teams and groups when such things are done very well. It is always a challenge to do this across the organisation.

We do it in many ways. We try to do it through outside consultants, try to meet as many people as possible, we connect with our team members in all geographies, when we travel we connect with their families. This factor plays a very important role.

Coming to the monetary side, your salary and perks must be in line with the industry. We continuously benchmark our remuneration policies with the help of an outside consultant. Furthermore, recently we have introduced the concept of variable compensation, which is very clearly linked to performance on multiple dimensions. So, the better you perform the more money you can make.

When you look at this model you will find that this is better than what one would have got through equity participation.

That is what we call the EVA model or EVA method of compensation. We are trying to continuously work on this and deploy it across the organisation. That’s the challenge. Today, we have extended the coverage up to certain levels. We have set ourselves the target of 2002 by when the process will be completed. This will then give us the organisation-wide capability to work on providing our employees multiple career paths across technical dimensions, management dimensions and research dimensions, so that they can participate in what interests them the most.

Our efforts to constantly communicate with our people even beyond the workplace {see Waves 2001}, our world class infrastructure and its ambience, and the facilities, including recreational facilities, play a major role in our retention policies.

At the end of the day attrition comes in multiple forms: people who migrate abroad for higher studies, people who migrate abroad for family reasons, and people who are forced to leave the organisation because they cannot withstand the pressures TCS expects them to. We cannot control these.

Then there is always the last category of people who would leave to go to competition. This is what we are trying to minimise and effectively address. I think we have fairly succeeded in our attempts – but a very small number might still get away.

On institutionalising the pursuit for excellence
There is already a strong commitment to quality across the organisation. Our development centre at Shollinganallur (near Chennai) was the first to get the SEI-CMM Level 5 nomination in a record eight months. {see item on Shollinganallur development centre}. This has become a benchmark for the industry.

The ownership has to percolate across the individual businesses or parts of the organisation. It’s a collective team effort – essentially because it is bottom-up and top-down so that every single employee has to gather the matrix in his workplace, incorporate the matrix, work on the matrix to increase performance on a continuous basis.

Across 13 locations we have covered 8,000-9,000 of our employees. The remaining 6,000 or so of our employees are outside the country. So we have practically covered most of the organisation by the SEI CMM level 5. A few locations are left in Delhi, Pune, and so on, and we have set a time frame by which we will complete the process.

On what's next on the quality front
The bigger challenge, once you have been assessed at SEI CMM level 5, is to ensure that you keep working on the matrix because you will have to do a reassessment every year.

We are also faced with the question, where do we go beyond Level 5? Because even though there is no mention by the SEI institute in Pittsburgh, TCS has the capability to define excellence beyond Level 5. At a research level, we are looking at integrating the Six Sigma and the CMM initiatives together.

Six Sigma efforts are already underway and we are getting our employees certified as certified quality analysts (CQA). From May this year, we would get our people capability maturity model rated. It’s a combination of all these that will push or greatly drive the organisation.

Then we have our own TBEM model. All along we have focussed on the CMM model since that is what our customers wanted. But the TBEM quality model is just as powerful.

The biggest challenge has been to integrate the TBEM and SEI-CMM initiatives. We are integrating the two by building strong internal systems and by completely digitising or e-enabling TCS. The manual intervention as TCS connects with its people, customers and its suppliers has to be seamless. This is a major initiative that is driving our vision for the next 18 to 24 months.

In terms of the TBEM, last year we were at 421 points. We want to get to 600 points and above in the next application or the next cycle of the application next year, under the TBEM. That is when our internal system will be well-ingrained.

Unless there is a well-integrated digitised, e-enabled internal system and connections, you can't just consolidate the matrix in which the TBEM works. While we have thought through the whole architecture, we are looking at the security aspects since we don’t want any loss of information, whatever be the type of information. We have a very strong security group working out of our Hyderabad-based Advanced Technology Centre.

On products from the TCS stable
We are very clear that we will not be in the shrink-wrapped product game. If you are headquartered in India, you cannot satisfy a product for the US market because it is purely a marketing and branding game.

But we have some very strong products for the vertical markets such as banking, finance and telecommunications. Our retail-banking product for the domestic industry, called ISBS, has the highest market share in the country. We command 60-65 per cent of the branch banking software package market in the country. This package was very clearly positioned to be a domestic market product. The other domestic market product was EX, a single-user, small business tool, where again we have a sizeable market share.

The other products we are focusing on are an outcome of our domain capabilities. These are a custody product, a treasury product, a wholesale banking product called Quartz – all of which are today beginning to take leadership positions in India and outside. Investments are phenomenal in the larger products game. You cannot build these products in a year or two. It can take up to four to five years to build these products, before they reach the marketplace.

Additionally, the development tools developed at our R&D centre in Pune will be sold in the open market at an appropriate time. It is all part of a planned strategy.

On the company’s IPO plans
We don’t talk about what has gone by. There is no point in wondering if we should have gone public last year when the markets were on a high. It does not help anyone. We need to talk about TCS’s future with regard to the requirements of various stakeholders involved. We need to ask ourselves the question, does it address the needs of our employees? Does it generate a currency for inorganic growth of the organisation through acquisitions? Does it give us the ability to give options to some of our critical customers? So all these may necessitate a requirement of creating a currency for the growth beyond the normal alternative growth. So if we look at a listing, an IPO, from this perspective, we must take care of employees, of their future growth and the stakeholders’ needs. As to the timing of an IPO, I would not like to comment on the subject at this point.

On how he keeps himself abreast of technology
I keep myself abreast of technology in many ways. I read a lot. Besides, I travel a lot and am hence close to the markets in which we operate. I maintain close connections with academic institutions, research institutions and technology companies. I am also very close to all our customers and learn a lot from them.

The best way to get a hold on technology is to start using it, and I use all the possible new technologies as and when they become available, to personally get used to them. I participate in product reviews and bid processes that give me an insight into technology.

On the TCS-HDFC promoted call centre
The whole value chain in an organisation to provide value to customers starts from business strategy to IT strategy to system deployment to back office processing. We have a whole range of long-term customers who would like to outsource their customer service activities. So when we look at this value chain the question we deliberate is whether we do the back office processing within TCS or go out.

We realised that we should not do it within TCS because of the type of skills needed. The type of people required to do the back office processing are different from the mainstream system building, systems support, IT strategy and business strategy that we are currently in.

We looked at the best way we could provide value to our customers across the entire value chain. That is when we decided to go in for a joint venture with HDFC for a call centre operation. The joint venture represents two very powerful brands which address a base that both believe is likely to grow exponentially. The demand is very large.

Organisations outside India which outsource their IT deployment to a country like India would also expect to offload their back-office processing, call centre processing and infrastructure due to the same problems of non-availability of people at the right price in their own countries.

That is why we decided to venture into this area. The other reason we went in for a joint venture with HDFC is the scalability issue. Call centres are an operation growing to a 5,000-people organisation over a three-year period of time. This needs to be done out of multiple locations, and multiple cities with the highest levels of technology.

Having such an offering for our customers helps us in many ways. Existing customers of TCS or HDFC, may do call processing with us. Secondly, new customers from the call centre could well feed into the TCS consulting system in the process. We are looking at business generation in addition to satisfying demand by occupying the space in the entire spectrum of the value chain.