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BW Businessworld

Book Extract: Mark Of A Leader

‘Why don’t you apply for it’, his father’s letter suggested. There were two advantages if he was chosen. Ramadorai would get to work for India’s most respected business group and he could come back to his country to work, which his parents were hoping for.

Some time during the second half of 1971, Subramaniam Ramadorai received a letter from his father. He had been working for Los Angeles-based computer hardware and software giant NCR Corporation for over a year, after his masters in computer science at the University of California. As he opened the envelope, Ramadorai found a clipping of a newspaper which had an advertisement. Mumbai-headquartered Tata Group was looking for bright young professionals.

‘Why don’t you apply for it’, his father’s letter suggested. There were two advantages if he was chosen. Ramadorai would get to work for India’s most respected business group and he could come back to his country to work, which his parents were hoping for.

Ramadorai had grown up under the tutelage of his father, a wonderful teacher who had taught him science and mathematics during his school years and spent a lot of time with him. He was the fourth among five children in the household....

At the Madras Higher Secondary School, now called Delhi Tamil Education Association School, Ramadorai was among the brighter students. His father took keen interest in his son’s education and put in a lot of effort in him. Ramadorai studied at Delhi University and later went ahead to study electronics and telecommunication at Indian Institute of Science. After his Master’s in computer science, he was settled in a comfortable job in the US.

Like an obedient son, Ramadorai accepted his father’s suggestion and promptly applied for the job.

A few weeks later, he got a call from the office of AH Tobaccowala, the president of Tata Inc who was based in New York. Tobaccowala asked Ramadorai to meet him about his application for the job. After an engaging conversation, the two agreed to a date and Tobaccowala flew down to Los Angeles to interview Ramadorai. It took a couple of months before Ramadorai got a job offer from TCS in December 1971.

Once he had the offer, it didn’t take long for Ramadorai to decide whether he wanted to leave his cushy job. It was often the norm for well-educated Indians to find a job in the US and then settle there. Not for Ramadorai, who returned to India in February next year and joined Tata Consultancy Services on February 23, 1972.

“There was certainly more to do in India”, he says about his decision to move back to India. “When you are thinking of doing something that can impact an industry, it is passion that drives you more than logic”, he says.

It was a daunting task to drive Tata Consultancy Services (TCS) in the early years. The company had been set up in 1968, led by the visionary Faqir Chand Kohli, the man who was running TCS. In setting up the company, Tata Sons, the parent company for the entire group had lent Rs. 35 lakh to fund expenses of TCS in its early growth years. The early movers in India’s IT services industry had no idea of how technology would shape their lives.

With his educational background in computer science, electronics and telecommunication, Ramadorai was willing to be the face of the company in the early years of the company during the 1970s. There were just three computers that TCS had at its Nirmal building office in Mumbai – two IBM 1401 and one ICL 1903. Anyone who wanted to, or was required to, learnt programming on these three machines. People used to take their turns using the computers because it was so precious!! Everyone was constrained and restricted on how much time he could use on the machine. The size of the machine was so huge that it occupied the whole of 8th floor and 9th floor of Nirmal Building.

In 1974, TCS purchased its first Burroughs machine, a popular computer hardware brand then. By then TCS has moved in at the Air India building at Nariman Point office, an office that it still operates from. A select group of officials had gone to the US in 1973 to get trained on the machine for hands on experience in Canada. The team then went to the factory to hot-stage the machine – it was the testing process of the machine, before it was to be shipped to TCS. Customs clearances, brought the machine to the office, installed it, ran it at the office and maintained it. It cost the company around 250,000 US$ at that time, a princely sum for a country starved of foreign exchange. In Indian currency, it cost nearly Rs. 50 lakh in 1974 to import the computers to India. That included almost 100 per cent duty which had to be paid for the import.

It was not easy selling software services in the early years. Potential customers had to be educated about the benefits of using customised software to run their business more efficiently. Getting the first few customers was the challenge. TCS decided to focus on some banks to automate the branch processes. A number of Indian banks had been nationalized and it was not an easy sell. But once some early customers saw the advantages of branch automation, others soon followed. All this was done on the Burroughs computers, which had been mastered by TCS by now. Bombay Telephones needed to print their directory and it was able to do it with the help of Burroughs computers. Electricity billing for BEST, Mumbai’s electricity provider was also done by these machines. These were some of the earliest customers of TCS.

The company has started focusing on overseas markets too as migration tools for porting software from an IBM to a Burroughs machine had been mastered by TCS by then. The presence of some researchers from Carnegie Mellon University, who had joined TCS, helped instill even more confidence among customers. With a workforce that included Indians as well as non-Indians – several of them experts at Burroughs computers – TCS managed to reach out to customers who were looking for software services. Those were the first steps in creating intellectual property of the company. TCS now knew the building blocks of technology and software. The bosses had allowed them to experiment.

“The hunger was there for us to help create a differentiator because it helped us to relate with the needs of our customers. You could not just have said I can supply 20 programmers at an affordable cost”, Ramadorai says of the early years at TCS. It was a people’s business from the early years and once TCS was able to get them with the right skills, customers followed soon. “Human capital was just the first tool. After that customers were looking at value addition. That is what gave us the early breakthrough”, he adds.

During the 1980s, TCS had started coming on its own as major software services company. HCL, more of a hardware company, and Infosys, were toddlers. Given the kind of growth that it was beginning to see, the thought within TCS was that it could, at best, be a 5000 people company. To handle that kind of growth, one of the ideas mooted was to have several companies within its fold so that growth could be handled effectively. It did not take long for TCS to dream to be a 10,000 people company!

“After that we had to put in strong processes so that the company could grow”, Ramadorai says of the 1980s and early 1990s.

It taught Ramadorai a lesson that was to prove so important in later years, especially during its IPO: if you produce what you have promised to do, it is the first step towards success in your endeavours.

One of the early big breaks came from the US financial services giant American Express. There was an opportunity to do some work for American Express in Australia. With the appreciation of TCS’ work there, more work followed in Mexico and Argentina and finally in its home country, US. “It is the trust that we were able to establish. The other reason is that people were willing to listen to you”, says Ramadorai of one of the early big deals that TCS signed. With the work that it had done for American Express in Australia, TCS had established its credentials.

Ramadorai took over as the CEO in 1996, succeeding FC Kohli. As he took over the reins of India’s largest IT services company, he needed to move into higher gear to meet the challenges of the opportunities that were coming its way. The late Devang Mehta, then President at NASSCOM – National Association of Software and Service Companies – the representative body of IT industry in India, was busy telling the world about India’s IT prowess within the country and outside.
A meeting of the top officials of TCS was called at the Indian Institute of Science in 1998. Most of those attending the meeting were old hands who were part of the company since its early years. TCS had been around for three decades and it was time now for the vision of the company, and its 1996 to be aligned for a common goal...

By now TCS was gearing for aggressive growth as business had picked up speed after the Y2K boom. Till then, the presence of TCS was largely confined to IT services business. At the end of the meeting, six new growth areas were identified by the top management of the company. It planned to grow each of those verticals into a billion dollar business. At the time, the combined strength of the company was not even half a billion dollars. TCS also decided its goal, which was a moonshot – it wanted to be one of the top 10 IT services companies in the world.

In 2003, Ramadorai had successfully led TCS to become India’s first billion dollar IT services company.

“It was a grueling time for us to understand how the market functions because we were seeking a certain valuation for the company at the time of the public offering”, Ramadorai recalls of the days which led to TCS becoming a listed company in 2004. When TCS reported its financial details at the end of the first half of the financial year, its profit after tax, was Rs. 1058 crore.

The TCS IPO happened during the second half of 2004, a little after the markets had hit the lowest point during the last decade. India’s Sensex, the benchmark index for the stock market, had slipped below 3000. Infosys, the second largest IT services company by revenue, was the darling of the markets and was tracked very closely within India as well as the US.

Infosys got a better valuation in the eyes of the market even after TCS had listed and was a bigger company by revenue. Infosys followed a practice of giving a future looking guidance to the stock markets on what it expected its revenues and profit to be over the next year. Since it often outperformed its promise to the markets, Infosys was loved by the investors.

Ramadorai was not ruffled by Infosys becoming investor’s favourite choice. Over the years, TCS stepped on the gas and focused on work at hand. In a decade, TCS worked hard to increase its rate of growth and crossed market capitalization of Infosys.

“We focused on the customer. We made our promise to the customer. If we could exceed his expectations, it would automatically show up in results. The sustained value proposition for customers has been the key”, says Ramadorai, who handed over the reins as CEO in 2010.

He managed to make TCS one of the top 10 global IT services companies by revenue. The achievement came before his superannuation. For Ramadorai, the lesson has been: It is for the customer to decide who he wants to work with. Once you get the break, don’t let it go.

India’s IT services and the business process outsourcing industry, called BPM is now almost a $150 billion in size. Ramadorai and a few others have been pioneers of this industry who managed to pave the way for companies to make it big.

From the time TCS listed in 2004, its revenue is now in excess of Rs 73,000 crore (over $11 billion). Ramadorai had helped set it on a growth path. When he took over the reins, TCS was a $160 million company and when he handed over the reins to his successor, it was a $6 billion giant.

“It took us first 20 years to clean up the forest so that everybody could run. If the foundations and building blocks are not right you cannot accelerate”, Ramadorai says. The industry is now galloping ahead. Ramadorai is watching.