Business India
November 24 – December 7, 2003
Naazneen Karmali

You would think that Romesh Wadhwani would be swinging in a hammock somewhere, leisurely sipping mai tais and watching the sunset. After all, isn’t he that Silicon Valley guy who sold his firm Aspect Development for a record $9.3 billion to fellow Indian Sanjiv Sidhu of I2 Technologies at the height of the tech boom? That kind of money could douse the fire in anyone’s belly. Furthermore, Wadhwani had once gone on record to say that “If you’ve done two start-ups, you’ve used up most of your emotional and physical energy.” So it seemed more than likely that Aspect, his third venture, would be his last blast.

But Wadhwani is anything but a spent entrepreneurial force. As he confesses, “When it comes to entrepreneurial activity, I can’t be trusted!” Last year, he quietly stepped down from I2’s board where he was vice-chairman to pursue his own interests. Obviously, another Wadhwani enterprise was in the making. Last fortnight, the dimensions of that became clear when the serial entrepreneur flew in to Bangalore from his home in Palo Alto, for the formal launch of Symphony Services, his newest venture, in India.

As D. B. Inamdar, Karnataka’s minister of state for IT cut the ribbon for the Symphony Technology Center, a spanking new facility with a capacity to house 1,600 engineers, Wadhwani expounded on Symphony’s business model with all the evangelical fervour of a start-up entrepreneur. “With Symphony, we’re aiming to create the next generation infotech model,” he proclaimed. Rather that jumping onto the BPO bandwagon, Symphony is into higher-value BTO, business transformation outsourcing, which goes much beyond traditional software services.

“IT application work is commoditised now. And call centers are simply at the wrong end of the value chain,” says Wadhwani disdainfully. An Indian IT entrepreneur argues that low-end work or not, BPO is a profitable business. But Wadhwani has set his sights higher: “Indian engineering talent is capable of doing much more – R & D, advanced analytics – and we want to leverage that intellectual capital. In BTO, the focus is on helping companies increase their revenues and improve quality. Cost savings is only the third item and a by-product,” he explains. Adds Symphony’s CEO Bob Evans: “This is not about putting in Peoplesoft cheaper but about helping companies transform their business model.”

The BTO concept wasn’t invented by Wadhwani for global consulting firms like Accenture and IBM Global consulting are touting it as the next big wave. Jane Linder of Accenture elaborates that it is not about farming out payrolls, “but about taking on the outsourcer as a business partner-sharing both risks and rewards – to transform the critical processes that can most radically change a company’s way of doing business at the enterprise level. BTO goes beyond incremental improvements in costs, service levels, and support capabilities to aim squarely at results shareholders can see market share, share price, and return on capital, for example. And it does all of this in an accelerated time frame.”

Symphony is mainly targeting American software companies, selling them the idea that outsourcing product design and development – critical work that they have been loathe to move offshore – could dramatically reduce the time-to-market and, by the way, deliver cost efficiencies. According to Evans, there are over 700 software companies in the US, making the market ripe for consolidation. “They are under pressure to develop higher quality products, ahead of their competitors. We’re ready to take up full lifecycle responsibilities for our clients. As more companies see the benefits of BTO, our business will pick up,” says Evans confidently.

Since it was set up 15 months ago, Symphony Services has gained traction much beyond initial expectations. The Indian are got going with the acquisition of Cambridge Technology Partners’ Indian operation. (“They had 100 engineers but no revenues,” says Wadhwani.) The opportunity to do high-end work is drawing A-plus talent from here and overseas – about 10 percent of Symphony’s workforce consists of US returnees including India CEO Ajay Kela. The client portfolio includes respectable names like Siebel, Merant, Manugistic and Broad-vision.

Wadhwani is upping the stakes: investing a further $100 million over the next three years and increasing the number of employees in Bangalore from 600 to 2,500 by next year. He expects turnover to touch $100 million by end 2004 and $500 million three years down the line. Attracted by the potential, T. H. Lee Putnam recently invested $20 million in Symphony.

Going by Wadhwani’s past track record, he isn’t the kind to paint numbers in the sky. He admits that although Aspect pioneered offshore development in India back in 1991, in six years it was still a small 100-person outfit. “Like most American companies we were just tinkering and doing second rate work here,” he recalls. “It was only when we began to look at our Indian arm as a transformational operation that our fortunes changed. A lot of the value created in Aspect was created in India. We developed 18 hit products, which generated revenues of $500 million.”

Post 12, Wadhwani set up the Symphony Technology Group, an investment firm with a corpus of $300 million and focused on the enterprise software space. STG is not a venture fund in that it doesn’t invest in start ups but in existing companies that may be floundering but have the potential to become leaders. Symphony Services, the only start up in STG’s portfolio of eight companies, “could assist in their transformation”.

This has already happened with IMI, a retail software solutions provider, which was acquired in January. “It had made losses of $3 million to $5 million every quarter for 20 quarters. By rationalizing the product portfolio and moving development to Bangalore, we’ve made it profitable in 10 months,” claims Wadhwani. He’s hoping to do the same at GERS, a supply chain solutions provider that was also acquired. STG’s most recent acquisition and a big coup for Wadhwani is Information Resources Inc, a shoping data provider with revenues of $550 million. The acquisition, coming after an 8-months pursuit, was via an open offer for 62 per cent of IRI’s equity made by STG subsidiary Gingko Acquisition Corp together with investment firm Tennenbaum & Co. Looking ahead, IRI too will leverage its Bangalore connection.

Wadhwani’s mission of creating sustainable economic opportunities for underprivileged Indian families has translated into two focus areas for the foundation: funding not-for-profit activities to accelerate entrepreneurship and empowering the disabled. Rather than distribute cash by remote, the foundation is present on the ground with an office and full-time staff in India. Its board of advisors includes heavies like N. R. Narayana Murthy, ICICI’s K. V. Kamath, Prof. Howard Stevenson of Harvard Business School and Prof. Amar Bhide of Columbia University.

Amongst the Foundation’s first grants were towards funding the Wadhwani Electronics Laboratory at IIT, Mumbai (Wadhwani’s alma mater) and establishing the Wadhwani Center for Entrepreneurial Development at the Indian School of Business, Hyderabad. Big thinker that he is, Wadhwani launched a new initiative called the National Entrepreneurship Network eight months ago. This innovative programme aims to create an India-wide network of entrepreneurial development centers within academic institutions that will in turn, create “thousands of new entrepreneurs”, outlines Laura Parkin, the foundation’s executive director.

“The macro-economic climate in the country is right for such an initiative,” adds Parkin, who is based in Mumbai. Interestingly, the foundation hopes to spawn these new entrepreneurs in non-IT industries.

Another ambitious project is the National Entrepreneurship Study, a research exercise to be jointly conducted by Columbia’s Bhide and IIM, Bangalore. Its aim: to develop a database and identify factors critical to entrepreneurial success.

The foundation’s second focus area has been kicked off with the Opportunities Network for the Disabled. This aims to help the disabled find and retain long-term employment targeting particular industries and jobs (such as call centers). “Companies like Wipro are open to the idea of employing the disabled, but the disabled on their part have no idea how to go about. We hope to act as facilitators,” says Nilima Rovshen, who heads the Wadhwani Grant Programme in Bangalore.

Wadhwani’s pet projects have something to do with his early years he had polio as a child. Although he grew up in a family of professionals – his father was a banker – the entrepreneurial instinct came to him naturally. (Coincidentally, same was the case with younger brother Sunil who runs the Pittsburgh-based software services firm iGate Corporation). Wadhwani remembers writing his first prospectus at IIT, Mumbai to set up the Canteen Co-operative of Hostel 2 to provide a decent food option to students. From there to Symphony – it’s nothing but a new tune for an old song.