• Inspiration

He’s 48-years old, has been traveling 20 days a month for the last 15 years, a large part of which involves shuttling between his Bengaluru and Fremont offices. Still going strong, he’s decided to retire by 55. Unrelated to a formal retirement age, Phaneesh Murthy, CEO, iGATE Patni, says it’s a personal goal to take his company to the next level of success, and build a succession model as well. He’s got no plans set in stone post-retirement; maybe he’ll go back to studying medicine or start his dream venture, a cross between green, medicine and technology, he doesn’t know yet. “All this requires a lot of thinking and right now my focus is committed here,” says Murthy.

Foundation years
“My first recollection of school was in Ranchi when I went to St. Xavier’s,” recalls the soft-spoken Murthy. The memories are vivid, for the first time Murthy, the 11-year old boy, was uprooted in the middle of a school year. His father had moved jobs to Kolkata. Not being entirely clear on how long he was going to be there, he suggested Murthy and his sister live with their grandparents in Bengaluru. The then sixth-grader joined Bishop Cottons where he spent the rest of his school days. He went on to do a year of Pre-University at MES College, but his mind was quite set on studying medicine. Murthy’s father however suggested he write the IIT JEE examination, which he did, after a year’s preparation. In 1980, he got into IIT Madras, his first achievement which Murthy owes completely to his mother’s support and encouragement. “The whole concept of a mother’s love is completely different, that’s when you appreciate it,” he comments. Personally, he had to choose between taking the seat or applying for medicine. Peer pressure took over, and he opted for mechanical engineering. “Many of my friends hadn’t got into IIT and thought I was nuts, evaluating whether to take it or not,” he quips.

Graduating years
The five years at IIT was Murthy’s first taste of freedom, away from the shelter of home, no compulsory attendance, afternoon siestas in the hostel and football. In fact he went on to represent his hostel in seven-eight games. “IIT Madras was a fascinating first semester because of the 250 students in our batch, probably 240 of them would have been class-toppers in school,” he says. “Suddenly after the first couple of tests, you realize that you’re not likely to be number one here.” At that time, he gave himself a tough choice—whether he wanted to struggle to the top or live life differently. Murthy chose the latter. He still hadn’t given up his dream for medicine and he applied for the top five medicine schools in the U.S., post IIT. While he sought admission to a few like South Western Medical School in Dallas, University of Virginia, they weren’t able to offer financial assistance, so he applied for related programs like biomedical engineering “I got admission at Harvard MIT for a MD PhD degree; but it was committing me to five-seven more years of studies post IIT,” he says.

Murthy dropped the seat because it didn’t have fellowship, instead wrote the CAT examination on his father’s advice and got admission at IIM-Ahmedabad in 1985. “But they don’t call it an MBA, that’s the worst part, it’s called PGDM,” he disapproves, largely because it cost him visa hassles during his visit to the U.S. many years later.

IIM-A was a different experience, it’s where he met Jaya (now his wife) and also because he appreciated subjects unlike in engineering. “I was able to work for a few months before IIM-A, at a British company based in Kolkata, McNeil and Mager,” he mentions. Murthy was put in charge of sales of special purpose valves at their Bengaluru office. He vividly remembers an incident where he spotted a mistake in specifications for an order placed by Hindustan Aeronautics Limited. “I pointed this to the Chief Engineer, a big guy who saw credibility in my argument once he knew I was from IIT,” he says. In the end, Murthy’s initiative had the firm cancel the order from their end.

“I really understood the value of customer service,” he states. Thanks to solid work experience in hand, Murthy won a scholarship as one of the toppers of his batch despite taking up tough courses like statistical methods and data analysis.

Sonata days
Murthy joined Sonata Software after IIM-A, because he wanted to work in a startup, since it wouldn’t straightjacket him into a role. He had a ‘grand time’ there for five years, despite a meagre monthly salary of Rs.1,500. “It was fantastic, I loved my experience and was doing whatever I wanted,” he says. This included everything from product management, to building and selling of software and he accredits this to his boss, a certain Mr. Ramaswamy, who is still the MD of Sonata Software. By the fourth year, Murthy realized that if he wanted to make it big in the IT industry, he’d have to play a role in a bigger IT industry than India. “In Sonata we competed with software products’ marketing division at Infosys, we used to pretty much beat them every time,” says Murthy. “Through this, I think, Nandan heard of me.”

Life and learning at Infosys
Infosys, in 1992, had advertised a requirement for a marketing manager overseas. “I told myself that this company really requires marketing help, I must talk to them,” he quips. When he met the co-founders Nandan Nilekani and Narayana Murthy, the chemistry was great, but at the end of the day, the latter wasn’t 100 percent sure if Phaneesh would be successful since he didn’t drink or eat meat! He finally joined Infosys nine months after he received an offer because Sonata didn’t want to relieve him, and instead promoted him soon after he resigned in April ’92. When he joined Infosys as marketing manager, revenues were less than Rs.9 crore. “It was a fantastic learning period, truly like an entrepreneurial opportunity,” he says. As the first guy to sell in U.S., the period was also critical because a year before, the IT giant had almost decided to close down. “Mr. Murthy had prevailed on everybody to make one last big ditch attempt and that was the gamble,” he says. The plan was to use one or two years of cash left and see what happened.

Needless to say, the learning for Murthy during this phase were plenty. In true pioneering spirit, he started hiring MBAs from Hindustan Lever, P&G and Lipton, because selling software was no different, he felt. “To me, it was just selling a relationship, the value proposition, dreams and aspirations to CIOs,” he says. “And that’s one of the reasons we did so well.” The hiring of MBAs in the IT industry started many trends in the sector. Thanks to a startup environment, Murthy was able to contribute differently and launched new services, including consulting as a division.

More importantly, going to NASDAQ was a unique experience. “The biggest takeaway from Infosys was that it was fun to be first in anything,” he states. Plus, Nilekani’s philosophy of strong delegation not only helped build a strong sales culture in the company, but also empowered Murthy to an extent where he was able to learn a lot. “He was the big picture man; Murthy was the complete opposite,” he mentions. “His ability to crib about a Rs.2,250 expense in your budget to what we can do to eliminate poverty in the world and span the entire spectrum in one sentence was phenomenal; his attention to detail is something anybody can learn from,” he tells us.

Unfortunately, in 2002, Murthy had to quit Infosys unceremoniously over a sexual harassment lawsuit. When the news broke, he was in Alaska but by the time he was back he had six job offers for CEO on his home mail box. “I thought I might as well start something on my own and launched Primentor to do consulting till I could raise some capital,” he says.

Entrepreneurial journey
Quintant was started in the end of 2002, with partners Tiger Ramesh, Kanth (Miryala) and Amit Sethi, as the iTOPS (Integrated Technology and Operations) company with Rs.140 crore in the first round of funding by GMR Group. The opportunity was clear because all IT firms were doing work on ‘Time & Material’ model. “I wanted to change the industry and to be a closer partner with the customer, and this meant I had to make their objectives my objectives,” he points. Of course, this was also Murthy’s chance to shape the values of his company, create a work force, practice customer intimacy and establish an innovative culture, in the way he wanted.

In eight months, Quintant was approached by iGate with an acquisition offer. “I did not want to sell, but realized I had to worry about my partner’s sentiments, who saw millions of dollars coming their way, and said I had to accept,” he says. The sweetener, of course, was that iGATE wanted Murthy as CEO. Murthy’s investors left the decision entirely to him.

iGate era
At iGATE, Murthy had 1,800 employees, none of whom he knew, unlike Sonata and Infosys where he had hired everybody. Plus, five CEOs had already quit in the last four years before him and they expected him to do the same. “Here I was a heading a company that was staffing-driven unlike Quintant, which was innovation driven; it took me some time to come to terms with iGate,” he recalls. Back then, revenue of the comparable company was about Rs.250crore-Rs.300 crore (without the sub-contracting work). GE had 45 percent of revenues and the day after Murthy joined the co-chairman indicated that they had put iGate on notice period. They were going to lose the business. “I sat with GE and got the contract renewed,” he says. Murthy stopped staffing, decided to do only offshore projects, which started the profitability curve. “We went from minus 20 percent to over 20 percent in over six years, revenues went up to Rs.1,287crore in 2010,” he notes. Plus he instituted a lot of best practices from his Infosys days at iGATE like software certifications, quality management, and the way to approach customers. “It took me two-three months to clean up iGATE,” he points out. This included developing a sound work culture. iGate, Murthy said, works on an adult-adult model unlike paternalistic tendencies at many other firms in the industry. It’s a no-brainer then why iGate has been rated as the best employer consistently over the last four years. “We make a lot of investment in employees’ leadership development and career planning,” he says. “The market was ripe for companies where employees would be more entrepreneurial, more empowered; we’ve done a lot of that,” he adds.

Murthy’s ideology on hiring has been thanks to Dr Sabu’s advice, (from his Sonata days) who told him once. “Ek cheez dekhna. Dum hai ki nahin? Dum hai tho kuch bhi kar saktha hai.” “I’ve always looked for people who are willing to take ownership, with drive and energy to take it forward,” he reiterates.

Phaneesh, Patni and posterity
In May 2011 iGate made news with its acquisition of Patni Computer Systems with an 83 percent majority stake which catapulted it into the billion dollar game, despite incurring a debt of around Rs.3,300 crore. “The industry structure was changing a little, we started to feel that innovation alone wasn’t enough, we needed a bit of scale,” he states. There had been speculation around iGate’s interest in Satyam too, but Murthy confirmed reasons for choosing Patni. “I figured our core strength and what would turn Satyam around weren’t matching,” he highlights. The newly-formed combined entity, iGate Patni, deems to bring scale with 26,000 employees, 360 clients, and diversification of verticals to insurance and healthcare, media and entertainment, retail and logistics, communication and utilities. “Strategically we’ve done some more interesting things, and have acquired Patni’s Product Engineering Solution also on the revenue side,” explains Murthy.

While iGate Patni has a go-to-market strategy of a combined entity, both are still listed as separate companies in the stock market. Reasons for the latter are a combination of financial resources and Indian regulatory norms. “Indian norms only allow companies to delist themselves on a reverse book building process which we have to do. It also requires another around Rs.1,000 crore which I don’t have,” he states.

And since the whole thesis of the acquisition is revenue synergy, gain a larger share of customer’s dollar, more verticals, and a bundle of services to client, it made sense to go to the market together. Murthy maintains that the acquisition will only hit full speed by 2013. This year, he says, is about stability and building a foundation to achieve superior growth in the future which includes retaining customers and employees. “By 2012, our joint go-to-market strategy will start yielding results,” he affirms.

Like most transactions, iGate’s buyout of Patni involved heavy axing of senior management, to include CFO Surjeet Singh and HR Head Steve Correra, because there was room only for one to run the combined entity, those from iGate. “The fundamental trait for any CFO is high degree of trust, so someone you’ve worked with is better,” he says.
The new executive committee has four people from Patni’s side who in Murthy’s opinion were doing a great job of holding things together. “They have a good set of complementary skills, experience, and have been high performers, so I hope they bring that here,” he says. More importantly they were willing to give Murthy the five-year commitment he needed.

“There was no great value with others as they had built empires of their own; it would’ve made it difficult for us to streamline processes and cost structures, he states.”

Axing also involved the CEO of Patni Jeya Kumar to be replaced by Murthy himself. So what does he see himself bringing to the table as the CEO? “I have been part of the industry for a long time now and know the nuances more,” he points out.

“Plus, I’ve been based in primary market for long. Since 80 percent of the business comes from North America, the clients know me.” The IT entrepreneur hopes to make the new entity a high margin, high hustle company, which is what iGate was, and the next two years will be a good indication if they have a viable model for growth and be able to make further acquisitions in future.

“You have to build a culture that accepts acquisitions.” Moving ahead with the same vigor when he started his entrepreneurial journey, Murthy says it’s important to have conviction in what you’re offering.
“Bet for success, don’t hedge for failure,” he signs off.

©Entrepreneur October 2011

Tags:
iGate, IIT, Patni, Phaneesh Murthy, Shonali advani, sonata