“We are willing to take a risk,” he says.
In fact, Covansys’ reputation as a technology services Band-aid has preceded it for the past decade, helping it win strategic public sector accounts and business from companies such as Gap and Ford Motor Co. Vattikuti knows that being a fix-it man, the go-to guy who takes care of business, helps build strong, long-term relationships.
“There is nothing impossible, and success is a matter of putting our head down and executing,” he says.
This can-do attitude has paid off from the start. Covansys was a pioneer in offshoring business, setting up operations in India and integrating this overseas office with operations in the United States to ensure seamless service for customers.
Vattikuti’s plan was to stay close to customers while tapping into offshore resources.
“The key is to blend really well locally and, at the same time, leverage global resources like engineering, marketing and design,” Vattikuti says. “We make sure we think like our customers in the U.S. and understand their businesses and their pressure points. Then, we integrate that with our global resources.”
Stepping off of its sixth consecutive quarter of growth, Covansys closed 2004 with $374 million in revenue and is pushing through 2005 at a 15-percent growth rate. The company is a player in a hot market, and Vattikuti’s hunch about how to link local and global business will drive its success as corporations continue to outsource IT services.
Making the model
Covansys’ first large project 10 years ago set the stage for a business model of integrating onsite, offsite and offshore resources that the company still follows today. At that time, the Nevada state government was building a technology interface for its welfare system, and the project was behind schedule. The state called Covansys.
“They needed people working around the clock,” Vattikuti says.
He knew hat recruiting the technological manpower in the United States before project deadline was impossible. And at the time, Covansys’ India operation consisted of a 5,000-square-foot office space and 25 employees, but that wasn’t enough for the project.
“Besides the 70 to 80 people working onsite, we needed to quickly add 300 people to finish the project,” he says.
Those people came from India, and the project tested Covansys’ ability to ramp up resources offshore, integrate them with onsite knowledge, and deliver results to the customer quickly.
“We took the risk and fine-tuned our processes and communications,” Vattikuti says. “Today, the product we deliver is one of the best in the industry.”
The company breaks up projects into palatable issues and determines whether they are best addressed with local, onsite consultants, or whether cost-effective, offshore resources make more sense.
Flexibility is the company’s hallmark, Vattikuti says. “We take their resources and blend them with our resources, and that is where the trust grows,” he says.
Today, Covansys provides services to more than 400 clients. And as each accustoms to globalization in their respective industries, they trust Covansys’ experience running an offshore business, Vattikuti says.
“Our strategic customers have seen this [onsite-offsite-offshore] business model work well compared to the traditional offshore models of other competitors,” he says. “We can [deliver to] these accounts, and that helps us penetrate different markets.”
Michelle Jones, Covansys’ vice president of marketing, says Covansys’ business model is what most companies are working toward as they try to link U.S. and overseas operations. But it’s not that easy.
“In our industry, there are several ways you can deliver services to clients,” she says. “All of those models converge into the model we already have.”
Some international companies set up sales offices and limited infrastructure in other countries. They are able to sell IT services, but the interface is limited.
The goal is to move as much of the labor offshore as possible. This model appealed to clients who faced cost-reduction pressures during the economic downturn, Jones says.
Some multinational companies have adopted a different model, Jones says, with operations and support staff in other countries primarily serving those countries, not the United States. Many of these companies lack an effective communication link or delivery system that allows them to sell locally and delivery globally.
“We are already there,” Jones says. “We are the local footprint with delivery capabilities in India, and our clients have been with us as long as we have been doing it.”
When a U.S. customer seeks service from Covansys, a representative discusses with the client the problem, project size and timetable.
“We make a recommendation based on the best interest of the project,” Jones says, noting that projects aren’t automatically shifted overseas to cut costs if customer interaction at the local level is critical.
“This goes back to flexibility. If the hole is square, we can be square, too. We have the infrastructure [in the U.S. and India], the people and the delivery systems to answer questions for clients.”
Clients are answering with repeat business.
“Customers are embracing the global model,” Vattikuti says. “They are using global delivery more aggressively, and it is becoming mainstream for them.”
Path to India
Covansys’ passage to India evolved over time. Raised and educated there, Vattikuti left 30 years ago to attend Wayne State University. He later took corporate IT positions at Chrysler and Yurika foods before launching Covansys in 1985.
Then, the company was called Complete Business Systems, and its five-person staff attracted two key clients Daimler Chrysler and SWIFT, the Society for Worldwide Inner-bank Financial Telecommunications that are still with the company today.
Steady growth characterized the early years, until the dot.com boom and rush for Y2K compliance in 2000 fed Covansys’ first growth spurt. By then, the company was 5,500 employees strong, with 80 percent of the work force based in the United States.
“During Y2K, we won deals because we were confident enough in our technical capabilities to say, ‘We’ve never touched that type of language before and it’s a lot, but we are willing to work with you to get it done,’” says Jones, who managed Covansys’ Y2K practice.
Meanwhile, customers’ increasingly complex compliance needs required more expertise, but the technical recruiting pool in the United States was not deep enough to fuel the rapidly growing business. The people and skills available in India attracted Vattikuti to that country.
“As we started executing more projects in the U.S. [through our India office], we noticed that people from India had a strong technical background and an ability to work flexibly and learn new skills,” he says. “At the same time, there was a shortage of resources in the U.S.” The U.S. educational system was pumping out business and management graduates, while schools in India were training technologists and engineers.
Covansys tapped into India’s tech base and, as it grew, the company’s employee profile flip-flopped. Today, Covansys employs 6,500, but two-thirds of its team is based in India.
“Let’s say a basic tech programmer wage in the U.S. is about $70 per hour,” Vattikuti says. “That is equal to three people in India.”
Covansys was physically growing, winning business and multiplying in employee headcount. But for four years, its revenue slid as it worked to even out the revenue gap between U.S. consultant rates and Indian rates, which are at least 60 percent less.
The company wasn’t realizing top-line growth during the time it was operations in India were expanding exponentially. Revenue in 2001 was $404 million; the next year, it dropped to $383 million, and then more.
This year, with the model and mix in sync, the numbers are turning around.
Cultural differences pose a challenge with globalization, creating a barrier that prevents many companies from successfully integrating U.S. and Indian operations. While certain business challenges are universal, others are unique to the Indian culture.
“Mainly, people tend to say yes to everything,” Vattikuti says. “We don’t put our company out of business by always saying yes, but we try to strike a balance,” he says. “We cannot say yes to everything. That is why we have onsite management and key delivery personnel, because they understand the business culture of each of our clients.”
Vattikuti says managing this cultural norm is easier today with increased exposure to the Western world. Meanwhile, Covansys relies on a strong human resources group based in India to train employees and key management to oversee global projects.
Indian workers learn about clients’ needs and business goals, not just what each project requires technically, he says. And Indian employees are well-versed in the English language and exceptionally cross-trained in technological disciplines.
Education and strong leadership have turned what was at first considered a cultural weakness into an operational advantage for Covansys.
“[Through training], we are clear on our expectations, deliverables and processes,” Jones says. “We are more efficient because there is less of a chance for communication issues.”
Communication, ultimately, differentiates Covansys from its competition, Vattikuti says. “We make sure we align ourselves with the customer on the end-to-end delivery so we can be highly productive.”
Vattikuti’s way is to persevere, push forward and find solutions. “We believe in the long run,” he says. “We want the customer to feel good about Covansys and what we contribute that is how you build your brand.”
Vattikuti learned this the hard way a few years ago when he stepped away from Covansys’ daily operations.
He was still co-chairman, but customer interface was delegated to others. And Covansys was testing a different sales model, one that focused on hardcore selling.
“But our customers weren’t looking for a hardcore sell,” Vattikuti says. “They want to know how we can provide them what they need.”
Rather than staffing the sales team with tech-savvy representatives as it did in the past, Covansys relied on reps who were professional salespeople, skilled at finding opportunities but not well-versed in customers’ technology systems. Because of that, the people it brought in were less able to conduct the consultative sale that had been successful for Covansys in the past.
At the same time, Vattikuti noticed new competitors in the global market and a growing customer demand for outsourcing business processes such as accounts payable and claims processing the paperwork behind the technology.
“I realized it was important for me to come back and establish leadership so Covansys could go after the market much more aggressively,” Vattikuti says. And he knew some client relationships were wearing thin under the new sales model.
“They were not as flexible, and it is important for our business to be flexible,” he says. “We had to bring back that culture of flexibility to the customer.”
Back in its comfort zone for the last three years, Covansys is capturing new business. As certain industry segments adopt global business models, the company will expand its reach in these markets, Vattikuti says.
For example, financial services customers now encompass about 25 percent of Covansys’ business and represent an opportunity for future growth.
Meanwhile, infrastructure expansion in China and European countries isn’t far off. As Vattikuti considers these ventures and continues to address cultural integration in India, he will treat each challenge as a project.
“Each challenge has issues, so we structure it like a project,” Vattikuti says, reverting to his tireless approach to simply getting the job done. “We establish ownership and figure out the best way to solve the problem.”
HOW TO REACH: (800) 688-2088 or www.covansys.com