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Fostering change Featured

9:47am EDT July 29, 2005
Bharat Desai isn’t the type of leader who sits still. The chairman, president and CEO of IT service company Syntel Inc. lives and dies by tinkering with his company’s products, services and even its internal operations.

“It’s absolutely critical to innovate,” says Desai. “In the information technology industry, things are changing and evolving all the time. We see our role as helping clients figure out how they can use innovative technologies to create a competitive advantage in their business. That is a continually ongoing process.”

Accordingly, Desai, who launched the company in 1980 with $2,000 and an MBA from the University of Michigan, has been among the most daring in his industry. In 1992, when competitors were focused on delivering on-site services, Desai was spearheading offshore operations in Mumbai, India. Today, he’s put the emphasis on using his company’s own products and services to create better efficiencies within Syntel’s operations before offering them to the public.

“We thought that we first had to make our own example,” he says. “And only after we drive our own example home can we really take our message to our clients.”

Smart Business spoke with Desai about the importance of innovation and how the prevalence of outsourcing has changed the IT industry landscape and Syntel.

What is your philosophy for fostering innovation?

I emphasize the importance of innovation across the whole organization through constant communication. The best ideas come from people closest to our clients’ businesses.

We encourage people to innovate and take risks in delivering superior value to clients. We recognize people who take risks and come up with new ideas to push the envelope on how we can bring additional value to customers.

Let me give you a few examples. We launched two new service offerings in the last couple of quarters — SSN Secure and Synapp Test. SSN Secure was in response to clients’ escalating need for security of information.

The Social Security number is used extensively in financial services and health care applications. And yet, there is heightened need for security. Syntel came up with an offering that would help these clients create a security blanket around Social Security numbers.

The other one is Synapp Test. As more software is developed, there is an explosion in the use worldwide. There is also an increased need to ensure that software is really well field-tested so that people don’t encounter bugs once it is in use. We created this offering which allows clients to field-test software.

We applied various sophisticated tools and techniques to ensure that when software comes out, it is very well tested and there is a high degree of confidence in its robustness.

How do you solicit input from clients to address their escalating needs?

Through constant communication. The best way to understand customers’ needs is to be very close to them and learn more about their business. One of the initiatives we have taken is that even though we are a technology company, we’ve increased recruitment of people that understand specific industries and specific industry domains well.

It is these people (who are) communicating with clients, understanding their challenges and opportunities, then coming up with solutions proactively that we believe will help solve those problems or help them take advantage of opportunities.

What steps do you take to communicate the message that you’re encouraging employees to take risks?

We publicize new ideas internally. We have several publications, and one of the things they [feature] are great ideas that were presented and how an idea helped deliver value to a given client.

We recognize people who go out of their way in driving innovation. We also have rewards for people who have really strong performance — financial incentives. And then, for people who have really superior performance, they get nominated for our annual president’s award program. This is a program where roughly a dozen (out of 5,000 employees) of the top performers worldwide are invited on a cruise that my wife and I host.

It puts them in very elite company. Anyone can nominate someone. Typically, people nominate people who have shown exemplary performance in their group or in their interactions with them. We used to get 50 to 70 nominations. Last year, we put it on the intranet and got over 200 nominations.

How do you recruit these top-notch people?

You have to define the profiles of people who you think will be successful in your industry and who are aligned with your culture. Our culture is to be very customer-driven. We want people who are customer-driven, who are responsive to the needs of customers and who are motivated by growth and innovation.

We look for those attributes in people because those are the people who we know will be successful in our company and will have a multiplied effect on the innovation at Syntel.

How does your Indian operation create a competitive advantage for you and your clients?

There are several key benefits. First, availability to a highly talented work force. India has 500 million people under the age of 25, and there is a huge focus on education. Access to this very vast, very deep talent pool is No. 1.

Two, because the talent pool is so large, it allows clients to take on large projects. By outsourcing to us, they can ramp up or ramp down very quickly.

If they had to do that project in-house, to staff up 200, 300 or 400 people would be very difficult. But they can come to us and say, ‘We have this project that needs to be delivered in 15 months. We looked at the staffing profile, and it looks like we may need 50 people for the first six months, then 300 for the next nine and then 50 for the next three.’

We can quite easily manage that. So the second is scalability.

Third, because of the first two, it allows them (clients) to get a time-to-market advantage over their competition. A development cycle or innovation cycle that normally would have taken 12 to 18 months we can sometimes collapse to three to six months.

Finally, because the wage rate is so attractive there because the cost of living is so much lower, it allows them all of these benefits at a very attractive price point.

How do you identify opportunities without distracting from your core competencies?

By being in the marketplace all the time. My job is to figure out where are the next set of opportunities for Syntel. I do that by communicating with clients, talking to employees, talking to people in the industry and listening to my advisers. I encourage our leaders to do the same thing.

We have a periodic review process to decide which one of the many ideas that we have on the table we want to actually pursue.

Three quarters of your sales are driven from the applications outsourcing division. How do you ensure you’re diversified enough to weather a downturn in the marketplace?

We are actually further segmented by industry. We have penetration into financial services, health care, insurance, automotive, telecommunications, transportation, and logistics, and retail.

We have very specific plans for expansion in each industry. Applications outsourcing is really a service type, and each of these industries has their own drivers. By servicing multiple industries, leading the innovation process and driving the message innovation across the enterprise, we think we can mitigate the risk of a downturn in any one segment.

Do you practice what you preach for your clients within Syntel?

One of the things a leader has to do is drive change. Syntel has reinvented itself multiple times. Twenty-five years ago, when we started the company with $2,000, we were a local IT staffing company.

We grew from a local IT staffing company to a national staffing company that had lots of foreigners in the work force to a solutions company to an offshore outsourcing company. As we made each of those turns, it was very important to drive a message of change across the organization.

Human nature is to resist change. A leader has to successfully communicate where the enterprise is headed and get the organization aligned behind the change. I was lucky to have a team that understood the reason and motivation behind the change.

Therefore, we were able to successfully execute on that change. I firmly believe that you have to practice what you preach.

What lessons did that experience teach you?

As you are transitioning work, you have to recruit top talent that is capable of executing on that work. You have to have a very well-defined process for making the transition work.

And, most importantly, if you are going to transition from one mode of operation to another mode of operation, it is very important that the new mode of operation work so much better than the previous mode that people don’t even question it. They say, ‘Wow. This is so good. Why didn’t we do this before?’

HOW TO REACH: Syntel Inc., (248) 619-2800, http://www.syntelinc.com