Q&A: Patni chief executive Jeya Kumar

Patni chief executive Jeya Kumar

Patni Computer Services hired Jeya Kumar earlier this year to take over from one of its founders as chief executive of the offshore outsourcing firm.

A pioneer in the IT industry, Kumar was formerly the boss of HP subsidiary Mphasis and also a vice president at Sun Microsystems, where he managed a $5bn-a-year services business. Described by his new employer as a “service-oriented” leader, Kumar talked to Computing about his vision for Patni’s future.

What are the key market developments you have observed over the past 18 months and what are your focus areas at present?

The banking, financial services and insurance industries were really responsible for at least 45 per cent of the IT services market. Fortunately we are not so reliant on this area, so we have not been affected as much as many other companies in this sector.

This recession is different. I think it’s the first time for at least 15 years that at least half the economies around the world have experienced a lack of growth.

What we are doing is to focus much more on domain-centric IT solutions. Growth is there recently, but it has been shallow - something like 3.5 per cent quarter-on-quarter growth. However, in any other industry, if you could be getting such growth it would be great, but in Indian IT we have been used to something more like 8.5 per cent.

We are not sure how long this downturn will continue, but at least we can see that demand is stable. This industry has operated for a long time on two vectors, time to transition and unit cost. We have done a great job of containing costs, but the question now is how we help the overall time to transition and market for our customers.

We are not shifting away from what we currently do, even with the onset of new technologies and solutions, such as the cloud. We are not going to get into products. We are not a product company.

In terms of infrastructure management and business process outsourcing (BPO), we are continuing to grow at the same levels, but we are really looking at acquisition to help us grow faster.

Patni has always been associated with technical expertise, partly in embedded systems, but now you are focusing on developing your consultancy practice. How are you making that happen?

We hear from customers that “you guys are great at what you do”, but we would like to see you helping us to do things better. By focusing ourselves on building domain-centric skills we can really focus on helping our clients.

We have seen our consulting group work well in Europe and so we are now expanding and evolving this service in places such as Canada and Japan. This is really an evolution; once you have proved yourself to your customer you can work with them at a higher level.

With most outsourcing firms adopting a conservative strategy and in some cases even warning of even tougher times ahead, what is likely to trigger future growth in the industry?

The market economies need to start growing again. I think we will certainly see outsourcing increasing in the near future anyway, but offshoring will not. If you look at any major economy right now there is a decrease in private sector spending, but there is still a large amount of public sector and government spending – however this will not use offshoring.

Growth is now back, but it is not at the levels we are used to. We won’t see real growth until the customers recover to strong profitability.

Is India – or Asia as a whole – becoming an increasingly important market for Patni?

Yes, one of the things we are now focused on is how we can organise ourselves on a geographic structure, so we are breaking India, Japan, and Asia-Pacific apart. We see Japan as a large potential market, as something like half of its IT work goes to China. Look even at smaller countries such as Singapore. There is a huge amount spent by the government on IT systems.

There is a mass of potential outsourcing work in India alone, and we have started looking at some government opportunities. Hopefully we will win them and we can make an impact locally.

Could jobless IT experts in the UK potentially find work at Patni if they are willing to relocate to Asia?

Absolutely, yes. We acquired a company about 18 months ago and that’s now our telecoms consulting arm. At the same time if there are people in the UK and they are prepared to relocate then we are interested. The search for global talent is here to stay.

I don’t think it’s anything new. Contract sizes are coming down. There are not so many huge deals any more. We are still something like 25 per cent cheaper than the top-tier companies, so we don’t need to drop our prices to compete with those firms. We are focused on building our domain skills so we can compete more on skills.

In fact, we are not seeing any major price reduction in any of the services we are offering – we have only dropped prices generally by around two per cent, which is much less than the bigger players, who have dropped prices by more like eight per cent.

Many observers suggest that companies will treat IT much more as a commodity and will be more interested in buying business expertise. How does a company focused on IT services adapt to such a situation?

What’s wrong with being a commodity anyway? The world can’t live without this commodity now so that’s a good thing for our industry. We already have some strong domain expertise in many of our verticals and we are now focused entirely on building that further, even at the sub-vertical level. So we are not just working on insurance, but on specific sub-sectors of the market such as life insurance products.

What are your predictions for the UK IT services market over the next 18 months?

Outsourcing in the UK will increase. Offshoring will get back into momentum in late 2010. Between now and then, offshoring in the UK itself will really increase in popularity. Places like Northern Ireland (NI) will be far more attractive. NI is going to be a big player, not just for the UK, but for the whole of Europe. Nationalism is playing a part, but I know that it’s really all about skills and they have the skills there in the UK.