Ever since John Swainson took over as the CEO of the world's seventh largest software product firm CA (erstwhile Computer Associates) in 2004, the company has been retrenching staff and consolidating office space, as a result of which its global staff strength stands at 13,000 now from around 15,000 in 2004.
The move, however, had a positive impact on its India operations where the $4.3 billion company has its largest development centre -- the headcount grew from a mere 500 to around 1,600 employees.
In an exclusive interview with Bibhu Ranjan Mishra, Swainson discusses the rationality of such decisions and the value the company is deriving by being in India. Excerpts:
How smooth was the transition from Computer Associates to CA?
In November 2005, we formally changed the name of the company and its logo.
It is symbolic because of the transformation of Computer Associates to CA. We tried to implement best practices in the company, and we have been successful in doing that by and large.
Four years down the lane, we have changed practically everything about the company -- we changed the management team; the name, and a lot of other strategy. The results are testimony to that. The last seven quarters have been very strong for us. I feel very good about our position in the world.
But despite being world seventh largest software product firm, you still have revenues coming in from services?
Services is a terrible business to be in, especially for a software product company. Our services revenue is about 10 per cent of our total revenue and we have made a conscious decision to keep it below that level by partnering with services companies. Besides, the services business is not that attractive for us considering the fact that our operating margin is around 30 per cent whereas the margin for services business is approximately 10 per cent.
Some decisions taken by you -- like consolidation of offices, overhaul of sales force and staff cuts -- have not gone down well with analysts...
No. I think all decisions that were taken at that point of time, should have been taken much earlier. The company had millions of square feet of office space which we had acquired through acquisitions in the 80's and 90's, and had never been rationalised.
We had people doing things, without adding value to the customers, and they were not directly involved in building and selling products. In order to make the company survive and thrive, we have to reduce the costs, bring in an efficient management. I am very happy for doing that.
What had been the impact of such decisions on your India Software development centre?
In 2004, there were barely a few hundred people in India in two locations -- Chennai and Hyderabad. Now, India houses our largest software development centre in the whole company, having about 1,600 of the 5,000 odd engineers we have today. The rest of the engineering professionals are located across 30 or 40 centres across the world. Our next biggest centre will be about half of the size of our India development centre.
This means that when you were reducing the headcount globally, you were simultaneously busy increasing the India headcount?
In 2004, we were 15,000 globally, following which we added about 2,000 people through acquisitions. Then we reduced the headcount by almost 4,000. Our global headcount stands at about 13,000 at the moment. During that point of time, we had about 500 people located across our two offices in India -- Chennai and Hyderabad. We consolidated them in the same place. The team has grown fairly big in size, as a part of our strategy.
What had been the focus of your Indian development centre?
The engineering centre here works on a whole bunch of products, and they actually represent in almost every single product, starting from the development to quality assurance, and customising to suit various geographies. So there role varies. The team here have very good engineering skill-sets and they continue to produce great results for us.
In spite of having such a large team here, you still have partnered with HCL for product development?
We have a technology joint venture with the HCL around our Internet threat (anti-virus and spy-ware) products. They built those products for us, and we have a revenue sharing agreement with them. The partnership is not for cost cutting. We found in HCL the direct skill-sets required to develop such kind of products, which they have developed working with the technology providers.
What is your opinion about India as a market for your kind of products?
India is probably the most important growth market for us today. There are a lot of raw potentials in this market. It is the place where we are investing the most and where we have highest level of expectations. We have plans to double our revenues from India in two years, and we are very much in track.
However, it will still be a smaller market for the company in terms of volume, contributing less than one per cent to our global revenue.
But all your global competitors are very much present in India -- Like IBM, Microsoft and HP etc?
IBM, Microsoft are certainly not our competitors Microsoft is a partner of ours as well. They have some solutions in some areas, and they rely on us for other things.
Even though we compete with IBM in some spaces, they are also our partners in other areas. But it is safe to say that the competitors we deal with mostly are HP and IBM.
