"Netsol was my passion then and it continues to be my passion now"
IBM's acquisition of Bangalore-based Network Solutions last year was big news and there were apprehensions that ran rife in the market
Monday, May 15, 2006 - IBM's acquisition of Bangalore-based Network Solutions last year was big news and there were apprehensions that ran rife in the market as to what would happen to the future of one of the biggest and most successful solution providers in the business. But Sudhir Sarma says that his company's acquisition by IBM was a well-planned move and indicates that post-acquisition, Netsol still works and operates like before. He also feels that many early apprehensions of the exercise have ceased to exist now.
He is now happy that the company has retained all of its customers post-acquisition.
What would you say is the status of Netsol as a company post the IBM acquisition? Have there been any drastic changes in the way the company's operations are run now?
Post-acquisition, Netsol is a 100 percent subsidiary of IBM. We are a part of IBM India and in fact the acquisition was done keeping in mind the Indian market needs. As regards the running of the company, we have not seen any dramatic changes in the way we operate now as compared to the way we did before.
Yes, we are an IBM company, but we still have a lot of independence and are running our operations just like before. In fact, even after our acquisition we have not lost any of our earlier customers. Manpower retention within Netsol is also a lot better now.
 You have indicated that manpower retention is better now. Does that mean attrition has reduced considerably?
When one talks of attrition, we could segregate employees into two groups-those who are here for less than two years, and those who are here for longer. Invariably people who are here for less than two years continue to move out. That is also because they are not here to make a
career.
The other group of people who are with us for longer than two years, are the ones that make a big difference. I must say that attrition in this group has reduced considerably post acquisition.
Lets us face it; whether it is Netsol or any other company, attrition continues to happen. We are therefore not looking at any dramatic change in that scenario, but I can certainly say that there has been a considerable reduction now.
Given that attrition has reduced, have employee expectations increased? Also since you are an IBM company, do employees look forward to better pay packets?
Actually, yes. Employee expectations have indeed gone up. The IBM factor prompts them to believe that they can look forward to much higher salaries. But the reality is that while people's expectation have gone up, business has not dramatically increased.
We are therefore trying to communicate to our employees that salary is not the only important factor. We are now a global company and people here can look forward to opportunities of working overseas and also get to learn a lot. We are trying to communicate this in the best possible way to our employees and I must admit that this is a huge challenge for us.
Besides manpower retention, what other benefits has Netsol got post this acquisition?
Let me start by saying that our single-point focus during the entire acquisition exercise was to retain our existing customers. Having attained that now, we have also realized that a number of customer accounts of IBM and Netsol are actually complementary to each other. We see very little overlap.
What this means is that there is a huge opportunity for us in terms of business and targeting new customers. Another advantage that Netsol has got post-acquisition is that we are part of a global company. We now have the capability of being able to support a number of other Indian companies
who would want to begin operations outside of India. We have access to global clients and we could help Indian companies to set up operations across different geographies of the world.
How will you take advantage of the new business opportunities available to you now?
While the opportunity to do business and grow is huge, the infrastructure cost, as well as people costs, have increased. So companies, ours included, need to focus on developing intellectual property tools that can be scaled up easily. In order to build these tools a lot of money is needed. Being associated with IBM places us in a good position to do that.
The need of the hour today is to work on asset-led models where tools as well as IPR can be provided as a service to customers. There are not many players who are working with this model. So we have a big differentiating factor that we can offer to our customers. Being associated with IBM, we would be able to do it better.
Do you think that the growth rate of Netsol has increased after its association with IBM?
Actually it is very early to say that now, as far as our topline growth is concerned. After all it is just one quarter that we have passed. Probably by the end of the year we will be in a better position to make a statement. But I am very sure that there has been no dip in our growth post acquisition. All I can say is that in the next few months we would come out with many more products, all of which would impact our growth tremendously.
What is your agenda for 2006? Would you be focusing more on the Indian or the global market?
We would still continue to focus on the Indian market, as we are not very concerned about global growth now. Given that we are a global company,
many of our people would get enough opportunities to work overseas.
We want to go slow in the first year, understand things, and then see how best to change our strategies. We still have to make our space and synergy with IBM work so as to benefit both of us.
This fiscal, we would increase our focus on the service business and grow in that space. We have already invested in IPR and tools required for that and need to strategize on how best we can take them to market.
Using the strengths of both IBM and Netsol, we would be looking to grow faster than the market and the next six to eight months would be very important for us. We would also continue to build on our customer relationship and therefore have the best of both worlds - business and people-with us.
Acquisition seems to have brought in a lot of benefits for you. Would you therefore say that inorganic growth is the best way out for companies to expand?
Let's face it, a lot of large players are in a selling mode now and are looking at some sort of consolidation. This means that acquisitions and mergers would continue. Yes, smaller companies will still need to build enough value to get there.
As far as Netsol is concerned, we realized that we needed to grow and expand. When we looked at the options on hand, we concluded that venture capital would not work for us, since most VCs come with a specific interest to exit. The option of an IPO would also not work, since the stock market is not really very excited about companies like ours who specialize in different areas.
The other option we had was inorganic growth. So we decided to take the acquisition path. With IBM, even post acquisition we are still able to do what we did before. In fact, as a global company we can do much more now. Yes, at this point we are still trying to understand IBM and also trying to work out the best possible ways to leverage on the value of being associated with a global company.
Would you say that you are more relaxed now or is it still a honeymoon period for both of you?
Yes, I am much more relaxed now. I do not have to bother about a lot of things that I used to earlier. As far as our partnership with IBM goes, I would say it is good. Yes, the honeymoon period is still on but a lot of apprehensions that existed earlier have disappeared now. In fact, in the many customer meetings that we have had post acquisition, we have learnt that customers are happy with the exercise. In that sense therefore, ours was a well-planned acquisition and we still hold on to our ideals that customer and people come before anything else.
Usually we see that the promoter of an acquisition quits the place after the exercise is complete. Are you also contemplating a similar move?
Actually this is one of the questions I am most frequently asked. Let me explain it in detail. Most people start a company, build it, then acquire another and then restart again.
Unlike most of these I am not a typical businessman. Netsol was my passion then and it continues to be my passion now. Even today when I come to work, I feel the same as I did before the IBM factor came in. So at this point in time I am not looking at moving out. Should any such situation arise in future, I will probably think over it.
ASIM RAINA and SUBBALAKSHM IBM in Bangalore
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