Dr. P.V. Viswanath

pviswanath@pace.edu

Ram drive: The career of Subramanian Ramadorai of Tata Consultancy Services parallels the rise of India’s software industry

Aug 21st 2008, From The Economist print edition

WHEN Subramanian Ramadorai joined Tata Consultancy Services (TCS), the Indian software company he now leads, in 1972, computers were bulky and temperamental contraptions, in need of assembly, installation and constant repair. He still winces at the memory of loose contacts on a computer’s backplane and components that died as they were being tested or “burnt in” (a phenomenon known as “infant mortality”). Mr Ramadorai, who learnt mathematics at his father’s knee and earned degrees in physics, electronics and computer science, was not above picking up a screwdriver or pliers. At TCS, a colleague recalls, “You had to work with your own hands.” You had to bash metal before you could crunch code.

Mr Ramadorai’s career at TCS parallels the rise of the industry itself. The Tata group first ventured into computers in 1968, serving its own companies with second-hand IBMs and an early ICL machine. Forty years later, India’s first software company is also its biggest, earning revenues of $5.7 billion in the year to March. Today it is difficult to appreciate the audacity and improbability of its success. In the 1970s India had a shortage of foreign exchange and an abundance of labour. The government did not make it easy for companies to spend precious dollars importing computers, which many suspected would only displace jobs. Even calculating the tariff was a computational feat. On the new Burroughs computer that TCS bought in 1974, it paid a tariff of 101.25%, including import duty, auxiliary duty, countervailing duty and a levy to help pay for the war in Bangladesh.

One of Mr Ramadorai’s colleagues, Jayant Pendharkar, now TCS’s chief marketing officer, remembers the computer arriving in three truckloads, under government seal awaiting a customs inspection. The next morning, he was horrified to discover that an overenthusiastic employee had broken the seal and unpacked the computer before the inspectors arrived. Showing an admirable talent for improvisation, Mr Ramadorai salvaged the sealing wires from the bin, threaded them back into place and refastened them with a twist. The customs officials were none the wiser.

The government required TCS to earn twice as much from exports as it spent on its imported machines. Thus before the internet, the fax machine or direct-dial phone connections, it pioneered “offshoring”. It won its first foreign contracts with the help of the Burroughs corporation, then the number two computer-maker, which sold its machines in India through TCS. Seturaman Mahalingam, now TCS’s chief financial officer, worked on an early offshore project in Feltham, outside London. He remembers sending his instructions to the Mumbai programmers by post, mailing two copies, one day apart. That way if one postbag was lost, the duplicate would still reach its destination.

These daunting, early years taught Mr Ramadorai and his co-workers frugality and rigour. Programmers had to book half-hour slots on the Burroughs terminals, working with their colleagues breathing down their neck. One hour’s computer time cost more than a programmer earned in a month. A call from London to Mumbai would be interrupted every few minutes by the operator, checking that you wanted to keep talking.

In 1979 Mr Ramadorai, who had earned a master’s degree at the University of California, Los Angeles, in 1970, was sent back to America to open the company’s first overseas office. TCS had just left Burroughs’s marsupial pouch, freeing it to work with other hardware-makers, but also forcing it to find its own customers. After two years knocking on doors, Mr Ramadorai’s success convincing American firms to send work to India proved that TCS could stand alone. It also showed he could run a business, helping him on his way to becoming chief executive in 1996.

Mr Ramadorai believes dealing with adversity only makes companies stronger. “If everything is peaceful, you don’t push yourself,” he says. That logic is now being tested by the economic slowdown in some of TCS’s biggest markets, which poses perhaps the biggest threat to its share price since he took TCS public in 2004. TCS is heavily exposed to the beleaguered finance industry, which accounts for over 40% of its revenue. Its net dollar profit fell by 7% in the first quarter of 2008, compared with the previous quarter, and a further 6% in the three months to June.

Time for a new approach

You might think that the priority would be to instil the discipline of TCS’s early years in its younger recruits, spoilt by cheap computing, uninterrupted growth and instantaneous communications. But some of the company’s veterans believe that it is the old-timers who must learn to let go. Today it is minds, not megahertz, that are the scarce commodity. Over its long history, TCS has achieved great success by pinching pennies, imposing discipline on the unruly art of programming, and relying on long-serving insiders. But now it must learn to give employees their head, so as to benefit from their ideas and retain their loyalty. America’s software industry renews itself through start-ups, founded by people who are not content to rise through the ranks of an established company. But Mr Ramadorai hopes his employees can scratch this entrepreneurial itch without leaving the fold. TCS invites them to send proposals to the chief technology officer, who will sponsor the most promising ideas.

There are signs that the company is at last ready to treat itself like a well-heeled incumbent, not a cash-strapped underdog. Its senior staff recently moved from the company’s cramped premises in Mumbai’s Air India building to airy headquarters of their own in “TCS House”, a handsome 1922 building, overlooking the cricket and rugby played on the city’s Azad Maidan sports field. The architects had to replace the building’s aged skeleton bit by bit, without disturbing its stone-clad exterior. This new, old building was Mr Ramadorai’s idea, and there is no better symbol of his efforts to renew his company from within.

Questions:

1. Why