I think that the pure plays have been able to ride the sectorial growth of the tectonic shift very effectively. IT companies, in particular, had a tremendous problem in getting more down for less. And the compelling change post–dot-com meltdown gave the offshore players an opening that was so compelling and so valuable. However, there's going to be another wave, and the new wave will be how do they now convert and find the convergence of IT and business process to really bring business value, leveraging IT technology and business transformational services to really create value for clients and the client's customers.
CM: This is the part of the consulting business where the offshore players would now like to play . . .Garnick: Yes. Well, what we looked at, and what Brian Keane and I converged around, was a shared vision about where do we have to go to create that next-generation global IT, business transformational services company. And it is the convergence of IT with business. And then it's coupled while on the backbone of a global delivery model.
So I was brought in, and the reason why I'm excited is that I have an operating opportunity to help a U.S-based company — and permit me a little bit of flag waving — to leverage a global delivery model. We are taking and repositioning a legacy company. Intellectually and business-wise, it's a tremendous challenge. We're taking a 40-year-old company, replatforming it in the public eye, in the clear light of day. And we're doing it very quickly and efficiently. And a common theme that's occurring across our clients is transformation. And if we could learn how to transform ourselves, we have a lot of credibility in going to our clients and helping them with their own transformations.
CM: What has perhaps prepared you for the management task you face at Keane?Garnick: I view myself as an executive and management professional. If you look at the common thread of my career, I've always gone into operations and improved them or fixed them. Even Wipro. Wipro was flat as a pancake for the three years prior to me joining the company. I took what was there and repositioned it, moved it around, changed the positioning, and re-created a growth engine that wasn't a necessarily a manifest destiny.
Keane, in this case, for me as a professional, gives me an opportunity to take on a great company — one built on the strong understanding of customers, good delivery, and integrity that the Keanes put into place. Those are important attributes in a business.
CM: Your arrival at Keane more or less kicked off the transformation efforts within the firm.Garnick: We kicked off a transformation my second day on the job. We changed the lens as far as who was our competition. Internally, I think they were competing with the domestic players. We really changed the firm's lens in order to look at the global landscape, not unlike GM. It took a long time for them to understand. Even up until three or four years ago when they did some competitive analysis of the market, General Motors looked only at Ford and Chrysler. It didn't even look at Toyota, Nissan, and Honda — again that was only up until four or five years ago. So companies get it in their mind-set that their dominant logic is to not look at the broader perspective. CM: So how should we expect Keane to enlarge its global capability going forward?
Garnick: We have a stated objective that we want to grow our global position faster than our U.S. today. We have stated that we're about 3,000 people in India today, up 60 percent from last year. The clear growth for our industry is the global model. It's grown at a 35 percent compounded annual growth rate over the last five years.
We need to take advantage of some of that growth. We've got to be perceived as a global player, so we've committed to be more than 10,000 people in India within three years. That's what we're committed to publicly.
CM: Having been part of Wipro's leadership team, you are aware of not only the organizational challenges offshore companies face as they seek to grow their high-value consulting capabilities, but also the cultural ones?Garnick: Building a Western culture into those offshore pure play models actually has dilutive effects and disruptive effects on a number of factors. One, at how they operate the business. And then it actually has deflationary effects on their overall market cap, because you make less margin with your onshore play, and it's actually dilutive on their margin. And it's counterintuitive, because Wall Street loves margins. And meanwhile their market cap is based on growth and margin growth. And so it's not in their interest, and what you'll see is that they'll talk a good game about moving up, but they can't do it.
Here at Keane, we have that front end. We have that capability. It's in the business. So as I make improvements, it will be accretive to my margin. And I can undercut what the Indian firms are doing, because I am not trading at — like Infosys — 20 times revenue from my market cap. I'm trading at a much different multiple. However, as we make improvements, we can compete effectively on the operating level.
CM: Certain Indian firms, meanwhile, have created separate high-value units to compete more effectively and attract Western talent.
Garnick: When it comes to people, I believe, there's a whole different approach to "care and feeding" within the Indian pure plays. And I was brought in to bring Western attributes or approaches into Wipro. And what I know is that you can move that meter only so far. Meanwhile, not many Western companies have succeeded in having some separate consultancy on the high end actually bring revenue downstream, and this is the core to the IT services space, because that's where you get your revenue and your scale and your profitability. EDS couldn't do it with A.T. Kearney.
CM: And as the Indian firms try to build front ends for high-value consulting, Keane is building out its offshore capability . . .
Garnick: IWell, we think that we understand the nuances of the front end. And here's where I think that we have a competitive advantage. Keane is small enough — but big enough to be relevant — to transform fairly quickly. Meanwhile, we know where some of the weaknesses are within the pure plays. I'm not saying they're big. They're small, nuanced weaknesses.
However, we're going to exploit the heck out of those weaknesses, and make them our strengths. And we're going to integrate a little bit of Yankee ingenuity coupled with a global delivery model that is an economic model; it's no longer black magic. So it's fundamentally now a race. I already know how to go scale an Indian operation. The question is now how fast can I scale my Indian operation? And can I do that faster than they can scale their front end?
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