RESPOND TO CHANGE

Vishwanath Kulkarni, Shamik Paul, February 9, 2009
The Hindu Business Line

A sense of suppressed optimism and strong resolution is reflected in Sasken’s founder and chief executive officer, Rajiv Mody, who continues to steer the company against the odds, since inception in 1989 as a typical Silicon Valley start-up.

Like all other Indian IT vendors, Sasken is fighting tough times as key customers such as Nortel Networks, Motorola, Texas Instruments and Intel Corp have shrivelled amidst the economic downturn as sales have slumped and new product development has taken a backseat.

While other vendors have exposure to different verticals, Sasken is focused on communications alone, which makes it all the more difficult for the company. The telecom sector continues to be in trouble globally. The troubles, which started with the dotcom bust when equipment makers in the US saw a slump in business, ultimately led to large-scale consolidation. However, the woes for equipment vendors did not end with the mergers, and they continue to see declining sales. Nortel, one of the top five customers and an investor in Sasken, filed for creditor protection under Chapter 11 recently and owes about Rs 7 crore to the Bangalore-based vendor. Also, Sasken recently decided to part ways in a joint venture with Tata Auto Comp Systems for want of traction in the business.

Trying to implement learning from the previous slowdown, Mody has put in place a series of stringent measures to rein in cost structure as the company braces to meet challenges thrown up by the current turmoil. Taking a top-down approach, the company proactively rationalised a few key management positions, stopped recruitment, introduced a variable component of 10 percent in employee compensation, and asked freshers to work only for three days a week till the situation improved. Sasken has also set up a business restructuring fund of up to Rs 150 crore, to offset losses against the reserves as and when required.

“We are honest about doing these changes and have done them openly,” says Mody. Sasken’s headcount has seen over four-fold growth in the past seven years to about 3,555, while its revenues have multiplied by five times in the period.

Stating that such changes were effected proactively to fortify the company, Mody says, “We don’t want to be like deer caught in the head lamp.” Notwithstanding the cost-cutting measures, Sasken has not held back its investments in newer technologies and platforms such as Android, Symbian 60, Ultrawide band and Femtocell, among others. “We are investing in areas where we believe opportunities exist,” Mody says.

If the 2001 tech meltdown triggered by the dotcom bust in the US prompted Sasken to diversify into handset and semiconductor business, the present economic crisis has made it focus aggressively on the domestic market where the auction of 3G spectrum will unfold growth opportunities.