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SPARK OF THE CORPORATE

This week, in the "spark of the corporate", we will talk about the forgotten hero of the Indian IT industry, not many people can recognize him by seeing his picture. Certainly a forgotten hero isn't?

He is one among the very few people who had the vision to see the future and growth scope of the IT industry. He dreamt about floating a software company when we did not have proper telephone connection.

In the early 80's, much before IT was a buzzword, Ashank Desai set up Mastek along with a couple of friends. Mastek was the first company to focus on India as a market and is today one of the top 15 IT companies in the country. Mastek may not be the biggest Indian IT company in terms of size or scale, but it is certainly one with a lesson for many an entrepreneur wanting to start a company with his college buddies. More than friends getting together though, it is friends staying together for 25 years that is intriguing. Because partnerships which endure are such a rare thing in today's world!

Many a dream is born on an IIM campus, only to die out when faced with the real world. However Ashank, Ketan and Sundar kept that dream alive and made it happen. What's more they did this in an era when it took, on average, 15 years to get a telephone connection. And you could start an IT company, but forget about owning a PC. In fact, the 'PC' was not even in the market, technically speaking.

But life in the Doordarshan era was kinder and gentler. There was less pressure to perform, and leeway to make some mistakes. The team was young and flexible, and figured out a way. And they had patience, which is another commodity in short supply today!

Early days

Ashank Desai came from a family where becoming a professor, doctor or engineer was the ultimate goal. Yet he had the bug of doing something out of the box always, at the back of his mind.

The core group at Mastek was formed on the IIMA campus - Ashank, Ketan Mehta, Sundar and Wasan. The group would sit and discuss what kind of venture they could take up after passing out. They decided to make use of a course called PPID (Project Planning Implementation and Development) to actually put together a workable plan.

The team took up a project based on 'IT' which at that time was a little known concept. They took advantage of being IIMA students and contacted very senior bureaucrats in Delhi and IIMA alumni.

Of course, there was this feeling that it's fine to plan but once you get a job, once you get married, all this will be over. Yet somehow they managed to keep the spark alive.

Ashank's joined Godrej, who offered the advantage of a house. So the friends literally 'stayed together'. "I tell Jamshyd Godrej that you are indirectly responsible for starting Mastek," grins Ashank. The flat mates spent most nights chatting away till 2 am, discussing their business plans.

Ashank desai did a lot of market research, voltage stabilizers and even manufacturing computers (they were not called PCs at the time though!). But finally they settled on IT because it required less investment, no manufacturing and also, it was a field they were comfortable with. This was the era when computer data was stored on 'tapes' and Ashank admits they had no clue about the PC revolution which lay ahead. But they did know IT was important to companies at a strategic level; software as a field would grow.

"We genuinely believed, and still believe, that IT should help with management decisions, it should offer solutions. That's why we didn't call ourselves Software Technologies, or Information Systems, but 'Management and Software Technologies' (Mastek, in short)."

The Birth of the Spark

In 1982 Mastek was born in Ghatkopar, where Ketan had a house. The total investment was Rs 15,000. Business started coming in through friends and contacts. Sundar's stint at HCL helped, and the first big contract Mastek secured was from Richardson Hindustan (now Procter & Gamble), through IIMA classmates.

It was a classic management problem. Richardson Hindustan were manufacturers of Vicks. It was a product whose peak demand was in June, July and August (cough and cold season, so to speak). The dilemma they faced was whether to manufacture in advance and stock goods or produce just in time. There were costs and benefits associated with each option.

The problem came to Ashank's group for solution, Mastek built a complete model based on the transportation algorithm and it worked really great, they solved the problem.

The first contract fetched Rs 30,000 and long with a bonus for completing the work early, the first income for the company.

Mastek quickly moved out of Ketan's drawing room to Nariman Point because they wanted a 'good address'. It was a 35 square foot office, but it was in the prestigious Mittal Towers. The other problem was that there was no phone in Ghatkopar, it used to take 15 years to get a connection in those days!

A jeweller friend agreed to take their calls, but he stopped when there were one too many! Sounds like science fiction in today's day and age but it tells you the kind of 'true grit' one needed to get into business in pre-liberalized India.

"We have started business with a public phone. We did not have a computer for the first five years, can you imagine that?" grins Ashank. The business was executed at the customer's office, on their machines. "But it was a difficult time. Like all new businesses, it took time to stabilize. We were not earning money..."

They literally have taken any salaries. At this point, friends and batch mates working for multinational companies were 'moving up in life' while the Mastek team was traveling second class. So, once in a while, the thought of closing down and getting back to a job did come to mind. But what carried the team was two things - moral support from the family and the vision of building an institution.

An exhibition by CSI (Computer Society of India) proved to be a turning point of sorts. The PC had just been launched and Mastek was the only software company to advertise there. The company bagged orders from companies like Citibank and Hindustan Lever through its visibility at this event. So Mastek started getting some kind of traction in the market and somewhere, the IIM brand also helped. But the 'struggle phase' lasted six years.

By year six, Mastek was in Dataquest magazine's list of top software companies in the domestic market. The company was ranked #6. "So we said 'Aha! We are not small now!'" The actual turnover of the company at this point was Rs 46 lakhs. The year was 1988.

"Where we have started and where are we now?" Ashank believes there is a difference in the trajectory followed by Mastek, compared to other software companies. Mastek was one of the first companies in India to build 'software products'. It introduced both financial accounting and stock broking packages. The company also signed on with 'Ingres', a database package competing with Oracle.

Now the challenge is to crack the overseas market!!!

The team had no experience in software export. Neither did it have a family nor friends network in the US. "That's the way it started, all exports in India at that time. Some NRI cousin would say, 'Can you do so and so project for my company'?"

So Mastek took much longer to break into the export market. In fact, it took 10 years. Ashank was the first person from Mastek to go abroad. It was a big thing; he recalls, all his colleagues came to drop him at the airport as he boarded the flight to Singapore! The role models for Mastek were TCS and Tata Burroughs. Yet Mastek stayed true to its roots, which lay in 'solutions'. The bug was to do something different, to build complete solutions for the global markets.

So in 1989-90, the company began working on a product called 'MAMIS' - a manufacturing ERP which was unheard of at the time. The company received venture capital of Rs 80 lakhs for this project from TDICI (an ICICI company). TDICI had burnt its fingers eight times; Mastek was the ninth company it funded. But the faith was well placed this time. Mastek went public in 1992 and TDICI made a 25x return on its investment.

Mastek was the first software company to go public post liberalization at 'free-pricing'. Its shares were sold at a 60 rupee premium. Incidentally, 80% of Mastek's revenues, at the time of its initial public offering, came from the domestic market. Yet people had faith and invested.

Mastek itself strongly believed in the domestic market. The company's approach was to build products and solutions which were IT based, launch successfully in India and then take them to the world market. It did not quite happen that way, but that was the operating philosophy.

Well things did not go well this time because of some technical and monetary issues.

What about the money Mastek took to build MAMIS? Well, that capital was not linked to the development of a particular product. So the world did not come crashing down.

There was no finance available from banks for software, where there are no physical assets to pledge.

The trick was to get 20-30% advance from customers. The other strategy was to divide the project into many micro steps so that every delivery gets some money. In time, some banks started giving credit against invoices.

The next phase from '95 to 2000 was one where the company focused on exports. One of the partners, Sundar, practically settled in the US to make this happen. Ashank was based in India but running around all over the world - Singapore, UK, Germany, Japan. Ketan and Sudhakar were busy building the software, the team and the organization as a whole.

Software exports became a larger cause and that helped the whole industry, including Mastek. Ashank became chairman of NASSCOM in 1996, taking over from FC Kohli.

The other major milestone was building internal systems and processes, so crucial for any company but especially in software. No outside consultants were involved; it was all done by the founding team.

Powered by strategy, systems and new markets to conquer, by the year 2000, Mastek achieved a turnover of Rs 250 crores with 900- 1,000 employees on board. The growth rate on the export side was 40-45% year on year. Mastek has consistently ranked among the top 10-15 in the software industry.

As a solutions company, Mastek had built a lot of work in the internet domain much before any other Indian company, including a tool called JAAL. So the company did a lot of work for dotcom companies but, unfortunately, also lost a fair bit of money when most of these companies went down the tube in 2001.

However, Ashank has no regrets. In fact, he recalls, it was a conscious decision to stay away from Y2K work and focus on the internet and new technologies which were more challenging.

The point is, the bar keeps moving and you have to move with it.

Technologies change, customer requirements change and your old software gets obsolete in no time.

Mastek was doing work across many industries upto the year 2000. The company was trying to figure out what worked best for it. With time there came focus but the question is who decides what to focus on?

Coming to the most recent phase, post 2000 was the era of 'focus'. Under an initiative dubbed 'MASTEK First', the company decided it made sense to focus on large customers and in particular, the financial space. In insurance, for example, the company has built a package and the Gartner Group has given Mastek a ranking as one of the promising companies in this space. Further, Mastek's core strength lay in systems integration and large projects, so that was the positioning the company adopted. That was how Mastek bagged the prestigious 'London congestion charge' project. Ashank is especially proud of this project, not only for its size but its impact on the lives of six million people. "If we had screwed up, India would have screwed up," he says in all seriousness. All went as planned and it was a feather in both Mastek and Brand India's cap.

Of course, all this effort to focus and consolidate involved considerable heartburn. Many projects were scaled down, some were discontinued. Several employees felt disheartened and left the company.

But there was one silver lining through these clouds. Mastek entered into a joint venture with Deloitte Consulting, which brought some more experience and more focus in the company. A strong management team was in place and CMM assessment also happened in the year 2000.

"We were the first IT company in the world to get 'People CMM' or PCMM. They had built an institution, an organization which has vision and values."

The values were articulated way back in the '90s. Although the vision was a little fuzzy, it all worked very fine. In time, focus got clarified, there was a sense of stability, sense of financial discipline came and now, there is financial muscle as well. But that has happened only in the last 8-9 years. After 1994, all the money was self-generated.

As of 31st March 2008, Mastek is a $200 million company with a strength of 4,000. It celebrated 25 years in the software business with considerable fanfare. No doubt a great achievement but one cannot help comparing it with some other names in the software business!

Ashank admits the Infosys and Wipros of the world have scaled up much faster - but they followed a strategy of size while Mastek focused on 'IT solutions'. Y2K gave these companies a foot in the door of many Fortune 500 companies. Mastek on the other hand did not climb on board the Y2K bandwagon at all.

"There is a DNA for each company. And that DNA has to manifest. So that is why I say again and again, Mastek is a story still unfolding." And the founders believe in that story and have firmly refused every M&A offer that came its way.

"All these years, there was always a constant pressure, somebody coming and saying, 'Why don't you join us. Together we will be larger.' But we never diluted. We said, 'We want to run this company ourselves. Whatever we want to do, we will do it ourselves.' We had that confidence. And I don't think that was a wrong decision."

Ashank is now vice chairman of SINE (Society for Innovation and Entrepreneurship). This is an organization set up by IIT Bombay which mentors and incubates young companies.

But as the Mastek story shows, you don't wait for someone to step forward and 'support' your idea. You simply go out there and make it happen.

More About Ashank Desai

Country of CitizenshipIndia
ResidenceMumbai
AlmaM.Tech from Indian Institute of Technology,
MBA from Indian Institute of Management.
OccupationFounder of Mastek
Marital statusMarried

Awards and Honors

Ashank desai has received many awards. Listed are some of them:
->Ashank Desai honored with the Distinguished Alumnus Award by IIT Mumbai
->Ashank Desai was awarded with Outstanding Entrepreneur Award at the Asia Pacific Entrepreneurship Awards (APEA) 2010 India in a gleaming ceremony at Hyatt, New Delhi
->Ashank Desai was bestowed with this prestigious honor for his outstanding contributions to the Indian Enterprise Solution industry
->Mastek has been assigned a composite (two parts - Financial Strength Indicator and Risk Factor) rating of 5A2 which indicates a Financially sound and Low risk trading record by D&B
->Excellence in education award by LOMA in 2009 and 2010
->Ranked among world's top outsourcing service providers in the Global Outsourcing 100 list produced by the International Association of Outsourcing Professionals (IAOP) in 2007, 2008 and 2009
->Mastek Ltd. solutions have been recognised with two Celent Model Carrier Awards in 2009
->Mastek bagged the "Maharashtra Information Technology Award 2008" under the category "IT Software" in 2008
->Ranked among Top 15 Indian IT companies as per NASSCOM survey in 2007
->Forbes Asia ranked Mastek amongst the World's 200 Best Small and Medium-sized Enterprises, all under $1 billion in revenues, using factors including five year return on equity and growth in 2006
->Awarded the 'Best Solution developed on .NET by an Indian System Integrator' by Microsoft in 2003
->From 2001 to 2004, consistently ranked among technology companies in a "CLSA Study on Corporate Governance" for 4 consecutive years among 25 emerging markets including Asia, Eastern Europe, and Latin America & South Africa
->Mastek's Elixir Distribution Management (EDM) solution rated "Positive" in Gartner's Incentive Compensation Management (ICM) Marketscope in 2010
->Mastek's client Apollo Munich Health Insurance, has won the "Celent Model Carrier Asia" award in the policy administration category in 2010
->Mastek's STG Billing solution developed for Farmers Alliance Mutual Insurance (FAMI) won the overall Celent Model Carrier award in 2010
->The Mortality management solution co developed by Mastek for Transamerica Life Insurance Company won the Celent Model Carrier award in the underwriting category in 2009
->Mastek ranked 69th in the FinTech Top 100 in 2009
->Earned prestigious standing in the vendor ranking of the Vanguards in Insurance Practices (VIP) program by INN and Celent - determined solely by voting from insurance carriers, brokers and agents in 2009
->INN (Innovators Awards) recognized the mortality management solution co developed by Mastek for Transamerica Reinsurance as a runner up in 2008
->Ranked 1 in Insurance Outsourcing in 2007 by the Black Book of Outsourcing in 2007
->Awarded the prestigious Social Contribution Award 2003 by the British Computer Society (BCS) for the London.
->Global Outsourcing 100 by IAOP ranks Mastek among the best 20 Leaders by Services Offered – Information & Communication in 2009.
Quotes by Ashank Desai
->"The key requisite for becoming an entrepreneur, and especially a first generation one, is to have the vision and risk taking ability to build something out of nothing."
->"I tell young people, we were not as lucky as you guys. You have some support."
->"Don't just think about it, don't just wish for it, jump into it and do it, if you are really serious."
->"Once you get into it, go all out; never look at quitting as an option."
->"Remember that if the startup fails, it is your idea that failed, not you."
->"What is needed is ability to focus on opportunities and leverage existing resources to make valuable difference to all the stakeholders."
->"Small vs big vs superbig is a choice that an entrepreneur makes himself or herself depending upon the ambitions, values and what he likes doing."
->"There is no one formula but I would say yes, get 4-5 years of experience - learn at somebody's cost if I may use the word. Get a bit of a feel, bit of financial stability, and some savings. After all, venture capital is there but you need your own money too. But don't wait too long."
Hope viewers caught up the spark...
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