Sucheta Dalal :Ashank Desai - A rare interview to MoneyLIFE
Sucheta Dalal

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Ashank Desai - A rare interview to MoneyLIFE  

September 11, 2008

"For four professionals, to build a business in the 1980s in a new industry, new market and an environment where business was not trusted, was tough. I feel proud that we were part of that history of India"

 

When history notes how Indian entrepreneurship was unshackled after the 1990s, Ashank Desai will figure right up there as one of those who grasped the opportunity and used it to build enterprises that put India on the world map. His story is about his ability to rise from a childhood of hardship and municipal schooling to become “a distinguished alumnus” of the prestigious IIT and a software entrepreneur recognised for “his visionary leadership in global positioning of the Indian software sector”, according to an IIT citation. To us, the story is even more remarkable because Desai remains proud of his middle-class value system and emphasis on ethical business practices. Desai went on a nostalgic journey with Sucheta Dalal and Debashis Basu a day after he handed over charge as chairman of Mastek Limited, to play a role as its brand ambassador and guide

 

ML: Could you tell us a little about your early life?

AD: My life story starts in Goa where I was born, but I was pretty unlucky because my father passed away when I was just two years old. That put a lot of pressure on us, since we had limited financial support. Our family was involved in the freedom struggle against the Portuguese rule. I am talking of Goa in 1951-52. My mother was involved in it and so was my 18-year old aunt who was even arrested. The judge asked her, “What will you do if we release you”? She said: “I will do it again”. She was sentenced to 10 years’ imprisonment, but was released after the liberation of Goa. All this made it difficult for us to remain in Goa. So we shifted to Nagar Haveli, which was also under Portuguese rule but had just been liberated and there were some Goans there already. It was a hard time for me as a child and for my mother, of course. She got a job that paid her a small sum of Rs130, but she had one passion -- that her son should do well; so she was pretty strict with me. Nagar Haveli was really backward. The population consisted mainly of adivasis. Not only were they poor, but they had a completely different mindset. There was only one school, so I studied there with the adivasi students who were all much older. They used to get married at 14 and 15 and join school at 17, so it was a kind of adult education. I used to stand first in the class. One of my relatives used to joke about it and say, “Ah! He comes first in the class but do you know how many students are there? Twelve”!

 

ML: But did you have proper classrooms?

AD: There was physical infrastructure, but it was pretty rudimentary and the medium of instruction was Marathi and Gujarati. I studied there till 1962, up to my seventh standard. In 1962, Goa was liberated and we quickly decided to go back. Anyway, I spent my childhood in a backward village completely unaware of anything.

 

Goa had a good education system with English-medium schools. But they refused to admit me; they wanted me to start at a lower level, which I refused. Because of this, I couldn’t get into the best schools and the best education again eluded me. I passed SSC and joined college. I considered applying for IIT but my mother wasn’t sure that it would work. There was no infrastructure at that time to let persons from rural areas to apply for IIT. Also, my mother was not sure of meeting the financial commitments. Fortunately, an engineering college started there right at that time. And that is how my life changed.

 

ML: Which engineering college was it?

AD: It was Goa Engineering College. That was when I decided I wanted to do something. Although the engineering college was not the best, it was part of the Bombay University. Unfortunately, we did not have all the laboratories and so we had to go to Mumbai to do our lab work. We were again handicapped. It was really way below the VJTIs (Veermata Jijabai Technological Institute) of the world and we had to compete with them and still do well. That taught me a lesson, which was the need to do well academically in order to move up in life.

 

ML: What stream of engineering did you opt for?

AD: I did Mechanical and I worked really hard at that, beating all these guys from VJTI. I was a rank-holder in my BE (bachelor of engineering) and was continuously improving. I was just OK when I started, but did better and better in subsequent years. That was a good feeling -- that you could do something in life, if you set a goal. Life was tough even then. My mother was still working in a government job and we had no electricity. I needed to draw these large diagrams and I had to do them all in the light of a kerosene lamp. I had no radio. I got my first radio just before I graduated. I was fond of Hindi songs and I still remember listening to Binaca Geetmala by pressing my ear to my neighbour’s wall. After getting an engineering degree, I went to IIT to pursue MTech. There is an interesting story which I recounted when I received the IIT Distinguished Alumni award in 2002.

 

ML: What is the story?

AD: I was new to Mumbai and staying with my aunt to appear for the MTech exam. I took a train to go from Dadar to Vikhroli, but it just stopped halfway at Matunga. I didn’t know what to do. I had only Rs40 with me. So I got down from the train and walked along the track to Sion and took a taxi. When I reached IIT, the test was half way through. The examiner said, “Do you want to try”? I said: “Why not. Let me try”. And I got in. This was in 1972. I did reasonably well at MTech. All I wanted was to get a good job. There was no dearth of jobs and I joined the Godrej group. I remind Jamshed Godrej that it was the only company where I worked. He was young and had just returned from the US so I was fortunate to interact with him.

 

ML: When was this?

AD: That was between 1974 and 1977. I was keen to do an MBA. So I considered IIM, Ahmedabad.

 

ML: Didn’t you feel the pressure to take up a job quickly? Obviously, your mother encouraged you to continue with your studies?

AD: She was possessive and wanted me to stay in Goa; she reluctantly let me do what I wanted to; it was a very difficult decision. Fortunately, she was working when I took up a job. She said: “OK, I am not depending on you. You do whatever you want. You take care of yourself. I will be fine”.

 

ML: Was your education funded by scholarships?

AD: Before IIT, no. It was my mother’ s money. I did get a scholarship, but it was very small. But education was cheap. Even at IIT, I got a monthly stipend of Rs50, which took care of everything. Anyway, I was very keen on going only to IIM, Ahmedabad; so I didn’ t even apply anywhere else. And I got in; that was 1977-79. Jamshed was very keen that I come back to Godrej so he kept my job and also paid my fees. That was a really generous gesture. At IIM, the entrepreneurship bug bit me. I also had classmates who were very keen to start a business. One was Ketan Mehta, a young guy from the BCom stream. Ketan said let us get one or two more persons and start something of our own. He picked one friend from his dorm; although he wasn’t in our class, we used to meet him in the evenings. His name is Sundar. There was another guy called Vasan, but he left us later. The four of us started doing some very interesting stuff.

 

ML: In Ahmedabad?

AD: In Ahmedabad itself. The whole idea of Mastek happened at IIM.

 

ML: Really? We thought you never get time to do anything other than projects and exams at IIM.

AD: May be we were not studying (laughs). At IIM, the first year is really taxing. They don’t allow you to do anything. But, from the second year onwards, you learn how to beat the system and it is more relaxed. You also choose your subjects. So, we sent a mailer to all the IIT alumni who were in the IT field.

 

ML: Why did you choose IT (Information Technology)?

AD: Because we had no capital. We looked at a lot of possibilities. We even looked at making voltage- stabilisers, which was a big business at that time due to power problems. We looked at market research. In fact, I met Arun Nanda (of Rediffusion), who was an IIM-Ahmedabad alumnus, and asked if he would help us. He said ‘sure’. Finally, we felt comfortable with IT.

 

ML: When you decided on IT, what aspect of it did you choose?

AD: At that time, IT meant assembling hardware. Software was given free with the hardware, which constituted 80% of the cost; software was 20%. So there was no concept of a software company at that time. I am not saying we were the first. TCS had started in 1968; but there was a very small domestic market for software. Many software companies got their first contracts from relatives in the US, but we had none. We all came from middle-class families and were first-generation entrepreneurs trying to do something. My mother, as I say jokingly, still doesn’t know what business I am in. She says: “You never show me your product and you get lot of calls at night. Are you doing some shady business”?

 

ML: So your first product was in hardware?

AD: No. We, indeed, started with software.

 

ML: Wasn’t there a software product called Strac for brokers?

AD: It is still there -- not in India but in the US. We were the first to introduce it in 1985 and sold it for 10 years. We stopped because it was not a big business and handed it over to one of our employees; he is running it now. But we converted it into a high-end product and are selling it in a big way in Malaysia and Indonesia.

 

Our IIM contacts led us to many projects. For one of these, we met the government’s Department of Electronics. I still remember that journey in a second-class, unreserved compartment from Ahmedabad. We were packed like sardines in a can. But many people helped us, including some of our IIM professors.

 

ML: Will you give us some names?

AD: One was Mohan Kaul, now the head of the Commonwealth Business Council in UK; another was Nitin Patel who was involved with founding TCS. Our families wondered what we were up to -- especially since nobody knew what software was. There were not many good projects going; yet, we were getting into an unknown business as unknown first-generation entrepreneurs. We had no support from the system either. By that time, Sudhakar Ram had joined us -- Ketan, Sundar and I. He was actually our customer when he was working at Rediffusion, but joined us a little later after he left Rediffusion.

 

ML: So what was your first project?

AD: Our first project was very interesting. It was for Procter & Gamble when Gurcharan Das was the CEO; we later invited him to the Mastek board. P&G had a problem with Vicks. It sells a lot during June-August when they can’t meet the demand. So they either had to produce it earlier and stock it or pay overtime to increase production in peak season. They asked if we could solve the problem.

 

ML: It was an operations research kind of problem…

AD: Yes exactly. We found an optimum solution. Microsoft’s Windows had not been launched at that time, so we designed our own user interface. And on what? They gave us a spare computer lying on the shop floor to work on. It was an HP with BASIC language.

 

ML: Was Microsoft DOS (disk operating system) there at that time?

AD: No, DOS became available in India in 1983. All of us stayed together in my house at that time. I was back in Godrej. They had paid my IIM fees and I had some commitment. We decided that one of us at least, should stick to IT. Sundar joined HCL and Ketan went to Nocil and did IT-related work. I also worked in after-sales service with a focus on IT. We left our jobs one after the other to work full-time for the business. Sundar left first and then Ketan. By 1982, our team was in place.

 

ML: Where was your office?

AD: Ah! That’s a good question. Our office was at Ghatkopar, a Mumbai suburb, where Ketan was staying. Our real first office was where I was staying but, after I got married, two people had to move out. It was very tough to start business in 1982. We had only Rs15,000 and no phone. It took 15 years to get a phone connection those days. There was a jeweller in Ghatkopar who was kind enough to receive our calls, while we made outgoing calls from public phones. When the calls started increasing, the jeweller found it tough to handle and stopped helping us. We then hired space in a business centre at Mittal Towers, Nariman Point. The office was a huge 35 sq ft with two chairs and two tables! Four of us could not sit at one time. There was a secretary who needed a fixed seat. So we were left with only one table and chair for the four of us.

 

ML: Was Mastek a company or a partnership?

AD: We started as a partnership with the name MACOM Services but realised that a private limited company was better. We then started Mastek, which came from Management & Software Technology. We decided to build a solutions company, which is the difference between the others and us even today. Our DNA was to build solutions. That is why we launched a stock brokers’ product, a financial accounting product. We were the first company to do such interesting stuff. It was mainly business solutions for IT and not outsourcing. At that time, there was no outsourcing. We built our business on the domestic market. It was very tough. My good friend Narayana Murthy says, “One thing I like about you guys is that you came up the hard way. You came from the domestic market”. We didn’t do exports; so we lost out a lot financially. Many others had started exporting eight or nine years before us. The problem with us was that we didn’t have money or contacts. That was the downside of our approach. The plus side was that in India we were providing IT solutions, because here we were not competing on a cost basis. We solved business problems and were consultants.

 

ML: What else did you do apart from P&G?

AD: We had to rely only on multinationals because they used IT more aggressively. In fact, our second customer was Boots Pharmaceuticals. Then we did projects for Hindustan Lever and American Express.

 

ML: After that, you bought an office at Unique Industrial Estate in Prabhadevi?

AD: Yes. That was in 1986. That was our first investment in fixed assets. We have still not sold it for emotional reasons. We had a bit of money, but many a times we were not sure about our future. We wondered whether we should close down. There were many offers to acquire us. A business house came up with the idea of starting a software business and asked us to join them. We had almost made up our mind. But when we went there, we were treated like employees. So that did not work.

 

ML: So, you were under constant pressure?

AD: Of course, payments were hard to come. People told you to do payroll and would try to include other things as part of it. Software is not a well-defined job so you go into losses if you are not careful about fixing specifications.

 

ML: Apart from all that, there is the pressure to get the next job.

AD: Besides, we had to prove ourselves. So we were constantly making losses and paying our employees before paying ourselves. That is where my wife’s support came in. I appreciate it very much. She supported me and the family; I couldn’t have done it without her. In such a situation, you don’t have time for wife and family.

 

ML: What then was the turning point in finances?

AD: It is difficult to say but we were living from hand-to-mouth until 1987-88.

 

ML: Were you getting repeat orders?

AD: We were getting repeat orders. Then we got into the software products business. We wanted to do something interesting. One stockbroker asked us to design software to automate their processes. As PC costs declined, small businesses began to buy computers. So this assignment led us to create a software product for brokers and we ended up having the largest number of installations. We also came out with a financial accounting package. We were doing reasonably well and that gave us a bit of money. By 1989-90, the economy was opening up, so we signed up with a US company to sell some of their software in India. That was also a turning point. People were buying software from abroad. The turning point for our confidence was a study done by Dataquest (DQ) magazine. DQ used to list the top 20 Indian IT companies. They asked us to fill up a questionnaire. It turned out that we were number seven or eight in the domestic market! We felt we had arrived. Now that you are asking me so many questions, let me ask you one. Guess what our turnover was?

 

ML: Rs two crore?

AD: (Laughs loudly) Rs45 lakh. That was the size of the market back then. But we felt good. We started branches in Bangalore, Delhi, Kolkata. We were established domestically and were just getting into exports. Then, in 1992, we decided to do ERP (enterprise resource planning) products. ERP is well known now mainly because of SAP but we had one of the first ERP products globally. SAP was not there then. There is always the thrill in Mastek to do different products. We didn’t have enough money even then so we got venture capital. We needed Rs60-70 lakh, which was big money then. TDICI (Technology Development & Information Company of India Ltd.) had started operations. Those days, there was no concept of sweat equity. Valuation was based on book value and it meant a huge dilution for the entrepreneur. Besides, you could not make a public issue at a premium either; you had to issue equity at par value. That meant more dilution for the entrepreneur. So TDICI structured a complicated deal. They funded us, but the repayment was based on a percentage of revenue. They funded seven to eight companies on that basis. But the profit from sale of Mastek shares doubled their venture fund! They got 20-times appreciation in two years after Mastek went public in the post-1992 free-pricing regime. We were one of the first IT companies to get premium pricing. In fact, those were the turning points for India’s IT industry -- first venture capital based on sweat equity and then IPOs based on premium pricing. We would not have gone public, if free pricing were not introduced. By that time, NASSCOM was formed and I was among the six or seven people actively involved in setting it up. We were working hard to change the government’s mindset. And it did happen, thanks to Dr Manmohan Singh.

 

ML: So the money from public equity was ploughed back into developing products?

AD: In fact, it is very interesting. When we went public, our promise was not exports. The profits we made were on domestic markets.

 

ML: Which later became a negative?

AD: Yes. Because everybody did exports and outsourcing… we didn’t do that. We were focused on the domestic market, which was very small. But we realised this won’t work if we want to become a large company. So we slowly reduced our domestic market focus. That was a very difficult decision, since we had so many customers. But we were already behind by several years. We recovered and now 98% of our business is exports. That’s a separate story. To do business then was tough. To build a business with four professionals coming together in a new industry, new market and an environment where business was not trusted. I feel proud that, at one level, we were part of that history of India.

 

ML: It was the worst time for entrepreneurship.

AD: It was. It was also a very tumultuous period. Software attracted 110% duty. In NASSCOM, we decided to plead for 0% duty on domestic market sales. It was good for the user industry but not good for domestic software companies. And I’m glad and proud that we didn’t oppose that; but it did hurt us because imported software was cheaper. Mind you, all this was in 1989, before Manmohan Singh’s reforms. Everybody said, “You must be crazy, you want to kill yourself”? Most of the business was domestic and exports had started only in a small way. We believed that if we wanted to export, we needed more software to be available at a lower price.

 

ML: So you took the hard route…

AD: Yes we took a very hard route.

 

ML: At no time did your partners sit down and think about whether you should take easier options like body shopping?

AD: No. It was not in the culture of the company.

 

ML: So even though there was money, you didn’t want to get into Y2K?

AD: Yes, I would say that. But Y2K was the turning point for the Indian software industry because it created customer contacts, which led to larger project contracts. However, Y2K did not excite us, since we believed in providing IT solutions using the latest technologies. We were focusing on the Internet and CRM (customer relation management) solutions.

 

Unfortunately, this market went down the tube. We became the first to announce a profit warning in 2000. Since this was not a practice then, many said we were a bunch of fools. But we believed in transparency and honesty towards shareholders and went ahead.

 

ML: You didn’t feel the pressure then?

AD: Our belief is that if you are a solutions company and do high value addition, it will be a more successful strategy in the long run. That has always been our DNA, so there was a complete fit between customer needs and what we could do. But, it so happened that outsourcing grew much faster than the IT solutions business and there were more outsourcing contracts available. Ultimately, when you run a company, you should only do what you are good at. We are setting the trend in solutions like the London Congestion Charge kind of projects. This is still a smaller market than outsourcing, but I’m sure it will change and India has to go in that direction.

 

ML: Tell us about the London Congestion Charge project and what about the future?

AD: Mastek has a long way to go. We want to become a global solutions company. We are focusing on the insurance industry just now. In insurance, particularly in life insurance, we have built a complete solution. We are not competing with other Indian companies; we compete with global players on intellectual property. Secondly, we are taking large projects based on complete responsibility for delivering IT solutions that make an impact on business. The London Congestion Charge is one such example which has been hugely successful, for which we worked with the Capita Group. Ask a Londoner how this scheme works; he may not like the fact that you have to pay eight pounds to enter the city, but he will admit “it works; we never had any problems”. An Indian company doing projects like these is unheard of -- taking full ownership. Can you imagine what would have happened if it had not worked? In fact, on the day it was launched, they say there was an eerie silence in London because people wondered whether the scheme would work and expected traffic jams everywhere. People had predicted all kinds of things. We were all tense. I was in Singapore that day and was calling my people every 30 minutes, asking “Kitne cars gaye”? They told me not to worry, there was no problem.

 

It all went very well. They had selected 13th February because it was a holiday and they did not want to try the new system during peak load time; but it worked well even afterwards. We absolutely had to deliver the system on that very day; the date was fixed six months or more in advance. As you know, it’s very difficult to finish a software job on a given date. And a job like this! Nothing of this sort had been done anywhere. We were not doing a tollgate system like in Singapore. It is not a card-based system. That’s the beauty of it. You don’t have to do anything there. You just have to get in. You buy a card to make the payment, but you don’t need to put a card in the car. Now you can even pay by SMS through your mobile phone. Prince Charles told me “Mr Desai, it works”; even he is impacted. He told me, “Your city needs it more than ours”! I said: “You must tell my government. I can’t tell them. I’m not powerful enough to convince them”. He started laughing. Now, we’re working on a similarly large healthcare project in UK, which will impact 50 million people. This is the largest on-going IT project in the world.

 

ML: What’s the project about?

AD: They are completely revolutionising the healthcare delivery system with a budget of nearly £8 billion. We are partners with British Telecom to digitise the movement of documents and prescriptions. So when a GP (general physician) recommends that you need to be operated, your hospital booking, your tests and X-rays will automatically go to the hospital; you don’t have to carry anything. Your prescriptions will automatically go to the pharmacist. Your insurance, etc., everything is digitised. It is a big and complex project with huge security issues. Remember, we are talking of 50 million people now. Large systems integration projects is what we do well. We were not competing with another Indian company for the London Congestion project. We were competing with another UK-based company. For the healthcare project again, we were not competing with any other Indian company.

 

ML: You have a good foothold in UK.

AD: We went into UK and did very well because UK was tuned to accepting solutions from an Indian company. UK is probably more open than the US to give you projects where you are in charge and this suits us. We are one of the top five Indian companies in UK. Some 60%-70% of our business comes from there. Success happens when what you do well matches with the market reality. What we did, matched their expectations. We also found good partners in Capita and British Telecom.

 

ML: You have just stepped down from an operating role. What is the thought process behind it?

AD: I feel that every company has to grow beyond a person. The real test of leadership is whether you have many more people who can take care of your company. So I think the younger generation needs to move in and take charge. We need more outside people to join us. So I stepped down. Of course, I would continue to be the chief ambassador of Mastek; I will stand up for Mastek in the industry. I have taken an important assignment as the president of Asia Oceanian Computing Industry Organisation (AOCIO). The mission is to improve trade across 19 Asia-Pacific countries including Australia, Japan, India and Singapore. I am quite actively involved with the pan-IIT alumni movement in India. We also have Mastek Foundation that I will continue to run. It has designed a course for those who want to make a social contribution. The course exposes them to a whole gamut of social issues based on which they can select an issue to be associated with. We have tied up with various NGOs to provide first-hand experience of their work to our people. Mastek’s job stops at helping them make a choice.

 

Coming back to the issue of my stepping down, I remain on the board as founder and major shareholder. But Sudhakar Ram is now the chairman.

 

ML: Is he one of the founders?

AD: Yes. He is one of the founders but he is much younger and, obviously, has more energy and passion. He has a vision to make Mastek a solutions company and I am sure he will take it to newer heights and I will support him in every way to make it happen.

 

ML: What has been your best investment?

AD: Nobody has asked me that question before. Obviously, purely in terms of financial investment, it is Mastek. But if I look back at what was important for me to succeed, I would say three things: education, values and relationships. The biggest investment, which has worked very well, is my IIT, IIM education. That was the foundation. At IIT and IIM, you compete with the best and it raises your expectations. You realise that you are not great because the guy next to you is 20 times better. So you begin to compete and you build networks. I’m lucky I could go there and get that kind of support. The second is the family environment of values and ethics. Whether it was my mother or my wife, we believe in middle-class values. My wife gets uncomfortable about publicity and prefers a low profile. She has modest spending habits and we still don’t have full-time domestic help. Obviously, we lead a comfortable life but we are not leading a luxurious life. I was lucky that both these ladies supported me -- first my mother and for the last 20-25 years, my wife. Without their support, I could not have done much. I didn’t have to deal with expectations, even though the first 10 years were very bad. And the third investment was building relationships with colleagues and Mastek founders. We helped and created space for each other to succeed. I couldn’t have done much of this alone.


-- Sucheta Dalal



 



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