The MD and CEO of Sonata Software, Sanjay Viswanathan, says that there is nothing wrong with the mid-tier firm?s strategy. Execution is the key to changing investor perception, he says in a chat with FE?s Goutam Das.
What is your mandate as the new CEO?
The mandate is to drive growth. I have been a growth leader. Therefore, the promoters of the firm felt that the time was right to build on what is already a good delivery engine and an operations backbone. The success of the role is dependent on the leadership team. The quality of the team makes my life easier.
If you say that the company has good leaders, why has it lagged in performance?
It is a perception that the company has not grown. If you look at the five-year window, it has a CAGR of 33%. If you look at the bets they made, it was visionary, like being in travel and in remote infrastructure. Having said that, the last three years were tough for anyone in the industry. Tier-II firms were the ones who were squashed in between nimble small players and the very agile large players. This is a firm that required the ability to take some risks. Maybe, they missed some of those windows because they did not take the risk.
The stock price of the company is almost half of what it was one year back. This doesn?t paint a pretty picture of what investors think of the company. With a CAGR of 33%, why have investors logged out?
The market does not always recognise the value of what is going on internally. GE is a great example of that. GE?s stock, over the last 7 years, has lost 45-50% in value. But the work that GE has done is great compared to most other peer groups in terms of operating efficiencies, business effectiveness and growth. But the market has not rewarded that because investors in the current climate think very differently. There is a lot more short-term-ism in play. Look at the investor profiles. You have a lot more hedge funds today ? they think in 90-day cycles rather than 9 quarters. Another example is 3M. The firm has been doing amazing work under George Buckley over the last 6 years. But their stock has lost 30% in value. Never co-relate internal performance of a company, its strategic direction and execution with market perception. Having said that, we want to have more consistent dialogue with the media as well as with the investor community. Open the kimono and share what?s going on. If we do what we want to do over the next three years, we are the stock to watch out for.
Recently, we have seen new CEOs in other companies spending a lot of time cleaning up the old system, making people-based changes and re-qualifying the deal pipeline. Are you doing the same?
The good thing about my role is that I don?t need to change too many things. When you look at transforming a firm and putting it on a growth agenda, what you look for is having a unified vision and people who buy into that vision as a team. In the last six weeks, the buy-in has been unanimous. Everyone today ? the 18 members in the senior leadership team ? are rowing the boat in the same direction. That?s a big positive for us.
Next, a new CEO usually wants to give some sound bytes in the first 100 days. I don?t need to do that in this case. It is going to take us six quarters to really begin to drive growth here. I am in no tearing hurry to make changes. What we really need to focus on, I would say, is getting the execution of our strategy right.
Why not tweak the strategy?
Sonata has made a big bet on travel, way ahead of any other firm. Travel, transportation and logistics is a $36- billion outsourcing market. Only 12% of it has been offshored. So the strategy was not wrong. It was the execution. Second, Sonata made a bet on Germany. Today, everybody wants to go there. We already have a 350-400 people shop. Question is how can you scale that? It is again an execution thing. Third is the whole game of specialisation. Can we add one or two more verticals or bring in a game changer in the horizontals? Sonata has also built an India business. We have to execute on it specially since the India-to-India story is so hot.