Food cafe: Building a great IT products company

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Published: February 22, 2016 1:12:42 AM

I met Arun Jain, the founder-chairman and CEO of Polaris, exactly five years ago, when he told me that, in the IT business, one has to keep reinventing oneself to survive and succeed.

I met Arun Jain, the founder-chairman and CEO of Polaris, exactly five years ago, when he told me that, in the IT business, one has to keep reinventing oneself to survive and succeed. That is exactly what he has been doing for almost 30 years now. Today, he is the chairman and managing director of Intellect Design Arena Ltd.

Polaris is one of the home-grown IT success stories to emerge from Chennai. Jain started small, setting up Nucleus Software Workshop in 1986 in Delhi, to provide back-end services to Citibank global consumer banking operations. When Citibank decided to relocate its global consumer banking business to Chennai from Delhi, Jain moved to Chennai and launched Polaris Software Lab with just R25,000 in 1993.

In 2000, he acquired OrbiTech Solutions, a technology subsidiary of the Citigroup. From 2004 onwards, Jain has been focusing on building the largest financial technology suite in the country. He then restructured Polaris’s businesses into services and products divisions for greater focus and efficiency in 2013, and separated the two businesses in March 2014.

In November 2015, he and a few other shareholders sold the 53% stake they held in the company to Massachusetts-based Virtusa Corporation for a consideration of R1,173 crore. His focus is now on building a great IT products company.

I ask him about how he moved away from services to products, and why is he so optimistic about the turn of events? We decide to meet for coffee at the revamped Upper Deck restaurant at Taj Vivanta’s Fisherman’s Cove. It is easy for him to come there from his 30,000 sq feet design centre in Navalur, a Chennai suburb. The scenic sea-facing restaurant is situated on a split-level green lawn. It is a perfect place to have a quiet chat al fresco on one of the last of the cooler Chennai days. The menu is bistro. We ask for vegetable wraps and one of their Italian coffees.

“In the last five years, many exciting opportunities in the banking, financial services and insurance (BFSI) areas were opening up, both in the services and products space. We set up Intellect Design Arena to develop the products business, while software services stayed with Polaris Software Lab. The board wanted us to give a clear focus when it came to investment, building competences, decision-making and processes to drive the two businesses to the next level.”

The Boston Consulting Group (BCG) was hired to give validation to this thought process. Jain says, “I need third-party products to grow the services business. So I have to be product-agnostic. For the products business, I need to have a systems integrator who can take it forward. In this case, I need to be highly systems-integrator-agnostic. So that was the biggest finding given in the BCG report. And that was the reason we internally restructured in the beginning of 2013. We wanted to see how it worked in the market. We were apprehensive initially, as it was a big change. After three quarters, we came back to the board.”

The market had accepted the changes. In March 2014, the board took a decision to demerge the two companies. “Normally, people don’t demerge, they only merge.” The demerger got all the approvals from the Securities and Exchange Board of India and the High Court in the next six months. At this point, the board asked Jain what his real passion was, and if he had to choose between the two companies, which one would he choose? “Obviously, my choice was Intellect, because my passion is to make India a product powerhouse.”

Sometime in March 2015, the decision was taken to find a suitor for the services business. Polaris is a R2,000 crore services business. But R2,000 crore in the global market is not an appropriate size. It has to be at least a R5,000 crore company to be sustainable. “That is why we gave the mandate to the investment banker to see what opportunities were available in the marketplace. By November 2015, we signed a deal with Virtusa. If we had sold out to a Capgemini or a TCS, the employees would have been lost in the ocean. Now Polaris’s billion-dollar dreams can be fulfilled with Virtusa.”

Our small coffee cups are being constantly filled and some delicious sandwiches arrive in various vegetarian and cheese combinations.

Jain is confident that Intellect can start growing much faster, as it has been released from the shackles of the combined entity. Although the IT industry is down this year, Jain is confident that Intellect will grow 20% year-on-year. “We promised three things to our investors. We said that Intellect will be doubling the revenue from R600 crore to R1,200 crore in three years. We will be doing some R800 crore to R850 crore this year. Intellect will be profitable by this quarter, January to March 2016. We are maintaining our operating margin above 50%, the best in the industry segment.”

“I have been working on products for the past 10 years and the most important aspect is the product design. A banking product needs to be robust and rugged. It should be a zero-defect product. We have a roadmap for the entire digital revolution that is happening with tablets and mobiles. We have a product in liquidity risk management (Basel III) and a great product for transaction banking—a complete integrated suite in transaction banking. These are leaders in their categories. We are not competing with Indian companies. We are competing most of the time with American or European companies. So that’s the fun part. I love challenges.”

In his current avatar, Jain has taken on the role of a mentor and has appointed four CEOs who report to him. “I must help them succeed in the marketplace and allow them to build leadership. Market opportunities are huge. Right now, what we are doing is like a drop in the ocean.”

Jain is also spending time and resources on causes close to his heart. “Money is the resource for making an impact and difference. We will be spending R100 crore on education and another R100 crore on healthcare. I want to make a difference.”

Jain has already started working on providing clean water to every household, working with students in corporation, municipal and government schools to encourage the ‘can do’ spirit in the underprivileged youngsters. He is setting up a start-up Nukkad to encourage budding entrepreneurs.

As we leave, I ask Jain why has he remained in a mid-level IT company. “People take different routes to their destinations,” he smiles.

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