After many years of successful operation, you opted to take in $20 million in venture funding from Chase Capital. How has that changed life at Syncata?
Our venture funding has changed life at Syncata primarily in three areas: We know that we are adequately funded now and have the confidence to know we can weather business downturns. We also have a good sounding board for business decision-making. We have an experienced Board of Directors who has helped us forge our strategy and serve as a very good barometer of business direction. But like every VC, they too are looking for a return on investment. As a result, in a couple of years we will need to package ourselves for an Merger and Acquisition transaction that would generate liquidity for our investors.
So many of the Information Technology (IT) services companies started by entrepreneurs of Indian origin in the 90s are in trouble at this time. Tell us how Syncata has survived the meltdown?
Syncata has survived by staying focused—we stay true to our strategy and are not fad-based. During the “dotcom” days, if we saw something fundamentally risky about a business model—a company not focused on their own business but driven strictly by venture capital consideration—where cash-flow, EBIT (Earnings Before Interest and Taxes), and other critical metrics were overshadowed by metrics such as “site hits,” “visitors,” and the “number of ads served,” it served as a red flag. We realized early that we needed to stick to our core competencies, such as making companies more competitive. Another key for us is that we have always run our firm very lean and mean—based on a “boot-strap” model. We never hire ahead of future business. Even when we got our venture funding—we never let ourselves become over extended—this is why we still have the majority of that funding still in the bank today.
You were an entrepreneur in India in the 1980s before immigrating to the U.S. How different is it? And how do you think the business climate in India has changed, since you are now back via your subsidiary.
The one big difference is that the U.S. is very competitive. It’s not uncommon to have six vendors bidding for the same work. So, you truly have to be differentiated and very focused. The Indian experience taught me how to deal with bureaucracy and it instilled an intense dislike for bureaucratic procedures. I saw the amount of waste created by paper-pushing bureaucrats. These lessons are reflected in how we chose to operate our company today—we are highly automated and electronic. We don’t have administrators just staffing the back-office. Our only formal filing system is our Internet-based knowledge management system. India though has changed significantly in recent years mostly in the IT services sector. While the manufacturing business that I ran hasn’t changed much, I think that IT services have been patterned on U.S. business practices—hence the big boom and the competitive business practices.
How important is your India operation to your success?
Our global offshore operation is very critical to our success. If you look into the future and to the amount of automation being created, the requirement for a knowledgeable and skilled workforce is growing exponentially. The U.S. is still mostly an importer of knowledge workers. But this process isn’t economically sustainable. We need to continue to build and then tap into the huge global resource pool and we need manage this efficiently and effectively. U.S. workers will have to become more specialized and we’ll have to get better at collaborating and utilizing the skills of a global workforce.
How do you determine what work is done in India and what in performed locally?
The key criterion for deciding what work gets done here vs. India is the amount of interaction that the business stakeholders require with their IT counterparts. For a business process redesign engagement, for example, we might dip into a global talent pool of resources from here and India where members of the team are here in the U.S. for the requirements gathering and design phases, but move some of the same resources back to India for the software design or package implementation and construction phases. Maintaining knowledge across all members of the team is critical.
Many IT service companies drew their revenues from the fast track “dotcoms.” Yet, you have always pursued slower moving corporate giants like American Honda and Pacific Life Insurance. How do you win business from these large companies? Does it take a special skill?
We are focused on companies that allow us to be successful in the long run and allow our engagements to have a very high return on investment. That requires fundamentally that our clients have a sound business strategy and vision that is long-term. Because IT services are primarily a referral business, the one special skill you need is patience. Established companies take a long time to make decisions and you need to have a long-term strategy form a client account management perspective in order to be successful working with them.
What advice would you give to someone starting a technology company now? Is this a terrible time to be a new entrepreneur?
Many successful entrepreneurs have started their careers during economically challenging times. We started our company during the ’90-’92 recession. I see some advantages to starting a business now—the number of entrepreneurs out there may be fewer and talent is fairly easy to recruit. You can go out there and get some really quality people—people that you may not have gotten a couple of years ago.
Very few venture-backed companies have two brothers working as colleagues.
From the very beginning, we made sure that we ran our company as a tightly managed professional organization. We therefore had our roles and responsibilities clearly delineated. Of course, there were times we found it challenging as siblings, but rarely, as Aloke works out of our Irvine Office and I work in El Segundo. Part of bringing in outside capital and a seasoned Board of Directors and top executives was to complete the transition from family run business to successful corporate enterprise.
You are very proud of your people. What traits must one have to become a Syncata employee? Are you hiring this year?
We are hiring very selectively this year. We’re looking for some key positions. We’re looking for an operations research expert with specialization in the optimization arena for example. We look for the CHAMPIONS traits, a Syncata acronym: Collaborative, Hardworking, Ambitious, Motivated, Positive, Innovative, Outstanding, Nimble, and Smart.
Gunjan Bagla is a technology executive based in Southern California. He advises technology companies on how to grow sales using smart marketing. [email protected]