The imminent consolidation in the IT services industry is looming large on every mid-tier company of Indian heritage and the current Mindtree episode appears to be the flavour of the season. In the on-going war of words and postures who blinks first is kept as a suspense to drag the story to the next episode with everyone claiming to be protectors of stakeholders’ interest.
There are founders, employees, customers, investors and suppliers in the game with a larger ecosystem making it all work together. The role of founders and the right time for them to relax their control is best determined by the situation as it is not taught in Harvard Business School. As far as Larsen & Toubro is concerned, there was a narration long ago making rounds about its founders.
One fine morning, an old gentleman of European origin lands at the gate of one of the L&T factories and reports to the security guard, wanting to meet the Managing Director. The guard on duty calls up the Human Resources department, stating that an old gentleman, who says his name is some Larsen wants to meet the Managing Director; should he be allowed?
L&T was handed over by the legendary founders Henning Holck Larsen and Kristian Toubro, to become a professionally managed company without minding the Chairman Emeritus being stopped at the gate by the professional guard on duty. Under the professional management, L&T has grown in to a huge tree with multiple branches, each producing its own fruit, yet supported by the roots founders laid.
There was also another joke going around in the Indian IT services industry that if you mask the company logo and make a corporate presentation to visiting customers from another continent, they may not be able to say, which company is being presented to them. So much so, the IT services companies of Indian origin look alike in their service offerings, talent strategies, go to market techniques and value propositions. Couching under the unique culture banner may not take it too far.
As I often used to tell my staff, for a visitor from any other planet, all human beings on earth look similar with one head, two legs, two arms, blinking with two eyeballs and making some noise. It is the same case with Indian IT services industry, everyone looking alike, but the nuances being seen only when you dive deep and start meeting the people. The cultural integration, between two Indian IT services companies, can only be held hostile through non-co-operation as the gravity dictates otherwise a smooth flow.
Having worked for a large Indian IT services company for 15 years and with L&T for over 5 years in two terms, both at the Heavy Engineering division and the IT services arm, I am of the opinioin that the cultural integration is not as tough as it is made to be by few stakeholders.
As far as the hostile takeover talks are concerned, it should have been pre-empted by Mindtree management when the largest shareholder with 20.3% financial stake is seeking buyers. If it is not L&T, it might have gone to any other Private Equity firm who are no different in demanding their pound of flesh and looking for an exit at appropriate time again.
The PE firms, as we all know are no less ruthless and the operational independence is all towards making them richer in their valuation game. L&T again, under its legendary current Chairman has thwarted the hostile takeover bid twice and ring fenced the company from future takeover by keeping a large stake under the employee welfare trust.
IT is a long term move although probably started as an outburst. Not for nothing, L&T is now called a national resource with solid roots, blooming branches and revered by stakeholders to the common citizen. If you look at the top tier IT services companies of Indian heritage, barring the exception of Infosys, which remains a standalone IT services company with no diversification or any other corporate backing, most of the other companies have an established corporation to support and have done well.
Cultural infringement between manufacturing and services has not come in the way of their progress. It is too premature to classify the L&T move as an assault by Mindtree management closing the mind for further value creation possibilities. Mindtree can get grafted well with the huge L&T tree and have its own branch, blooming better with support from L&T roots.
Hope, without dragging the episode, curtains will fall for a happy ending.
(The writer is former SVP and Executive Council Member and former COO of L&T Infotech)