Friday 21 December 2007

Nasscom remake

Business India, February 16-29, 2004

Coming of age

Nasscom, the apex body of Indian software and services companies, has overcome setbacks and reinvented itself to thrive in adversity.

Shivanand Kanavi

Kiran Karnik is the most unlikely face of the year. Thoughtful, self deprecating, cultured, always giving credit to others, no self promotion ... these are the many epithets that come to mind on meeting him.

When he took over the stewardship of Nasscom (National Association of Software and Services Companies) in September 2001, a comparison between him and his predecessor - Dewang Mehta, was inevitable. Mehta had died tragically in harness at 39, in a hotel in Australia. Dewang was a dynamo of manic energy that made him the premier IT evangelist of India and the face of the entire Indian IT industry. Many wondered if Karnik could fit into Mehta's big shoes. In short, if Mehta was the irrepressible Elvis Presley of Indian IT (including the side burns and hair do) then Kiran Karnik is the tambourine man - Bob Dylan.

"My answer to such posers was, 'look at it differently, I am standing on a very tall man's shoulders’”, says Karnik, in his typically modest style. Today as Karnik gets featured as the Face of the Year, 2003 by, one can objectively say that Karnik and Nasscom have finally moved out of Mehta's shadows in more ways than one.

Quietly Karnik and a host of IT stalwarts - Phiroz Vandrevala, Harish Mehta, Saurabh Srivastava, Arun Kumar and others - helped reengineer Nasscom. It is no longer centred around personalities and individuals but is becoming an institution. It is not just plain old lobbying based on contacts and charm, which Mehta excelled in, but research-based policy interventions; it is not any more a one man army of Mehta working 20 hour days, but a whole host of IT entrepreneurs and executives, giving their time willingly for India's most successful industry association.

Business India recognised Nasscom's contribution to the business landscape in India long ago in a cover story in February 2001, 'Power lobbying'. We said then, "Nasscom has functioned more than just a trade body. To be sure, it has advocated the cause of its members, but at the same time it has looked well beyond this and it has advocated changes in the national interest. In fact, Nasscom has morphed from a mere trade association to a catalyst for change on the national scale."

Three years later we can safely say that despite catastrophic events, like the loss of Mehta, a recession in the US and 11 September, Nasscom has come out trumps. Advanced countries with high cost economies are outsourcing services to countries like India. Today outsourcing has become a big buzzword. India is the first destination for many western companies and when they land up here the first address they visit is that of Nasscom. No wonder chose Karnik. "I am no celebrity, they took bits and pieces of what is happening the world over and what Nasscom is doing, and when they put it all together the face that appeared was mine," reacts Karnik.

Nasscom's annual conference showed clearly the coming of age of Nasscom and the Indian IT industry. Why do we say that? There are many small changes, some tangible and some intangible, which all add up to a new phase of Nasscom.

Earlier Nasscom brought in celebrities, Indian and foreign, to draw media and delegates. This year, celebrities in the opening session were the billion dollar club of IT companies, made in India. The panel consisted of S. Ramadorai, CEO, TCS; Nandan Nilekani, CEO, Infosys; Ramalinga Raju, chairman, Satyam; and Vivek Paul, CEO, Wipro Technologies (through a video conferencing link from California). They were not great orators, there was no grand standing, they were not a Steve Jobs, a Scott McNealy or a Larry Ellison, but there was tremendous self assurance. They impressed Suhas Patil, the grand old man of Silicon Valley. "We have come of age," he said, later.

In fact, more Indian tech gurus from the Silicon Valley, are rescinding their earlier views and admitting that Indian offshore development is a new model and it has worked. Earlier many of them used to look down upon the Indian IT sector as mere 'labour arbitrage' - a fancy word for middlemen between Fortune 500 clients, and poorly paid but highly qualified Indian programmers.

But Indian IT companies were quietly confident that they are their own models. "From the beginning that has been the case. We could not learn even from services companies like IBM or EDS. They had different cost structures and delivery models. We could not benchmark against them. So we had to go into a huddle, brainstorm, share our data and woes, pass tips to the next guy who is entering a new market, etc, and the forum that we created for that was Nasscom," says Saurabh Srivastava, chairman, Xansa, and one of the founders of Nasscom.

"It is a great place where CEOs and entrepreneurs do really share data, and their worries without any inhibitions," says Revathi Kasturi, president, Tarang Software Technologies, a Bangalore-based startup, the first woman to become an executive council member.

And that tells us something about the internal working of Nasscoml and what makes it different from other industry lobbies. While other industry associations get activated come budget time and are riven with factionalism and contrarian pulls, Nasscom has survived and thrived. Of course, some might say it is narrowly focused into software and hence the cohesion, but that is only a part of the story. After all, it consists of 800 members, only five of who contribute to 35 per cent of the industry turnover. It consists of MNCS, it consists of services companies and product companies, it consists of third party BPOs (Business Process Outsourcing companies) and captive BPOs of MNCs. SO there is enough scope for all kind of push and pull. But Nasscom continues to draw them together.

The biggies of software like TCS, Infosys, Wipro, HCL, Satyam, Cognizant and so on have long out grown their start up phases, have enough financial muscle to invest in marketing, research, overseas offices, etc, so commonsense says that they do not need the hand-holding of Nasscom. But out of 30-odd executive council members, at least 20 attend all meetings. As for the annual conference, everybody keeps it on the top of their agenda of them give a lot of their valuable time for the affairs of Nasscom. Why?

"Nasscom has a voice that carries more weight than any of the individual companies so we make the best of it. Moreover, it is a forum where we grow out of our narrow companywide concerns and brainstorm about what is good for the whole country and the entire IT industry," says Phiroz Vandrevala, executive V.P, TCS, who became a full-time spokesman for Nasscom in the post-Dewang period, before Karnik took over.

But what the industry needed in terms of tax benefits for software exports, and lower telecom tariffs that are crucial to deliver software to clients all over the world was won long ago by the diligent work Dewang Mehta and others, so what kind of policy intervention are they talking about?

Well there are always issues which affect the IT industry, where the knee-jerk reaction is usually the wrong one. For example, when everyone wanted duty protection from imports, Nasscom asked the government for zero duty on imports. When IPR had scant value in India, Nasscom carried out campaigns against software piracy, despite the fact that it could only benefit MNCS like Microsoft and not Indian services companies. Recently, when the government made noises about taxing the foreign BPO companies, Nasscom as a body advised against it, even though Indian BPO companies would have 'benefited' from it.

Why? Well let us look at the big picture. The zero duty on imported software helped in reducing the cost of IT in the domestic sector. Even though the bulk of Nasscom members depend on exports for their bread and butter, it has been their firm belief that without a large domestic base no product companies can come up here. "Moreover as Indians, all of us would like to see an IT-enabled knowledge based economy grow in India and not just in the rest of the world. We may not use fancy words like 'nation building', but we are after all proud to be Indians and want it to shine," says Harish Mehta, chairman, Onward Novell group and another founding member.

Similarly, copyright and IPR issues taken up by Nasscom have helped in the growth of product companies in India and have endeared Nasscom to MNCs as well. This is already paying off. Product companies contribute over Rs.6,600 crore to software exports, and are growing at a rapid clip of no less than 30 per cent per annum, according to Rajiv Mody of Sasken Communications, who heads the Nasscom Product Forum. The product forum is also promoting the 'India Inside' campaign, showcasing MNCS which are doing high-end research and development in India.

As a result, Microsoft, SUN, BT, Intel, Siemens and Price Waterhouse Coopers are very active participants of Nasscom. "We are deeply interested in promoting IT in the domestic sector. The benefits of e-governance, as a tool of transparency and using IT as a productivity tool in manufacturing and financial services are going to take India forward as a major economy and they transcend our narrow company interests," says Rajiv Kaul, MD, Microsoft India, who heads Nasscom, domestic IT market forum.

But why did Nasscom advise the government against taxing foreign captive BPOs? They are doing value added work here but are not showing it as a profitable business. As a result, not only is the government losing taxes but if an Indian company like TCS does it in the US then the US government's Internal Revenue Service would promptly put them in jail!

"Many times reciprocity is not the right response. If the circular issued by CBDT had gone through, then we would have got low-end work, which is not taxable and high-end work could have gone to other destinations. Our estimations are that by 2006-7 this industry might grow to about $70 billion. We know that 40 per cent of that will go as salaries. That means the government will get about $10 billion as taxes, which it would not get otherwise. So why do you want to kill the golden goose for a few dollars today?" asks Srivastava.

Business India spoke to several Nasscom executive members and all of them echoed the same sentiment independently. This shows several things. Firstly, Nasscom members are thinking their policy positions through, which are widely debated internally and backed up by hard data, leading to a united stand. Secondly, lobbying is now based on hard statistical data and not personal charm. Thirdly, they are rising above their immediate interests and looking at what is good for the country in the long term.

"If we had stayed in the same mould as we have been, then Nasscom would soon become irrelevant. I divide the growth of Nasscom into three phases, in the first phase it needed evangelizing and Mehta did it brilliantly. The second phase was putting in place the right policies and regulations, and that was hard work: telecom liberalization, 10A/10B in the Income Tax Act, Software Technology Parks, a host of things which helped the industry. The third, which started just before Dewang passed away, was brand building,” says Karnik.

“So far we have done well, but to maintain a 28-30per cent growth we need to be innovative. It cannot be incremental growth. We are promoting start ups, innovation and incubation, and continuing to influence policy, based on solid research, on hard data. For example, about lowering duty on computers and its effect on the PC market, we looked at prices and demand in different countries. But since people say India is different we looked at price elasticity in mobile phones and the CTV market, and what employment multipliers they can be and what they can do to the rest of the Indian industry including the software industry."

"Today, against the backlash to outsourcing jobs to India too, we are going to policy makers in the UK and the US, with hard research data from the Department of Labour, US, etc. We talk of gains to their domestic industry through outsourcing, we look at the demographics and the aging population profile there and the resultant drop in GDP growth, problems with immigration, etc, and hence project outsourcing as the best way out. This is a more professional and sustainable approach," explains Karnik.

Besides e-governance, Karnik himself is very excited about IT in defence, which is not talked about much. Today IT is the primary weapon in defence. One can use IT in blocking, tracking, tracing and directing armament fire, etc. But it is all packaged with the hardware. If the hardware and software are disaggregated then the cost of the system will come down heavily in India's favour and Indian companies can be involved in doing the software. It will save money and make India more secure.

Nasscom, however, is also working behind the scenes on WTO negotiations. If India works out its strategy properly, then there is a great opportunity for the Indian services sector. "There are some genuine problems for CAS, etc, but let us look at the total picture. We put together a high powered task force and got people from four top companies to come and work full time on this, and put together a document on the services opportunity and how it can grow to 10 times our other exports in six to seven years, if we can get the foreign markets opened up," says Karnik.

"There are two reactions to globalisation. Either there are people who are ideologically for globalisation or old socialists like me, who are sceptics, who say for 10 years nothing has happened so it is bad per se. But today we can see that unlike other developing countries we have a great opportunity. We should open up earlier. Tactically you can have different stances.
You can hold back retailing, till they open up something else, etc, that is a different issue," says an excited Karnik.

Karnik has drawn on the collective wisdom of his members. Ganesh Natarajan, Rajendra Pawar, Rajiv Kaul, Rajiv Mody, Ramalinga Raju, Arun Seth, Bhaskar Pramanik have been drawn in to head specific activity.

What about the 80 per cent of small companies, who might not connect with the concerns of the biggies? "'Within Nasscom there are enough activities which help the SME or startup sector in terms of research, advice on marketing or IPR, etc. I have never felt any kind of discrimination of smaller companies. In fact, even if somebody makes a remark inadvertently, I don't let it get me down after all I represent 80 per cent of the membership," says Revathi Kasturi.

Nasscom is being studied by several countries since there is no other similar example in the world. "National Rifle Association in the US is probably the only other," laughs Harish Mehta. But jokes aside, the diligent Chinese are sending a delegation every month and closely monitoring Nasscom's activities to learn from it. "There is a saying that if you carry a big stick then you can talk softly and others will listen carefully. Dewang gave us a big stick so I can afford to talk softly," acknowledges Karnik.

Looking ahead there will be non-tariff barriers, not just due to job losses but because India has emerged as a major player. Other countries want to know whether they are too dependent on Indian software. "How do we sustain our competitive advantage, after all we have cleared the path for our competitors? China in the long run because of size and bandwidth will be our competitors. They will be offering everything from call centres to R&D. But ultimately our biggest differentiator will be diversity. We are used to working in multicultural teams, being ourselves a multicultural society. So it is easy for us to work in international teams."

"At a more basic level our culture is that of ambiguity. Recognising gray areas helps us think creatively. When things are given step by step as in manufacturing, the East Asians are great. When you look at us five to 10 years ahead, you will see us as great source of ideas and solutions," says Karnik.

Where do we go from here? In Karnik's words, "When I took over, a journalist asked me to summarise in one sentence what I want to do! I thought hard over it and said, 'I want to make India and IT synonymous'. When you think of wines you think of France or with watches you think of Switzerland. Of course, everybody makes wines, California, Australia, Chile and even India. Similarly everybody makes watches, but France and Switzerland stand out in our minds. In the US, associating India with IT, has already happened. That is what is seen in the backlash in a negative way. But my hope is that when this blows over, association of India with IT will remain. "We say Amen to that.

Profile: Pradeep Sindhu

Business India, January 22-February 4, 2001


Shivanand Kanavi

Pradeep Sindhu is a difficult man to interview. "If you are talking money, networth, etc, then I am walking out of this. If you have anything to discuss about Juniper, I will be glad to talk. Anything about myself and family is a no, no," he burst out.

Apparently, he has had a bad experience with Indian media and its crass obsession with dollars made. We, of course, placated him quickly, "Networth, what networth? Perish the thought! We want to ask you about routers, about Internet Protocol (IP), about how you are giving sleepless nights to John Chambers & Co at Cisco."

The effect was instantaneous. He changed into a professor, an ardent researcher, an engineer's engineer who talks English. It was so dramatic, that for a moment one thought the guy was either one-dimensional or unreal. But Pradeep is simply passionate about his work.
That is how Pradeep Sindhu and his colleagues at Juniper Networks have carved out nearly 30 per cent of the high-end router market. Earlier, Cisco was the uncrowned king of Internet infra­structure. It still is, when it comes to enterprise level networks, but for the core of the network, more and more telcos are buying Juniper's equipment.

Pradeep narrates the story of Juniper: "In 1996, when I asked myself how an exponential phe­nomenon like the Internet could be facilitated, I saw that the only protocol that could do it is IP, since it is a connectionless protocol, it is reliable and easily scalable. The elements that were miss­ing in IP were routers. When I looked at IP routers built by others, I was really surprised at their prim­itive nature. That is when I realised that there was a great opportunity to build IP routers from the ground up, using all the software and hardware techniques I had learnt at Xerox PARC (Palo Alto Research Centre). I thought every second wasted would lead to some- body else discovering the same. I called Vinod since I had done some work with Sun and he had investments in networking. He gave me an hour. I spoke to him about the macro scene and told him that if we design from first principles we could do 50 times better than what is available. He asked some questions and said he would think about it. He called back two weeks later and said let us do something together."

"When Pradeep came to me, he had no business experience. My view was: 'I like the person and I like the way he thinks'. I asked him to sit next to somebody who was trying to build an Internet net­work for three weeks and asked him to understand what the problems are. He is such a good guy that he was able to learn quickly what the problems are. Helping a brilliant thinker like Pradeep and guiding him gives me great satisfaction. This is one guy who has really changed what the Internet is. The difference he has made is fabulous," says Vinod Khosla. That is tall praise coming from Vinod, who is no mean thinker himself.

With apologies to Sun Microsystems, who produce chips named Sparc (in fact, Sindhu played a significant role in it), we are using the same for the title, since Pradeep Sindhu is really a spark that came out of PARC.

Monday 10 December 2007

Profile: Rajvir Singh

Business India, January 22-February 4, 2001

A VC with a soul

Shivanand Kanavi

“Rajvir Singh is an usual Valley VC. He still has some soul left,” an entrepreneur told us. “You must meet him before you go. I will give you his cell number and you can talk to him,” said part-time entrepre­neur and full-time academic Prof Paul Raj. “Raj, as he is popularly known in the Valley, is one of the biggest. He did Cerent and sold it to Cisco for $7 billion, and Sierra and sold it to Redback for $4.3 billion,” said yet another entrepre­neur. We were leaving the Valley the same day and we dialed the number given to us. “Oh, you must be looking for Raj Singh, I am Raj Parekh," said the voice on the other side. Our curiosity had been sufficiently aroused and when we found that both the Raj’s work for the same firm, Red­wood Venture Partners, we decided to pray for good traffic conditions so that we didn't miss the flight, and meet them anyway before we left for San Francisco.

Needless to say, we were handsomely rewarded. Though we did not have much time together, we struck a cord instantaneously. "I am from Idrishpur village, near Meerut, and was born in an ordinary farming family," began Raj Singh. We continued in this vein for a short time and then contin­ued the rest electronically. Raj Singh is a true wanderer. Not only in the physical sense of trekking, which he does regu­larly with his family ("we went to the Andes this summer," he informed us). Like a seeker of something ethereal, he keeps wandering from job to job, startup to startup, idea to idea. On the way, he also creates knowledge and wealth.

After his BE in Roorkee Engi­neering College in EE, Raj joined the Navy. After a couple of years working on the aircraft carrier Vikrant, Raj found the regime too rigid and so, he resigned. He then joined IIT Delhi and worked in TIFR'S mathematics depart­ment, studying computer sci­ence. To this day, he says he found the atmosphere at TIFR the most stimulating. In 1974, he joined a startup in Delhi, Alpha Electro, to make minicomputers. He was then given an assignment in Libya. Working for the Libyan Electricity Corporation, he developed a computer programme for grid planning and load dispatch. After a couple of years there, he joined the University of Minnesota at Minneapolis for an MS in computer science. From 1981 to 1995 Raj changed jobs - from CDC to National Semiconductors, to Trilogy Systems, to Cirrus Logic to Nexgen to Inter HDL.

Then he ventured onto his first startup Advancel Logic, which later split into Fiberlane and Stratum One. Fiberlane again split into Cerent and Siara and Cyras.

In 1999, Raj teamed up with old friend Raj Parekh to float a venture fund, Redwood Ventures.
Today, Raj is part of Comstellar Technologies, a combi­nation of an incubator and a vc firm and a specialised tech­nology holding company in a particular sector. Anil Gupta of Stanford University has called Comstellar Technologies a Metacompany and has predicted a brighter future for this model. Raj has invested in 40-50 startups. A large number of them are in the optical component space - which is why Raj is described as a fountain of optical startups. The way he has started his companies and then split them as and when required, show an extremely flexible and functional strat­egy, a key characteristic of the startup culture.

When Raj was facing a burnout, he found time to write a book, Digital Design and Synthesis with Verilog HDL, which has gone on to sell over 10,000 copies.

"I have learnt a lot from various industry stalwarts, I was lucky to directly work for people like Suhas Patil, Thampy Thomas, Atiq Raza, and Vinod Khosla. I also happened to work with Kamran Elahian in helping him start Momenta, and with Prakash Bhalerao, who was director on the board of Advancel. I worked with Prabhu Goel while I was writing my book on Verilog HDL. What I did was apply all that at Cerent, Startumone and Redwood Ven­tures. Now I am learning from my general partners Raj Parekh and Deven Verma," he says.

Raj Singh's reputation as an optical startup machine has spread far and wide. Recently, the Chinese government invited him for a visit. "They have invited me to become an advisor to their minister of information technology and also visit them again and give seminars to young graduates on how to start a company, how to develop a business plan. In return for their hospitality, I gave them free rights to translate Digital Design and Synthesis with Verilog HDL into Chinese," recalls Raj.

Raj Singh's soulfulness is evi­dent from an anecdote regard­ing Tachion Networks, now being eyed for an acquisition by Alcatel for a billion dol­lars. One day the president of Tachion Networks called Raj and said he had run out of money and could not meet his payroll any more. Raj decided to wire him $100,000. "He called me on Thursday, and Friday was his payroll date. I called Raj Parekh to do the same and he also wired him another $100,000. None of us had met this guy before, and it was a blind date. Investing is not just making money, it is also making the entrepre­neur's dream come true," says Raj. Amen.

As for equity in his startups, Raj says: "The more you give it away, more you get out of those who get it. I found it very satisfying when John Chambers of Cisco, who bought Cer­ent, made a statement to his staff that he was very happy to see that stocks distribution in Cerent was very even. That enables the company to hire more talent who help build a large company."

"I would like to use my new-found wealth to benefit the society that I got it from. I have a dream of creating a ven­ture fund out of my personal capital, the returns of which would not come to me, but would rather go to benefit char­ity organisations, Indian social entities, and to improve education in India. My village in India still does not have a high school. And the Hindu temple in Sunnyvale still does not have a clean carpet and a clean restroom. This fund will have part of the returns invested back into the fund, will be known as a green fund, and should hopefully continue to generate sufficient money to at least become a continuous source of money supply to some extent," he adds.

This simple man from Meerut seems to be a total misfit in the Valley, but paradoxically, that is where he is thriving.

Thursday 6 December 2007

Interview: Nuclear myths and half truths

11 myths that make nuclear deal an unclear one

D Murali

Chennai, 5 Dec: Intense debates have been on, about the nuke deal at the political level, generating possibly more heat than light. “Many half-truths and myths are doing their rounds,” frets Shivanand Kanavi, vice-president - Special Projects, Tata Consultancy Services, New Delhi.

A theoretical physicist from IIT Kanpur and Northeastern University, Boston, he has carried out research at IIT Bombay. After a teaching and academic career, Kanavi became an economic consultant and later turned to business journalism, before joining TCS.

Author of books such as ‘Sand to Silicon: The amazing story of digital technology’ (Rupa & Co. 2006) and ‘Research by Design-Innovation and TCS’ (2007), Kanavi is currently writing a book on India’s nuclear programme.

The first myth, according to him, is that nuclear power is expensive and, that India should build coal-based power plants, instead, as we have plenty of reserves.

“You cannot make generalisations about any source of energy,” reasons Kanavi, interacting with Business Line, over the e-mail, and expressing his personal views on the subject. “The economics of power depends on distance of raw material source, fixed costs and operating costs, gestation periods, environmental costs and social cost.”

He goes on to list ten more myths, on things ranging from gestation to safety, raw material to risk management.

Excerpts from the interview.

Isn’t the ‘coal’ option cheaper?

The answer is ‘no’ when coal has to come from more than 1,000 KM away, from the coalfields of Eastern India; coal then becomes expensive compared to other options.

Considering lifecycle issues, strip mining of coal is not environmentally friendly. Indian coal has low sulphur and high ash content; hence one has to deal with huge amounts of fly ash either in the air or in tailing ponds.

Imported coal has low ash, but produces acid rain due to sulphur and nitrogen oxides. Pithead coal-based power plants in Eastern India are a must. One needs a rational energy mix without a one-shoe-fits-all thinking.

Don’t nuclear plants take a long time to build?

This is the second myth, I’d say. Some projects did get inordinately delayed due to the fact the Canadian collaborators abruptly abandoned the projects they were involved in, after Pokharan I (1974). The Indian nuclear industry took some time to learn nuclear manufacturing; and NPC (the Nuclear Power Corporation) took time to master project management.

But now they are building nuclear power plants in a highly competitive 5.5 to 6 years time (global average is about 8 years). Let’s not forget that hydroelectric stations too take a long time to build because of dams and reservoirs.

Talking of hydro, isn’t that the most apt, as energy source?

Myth, again, is that hydro is the best suited for us since its operating cost is next to nothing and it is renewable.

While it is true that there is a lot of potential in the Sahyadris and the Himalayas for hydropower, it is not a panacea. Reservoirs lead to submergence of arable land and forestland and human habitations leading to serious ecological and social problems. In addition, the life of reservoir is limited due to silting.

What about safety in the N-option?

That nuclear power in India has safety issues for workers and waste disposal is myth four. India has a better track record than most countries like the US, Russia and Japan, where serious accidents and leakages have taken place. Remember, our atomic scientists who design and operate the plants live with their families in the same colonies as workers.

You mentioned about the raw material misconception…

Yes. Some people argue that since India has a lot of thorium, why should we go for imported uranium. There is no country that has the technology today for commercially exploiting thorium for power. In fact India is in a leadership position; however, the first thorium reactor is underway, and it will take 10-15 years more to master it.

We also hear critics wonder why India is not buying reactors or uranium from Russia and France who seem to be eager to sell, instead of getting into a conditional deal with the US.

We do hear thus; but it is based on flawed reasoning. Agreed, that France and Russia are eager to engage in nuclear commerce with India. But without the IAEA (International Atomic Energy Agency) safeguards in place, and a lifting of the blockade by the Nuclear Suppliers Group, no country would do business with India. Which is why the Indo-US deal is the key to unlock multilateral blockade.

Some complain about the technology.

More specifically, they ask why India is keen to buy expensive reactors from the US when no new reactor has been built in the US for the last 30 years and their technology and skills are rusty. Wait. The deal (123 Agreement) does not say how many reactors we will buy from the US. In fact if the price and financing are not right, India may not buy any from the US or for that matter from other countries too. As pointed out before, the deal just lifts the embargo for nuclear trade with India.

Would the deal undermine our foreign policy?

A common grouse is that the deal will enslave India to the diktat of the US foreign policy. No, the 123 Agreement is strictly regarding conditions accepted by both the countries to resume nuclear commerce while recognising that India has nuclear weapons and might continue to make them just as the US does.

It also does not pressure India to sign the NPT (Non-Proliferation Treaty). The Hyde Act – an Act passed by the US Congress and not an agreement between India and the US – has sections that hope to bring alignment in the foreign policy of both the countries.

Thus, any strategic or political alignment between India and the US is a separate issue and is not part of the 123 Agreement, which is in the nature of lifting technology embargo.

At the same time since India has big power ambitions it will have to take coordinated actions with other big powers on various international issues. In other words, it will move from being an agitator to a manager. Just as China has done.

How far are valid the fears that India will lose the right to conduct another nuclear test if it signs the deal?

First of all nobody gives anybody the right to conduct a nuclear test. If India still tested in 1974 and 1998 the same were based on its own sovereign decisions and threat perceptions.

However, in both the cases, India was isolated, and almost all countries put various kinds of restrictions on high technology trade with India. It hurt India’s economic and technological development but it was a calculated risk. If India wants to test at some later date, it will once again have to take a calculated risk.

There’s a myth about risk, you said?

That’s right. “Why are we risking so much for a 3-7 per cent of our power production?” demand the sceptics. First, in an energy-starved country every percentage point, counts. Second, 3-7 per cent is the projection based on current investment plans by the Government.

We could also go the French way, who generate close to 80 per cent of their power using nuclear technology; or the Chinese, who have already started an aggressive nuclear power programme.

That makes it ten myths. What’s the last?

That India’s civilian programme has always been a cover for the weapons programme and has not produced many results.

This, an uncharitable and sweeping comment, totally ignores the achievements of our scientists and engineers under extremely hostile international conditions.

India is perhaps the only country that started both nuclear and space programmes for peaceful purposes; achieved considerable expertise; and then started its weapons and missiles programme.

For example, the Atomic Energy Commission was set up in the late forties, soon after Independence, whereas the military programme started much later, in 1970-71.

India has always been held in very high regard in the International Atomic Energy Agency and it has chaired the board as well.

There is every possibility that India will start exporting research and power reactors in the 220-500-700 MW range, fuel bundles and other accessories as well as services to operate and maintain reactors.

For example, the Rajasthan reactor’s entire core was redone at a fraction of what it cost Canada and South Korea. Similarly, India has accumulated tremendous expertise in using nuclear technology for plant breeding and medicine.


Tuesday 4 December 2007

Profile: Desh Deshpande

Business India
, January 24-February 4, 2001

Lighting up

Shivanand Kanavi

“Serial entrepreneurship is not interesting to me", sounds facetious coming from Gururaj 'Desh' Deshpande, if you do not know the context in which he said it. After all, he is one of the most celebrated ser­ial entrepreneurs among Indians in the US. "If serial entre­preneurship means doing the same thing again and again, then it does not interest me. Making some money every time you have an idea, which you build to a certain extent and then sell out, is not my game. Big-time wealth creation is in building a company as a long-term play," he says. "I am not deprecating the value of that kind of serial entre­preneurship, may be one's capabilities end with idea gen­eration and taking it forward to a certain extent, then it is better to sell out," adds he.

Sycamore is not a hot startup any more. It was one or two years ago. Today, it has over 750 employees and nine offices in US, and seven international offices in UK, Ger­many, France, Sweden, South Korea, Japan and Canada. They notched up revenues of over $100 million in the quarter ending 30 October 2000. Though the stock value has fallen from the astronomical valuations 10 months ago, and the market cap has dropped from $55 billion to about $15 billion, it still trades at a P/E multiple of around 450. (Compare that to the P/E of Cisco: 81, Juniper: 275, Nortel: 50, and Lucent: 16.5.)

Vinod Khosla, partner in Kleiner Perkins Caulfield Byers, and another doyen among Indian entrepreneurs, agrees with Desh: "A decade or two later will we (Indians) make a difference to the economy by building a Sun, a Microsoft, an Intel, a Dell or an Oracle? Will we change the technol­ogy scenario? That is the crucial question to me. It looks like with Sycamore, Desh wants to build such a company."

We went to Boston to see just how Desh is building his company and how he has achieved what he has. We reached Boston in the middle of the night after a tiring trans-Atlantic flight and hassles at JFK. However, the lim­ousine driver taking us from Boston's Logan Airport to the Radisson Hotel at Chelmsford, Massachusetts made our day. He seemed very well informed about Sycamore. "It seems to be a really good company. I ferry around lots of people. Many of them come for interviews and they all say they want to work with Desh. He must be a very nice and smart guy to attract people like that. I have not met him but people say he is very simple and accessible. Till the papers in Boston wrote about him, we did not know such a wealthy guy lived among us," he added. Just to test him a bit we asked: "What is Sycamore into?" "Oh, Optical Net­working, where they use lasers and stuff like that," he replied. When we told him we were visiting the company and meeting Desh the next day, he was thrilled. We had a similar experience two more times the next day - at a small electronics store near the hotel and with another cab dri­ver who took us to Desh's house in Andover. To have a rep­utation among your peers, investment bankers, employees, customers is one thing. But to have it in the community around you, despite being low profile, speaks volumes about the person.

In every which way Desh looks and sounds like an unlikely candidate for a high-powered entrepreneur. He is firm in his views, quick and clear thinking but never throws his weight around. Desh comes from a modest fam­ily in Karnataka. His father served in the government's labour department and there's been no history of business in the family. Desh's education took place in really small towns of Karnataka like Sankeshwar, Dandeli and finally he joined the well-known National College in Bangalore.

After his BTech in electrical engineering from IIT Madras in 1973, Desh had a job offer from Telco at Pune which included a princely salary of Rs500 a month. Mean­while he was admitted with a full scholarship to the Uni­versity of New Brunswick. So he dropped the idea of joining Telco and went to New Brunswick. He did his MS there on microwaves and dielectric wave-guides (optic fibres are also dielectric wave guides).

Desh thought he found his true vocation in teaching.

But teaching needed a PhD, so he joined the University of Queens, Canada. After his PhD adviser Dr Peter Brack­ett, had joined Codex, a startup which was not doing well Motorola took it over and Brackett asked Desh to join him there as head of engineering. Desh liked the idea; they were supposed to build modems and networking products for Motorola.

By 1984, Desh pretty much took Codex from zero dol­lars to $100 million in revenues and employee strength rose from 20 to 400 people. This was a very important learning period. Desh participated in marketing, sales as well as engineering. On the personal front, in 1980 Desh married Jayashree Kulkarni, a physicist from IIT Madras. Jayashree had switched over to computer science and was working in Toronto, Canada, after her MS. "We did not know each other at IIT Madras, since I entered IIT Madras after Desh graduated, but our mothers were classmates and the families knew each other in Hubli," says Jayashree.

In 1984, the entrepreneurial itch started. Canada was not the place to launch hi-tech startups, so Desh and Jayashree decided to move to the US. Motorola offered him the choice to move to the Silicon Valley or to Boston. Desh chose Boston and worked for three more years at Codex waiting for his green card. But the pull of entrepre­neurship was too strong. Local area networks (LAN) were coming into vogue and Motorola was not interested in it. One of the possibilities was building high-speed LANS using optical fibre. Thus Desh got together with a friend to develop Fibre Distributed Data Interface. They pooled in $10,000 each and started working. Desh still had his job at Motorola, so he would go to the startup at 4 am in the morning and at 8 am would proceed to attend his duties at Motorola!

Then the Black Monday of September 1987 took place.

The stockmarket crashed by over 23 per cent in one day. Prospects for funding vanished and the $20,000 kitty also dried up. Desh's partner, whose wife was expecting and who was working full-time in the startup, had to quit. That was the end of the first effort.

As soon as he got his green card, Desh gave up his job at Motorola and started Coral Networks. Desh had enough savings to pull on for 18 months with Spartan living. It took a while to get seed funding. Finally they raised $4 mil­lion and hired 20-25 people. At this stage, a dispute arose between the two founders. According to Desh: "It was easy to come up with well-engineered routers that were five times faster than those available and it was difficult but possible to get them to be eight times faster but 10 times faster was almost impossible at that stage." Coral had kept the target of producing 10 times faster routers. Desh realised the market was ready to gobble up five times faster routers right away. So his view was that they should be pro­duced and sold while working on eight times faster routers. But his partner had a different view - he wanted 10 times faster or bust. He also thought it doable and asked for three weeks time. However, three weeks went by and then another two weeks and another four weeks and still they were nowhere near. Desh saw that the two views could not coexist, and walked out. "It gives me no pleasure to say now that I was right, but I was. After 18 months and $12 million more, Coral was still nowhere near the product, and finally it was sold for $15 million," recalls Desh.

However, Desh faced a fresh problem. In order to raise their two kids, Jayashree had given up her job. Now both were jobless. Desh went to India in 1990 for a visit and his parents were scared. But in his own words: "It was very hard to work for anybody else but yourself."

When Desh started Cascade Communications it took time to get seed funding. "In fact, the scariest moment was when Ravi (family name for Desh), came home one day and told the kids not to get hurt while playing, since the health insurance had run out," recalls Jayashree. Soon things started turning around. Desh sums up the Cascade story: "Ed Anderson, a VC I had known from my first attempt in Fibre Distributed Data Interface (FDDI), called me up one day and asked: 'what are you doing nowadays?' I had a lot of credibility due to what I had achieved in Motorola, though I had lost a bit due to the failure of Coral Network. We had lunch and I explained my idea to him. He was impressed and two weeks later he wrote a cheque for $125,000. And that is how we got started at Cascade. In '91 June we got funded and in nine months, by '92 March, we rolled out our first product. We had a good engineering team. Dan Smith joined us in June '92 as CEO. Till then I was the CEO. He had more business experience. Our rev­enues grew from $ 700,000 the first year to $330 million in '97 and the company grew to 1,000 people. We had the IPO in 1994 and from an offer price of $15 the stock went up at one time to $540. We even reached a market cap of $10 billion, which came down later. We had 60-70 per cent of market share and in July 1997 Ascend acquired Cascade for $3.7 billion. Ascend itself was acquired by Lucent later in 1998 for nearly $20 billion and analysts said about $17 billion of that value was contributed by Cascade acquisition!

Desh then spent a few months with his family. He began mentoring other entrepreneurs - 20-30 entrepre­neurs were visiting his home every week in those days ­and even agreed to become chairman of one of their star­tups, Cimaron Communications. This became a huge suc­cess later on. But soon the entrepreneurial itch started again. He thought: 'What if we could create tonnes of band­width on demand, since the New Economy is going to be driven by bandwidth?' In a Christmas party hosted by Matrix Partners, a well-known Boston-based VC fund, Desh met Rick Barry and Eric Swanson from MIT, who came with a deep knowledge of optics. Soon Sycamore Networks was born. The Cascade alumni were full of entrepreneurial energy. Already 18 new startups had come out of former cascade employees. When Desh started Sycamore with Berry and Swanson, several people from the Cascade team came and joined Desh. The rest is history. Within nine months they rolled out their first product and signed up their first customer. The IPO in October 1999 was a resound­ing success - a stock offered at $34 was listed at $210. Today, when dozens of companies including those who thought it all hype, are talking about intelligent optical networking, Sycamore is clearly recognised as the pioneer.

Why the name Sycamore? "Finding the right name is an art. I don't know how to do it. But I know the right one when I see it. Generally the name should have nothing to do with what you are doing at the moment, so that when you want to broaden your business, you don't get tied down. If one succeeds, of course, everybody will say it was a very good choice," says Desh tongue in cheek. "However, one point to remember is that the Sycamore tree, like Red­wood and Sequoia, lives for a long time - more than 500 years." So, let us keep our fingers crossed and wish that this serial entrepreneur par excellence will create something long lasting this time around.

Desh and Jayashree, both alumni of IIT Madras have promised $100 million to their alma mater to fund research over the next 20 years. But Desh is not ignoring his imme­diate environment in Boston either, where he wants to make MIT more responsive to industry, now that he has joined its governing board .