India: Sapient's "Best Investment"
Remember Sapient? At the start of the decade, the Cambridge (Mass.)-based e-consultant and information technology service provider had gone from dot-com hero to zero and looked likely to join other Web 1.0 flameouts such as Razorfish. Well, Sapient came close but managed to reinvent itself. It shifted a big chunk of its operations to India while refashioning itself as an offshore consulting firm as well as a Web support and maintenance specialist.
From a loss of $189.8 million in 2001, Sapient (SAPE) managed $26 million in net profits last year on $328 million in revenues. That's a performance that led IT research firm Forrester (FORR) to dub Sapient "The Comeback Kid" in a report last year. Back in 2002, Sapient Chairman Jerry Greenberg and co-Chairman Stuart Moore shifted the majority of the firm's operations to New Delhi and Bangalore. And the move paid off big time.
The company cut 30% of its 1,500 employees in the U.S. and dispatched 50 executives to New Delhi to set up a new operation. It was a risky and expensive repositioning. Yet the millions spent on the move, "was the best investment we ever made," says Soumya Banerjee, chief executive of Sapient in India.
BIZ MODEL OVERHAUL.
Sapient didn't just send the top brass from headquarters but a variety of managers who cut across various business units, including project managers and associates. These execs then hired locally, even recent college graduates. So when they started new projects, "we seeded them in India," explains Banerjee.
Those original 50 U.S. execs have since left and the organization's structure has changed dramatically with more local talent. About 54% of Sapient's total employees are now in India, though the company also has operations in the U.S., Canada, Europe, and Britain. Of the top dozen company execs, most are in the U.S., while two are in Europe, and one is in India. "We are globalization, truly," Banerjee says.
Sapient has also changed its business model dramatically. It has pulled back from Internet consulting and systems integration and increased its focus on less glamorous things like Net support and maintenance work—an area where Indian companies excel, of course. That now accounts for about 25% to 30% of Sapient's total global business, and Sapient no longer turns its nose up at it.
But the company is moving ahead, too, building higher-end Web-based applications for its clients, mostly financial companies and power operators. The idea is to help them use the Internet efficiently to get better returns on their investments. So far the strategy seems to be working and offers a lesson to other IT service firms about the importance of having a major presence in India to serve their global clients.
"Smart, edgy foreign players in the Sapient mold will similarly need to fundamentally redefine their businesses in order to survive and thrive in this new environment," says Sunil Mehta, vice-president of software industry association Nasscom.
For Dutch power company Essant, Sapient reengineered the processes that delivered real-time energy-trading information to company traders and automated them, helping the company increase the return on its investment in the system very quickly. And it put all of MIT's course work online via a Web-based publishing system, giving free, searchable access of the materials to anyone anywhere in the world.
Sapient doesn't do work for any Indian companies yet but hopes to snare some deals given that Indian companies are becoming more Net-savvy. These days, Sapient sometimes bumps into big boys such as Accenture (ACN) and IBM (IBM). Next focus: getting online advertising and marketing business and helping clients "analyze how much their spending on the Net is getting them in real dollar terms," says Banerjee.
Sapient's U.S. employees sell the space on the Net, and they leverage their India employees to do the creative tech work, such as designing the pages users see and tracking user behavior. It's what Sapient feels is the perfect hybrid model—50% India, 50% USA. Says Banerjee: "If we didn't have India, we'd have been finished."