`Risk is also a business opportunity -- Mr Manoj Tirodkar, Executive Vice-Chairman, Global Telesystems

Krishnan Thiagarajan

Global Tele-Systems has over the past decade transformed from being a telecom equipment player to software services to an `end-to-end e-commerce enabler'.

The creation of a unique business model that synergises the elements of telecom, software and e-commerce services has been its biggest move. Mr Manoj Tirodkar, Executive Vice-Chairman, Global Tele-Systems, spoke to Business Line about the evaluation of risks in a dynamic and challenging technological environment.

Excerpts from the interview:

What has been Global Tele-Systems' approach to managing risks in a dynamic environment?

Let us take risk per se. Every business has a certain amount of risk. How we manage it, rather than eliminating it, should be the objective. When we look at newer areas, we do not look at them only in terms of profitability, but risks too. We promoted Global Electronic Commerce Services (which was recently merged with Global Tele-Systems) way back in 1993, when e-commerce was not heard off in this country. When we promoted it, the required capital investment was Rs 350 crore.

We realised we could not risk the company with such a large sum. We invested 13 per cent of our capital, which came to around Rs 30 crore. That was the maximum permissible risk we could take at that time. Instead of investing the amount in a separate company, had we done that business (GECS) within our company, we could have written off that amount in our profit and loss account and possibly we would not have made the bonanza (through the sale of GECS equity) last year.

When we look at risk and how to tackle it, we are looking at how to structure the opportunity, the investment in the opportunity; how do you add value and, most important, what many analysts, fund managers and media persons have failed to recognised about Global is -- have you got low inertia about the business. (To put it differently) are you prepared to divest (the equity stake) when the time is right? Risks bring rewards when the timing is right. So far I have been talking about investment-oriented risks.

Let me now come to business risks. For every business we undertake we first ask ourselves: How will it fit into our overall business profile in terms of industry. Say, payment gateway. When we invested in it, we had no doubt that payment gateway will be a very big business moving forward. Then we asked ourselves: Can we be strong in it? Sometimes, the answer is yes and sometimes, maybe. We are not deterred by the `maybe' risks. Because if the industry paradigm shows it will become big, we may want to do it, not as a business but as an investment. We got into payment gateway and set up the unit at least two years ahead of the banks. The banks are now rushing to get in. We realise it.

Now we are trying to put that as a separate unit with the banks themselves and saying that Rs 12-15 crore (we had invested) to be treated as our capital. Hence, when the banks move up the curve -- many of them are already involved with us -- our investment of Rs 12-15 crore will be worth much more. The Rs 12-15 crore may or may not make profits for years to come. It does not deter us.

Did you employ the same approach to risk in your investment in GECS (Global Electronic Commerce Services) and your present call centre business?

Almost the same. GECS is a Rs 45-crore company today with a Rs 5-crore loss. However, we sold the 13 per cent equity stake we had for Rs 55 crore. But we did not become successful in it overnight. We sat on the GECS investment for 8-9 years. During this period, we went through all the trouble one has to go through in building a business, business model, investing in it and building-up the assets.

Hence, once you look at the risk, it has several elements to it -- engineering, business, political, external factors and regulatory elements. Whenever we looked at these five issues, we also said that all these risks are also an entry barrier. People kept telling us that the RBI will not permit e-commerce, cyberlaws were not in place. But the IT Bill has been passed. But we said it is an opportunity. Every time the barrier gets lowered, the value we have built in will be seen. Competition will come but we will have a first mover advantage.

Whenever I discuss risk with my senior management officials, I talk about and look at ``the velocity around the risks.'' Risk means here is a business. Will it materialise or not? The business moves at a great speed when everybody sees an opportunity. Hence, we need to spot the business opportunity early and work at great speed to seize the opportunity.

Let us take our call centre business. We started our call centre business five years ago as a joint venture with Broadsystem Multimedia, Australia. Broadsystem was a 51:49 JV with Rupert Murdoch. They said DTH (Direct-to Home) requires call centres, we liked the idea and started it. In the first three years we made a loss of Rs 3.50 crore. The partners came in and said, we do not want to continue, because DTH will take time to happen in India.

We bought its share of Rs 2.50 crore for Rs 60 lakh. We decided we did not want to keep it a separate company and brought it under Global's umbrella. We did it because we felt it needed good quality management, needed support from other activities and also scale to succeed. In this case, once we made the decision, we acted with speed.

You must remember, if we go down or make a mistake, the signs will be visible. Businesses do not go down overnight. The warning signals are all there. In 1995, we had a Rs 350-crore debt and that was a big problem. Last year, we took a conscious decision to get out of consumer telecom.

How is your business model dramatically different from other software service players?

Our vision, as we see it, is to be an ``end-to-end e-commerce service provider''. Going forward, we believe that people are going to demand ``solutions under one roof''. The company which can capture customers at the front end and integrate the different technologies are on offer, will be the sought-after player. Our business model is dramatically different.

As an e-commerce player, we are not moving from the software to the ASP (Application Service Provider -- pay as you use) model but from ASP to software. We will allow companies to licence the software they want and then carry them up the value chain by providing e-mail, EDI, e-fax, e-procurement and whatever they want. Therefore, our chances of survival in this business are far higher. We have taken a path that is process- and IPR-driven, where we have had competence in the past and not HR-driven. Instead of spending on salaries and wages on 6,000 people, we are outsourcing our requirements from different places and integrating it as a solution for our customer.

We think what will provide us the edge is the customer relationships which we have built over the years, be it consumer telecom, software or ASP. And we believe that customers, whether it is a Bajaj Auto, Citibank, Tata engineering, Tata Steel will enjoy the spectrum of activities provided by us. The advantage we have is that we are focussed on the domestic markets and are not dependent only on overseas customers. Which means that our margins may not be as high as that of overseas business, but we shall remain transaction focussed. Another advantage is the diversity of our customer base which we have built over the years.