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Mid Tier Tech Companies Adjust to the New Paradigm

From cash flow challenges, managing employees, to customer engagement and new technologies, 4 CEOs talk threadbare on the path ahead.

No amount of spin doctoring or PR machinations can hide the fact that COVID19 and the subsequent lockdowns have had a crippling effect on the Indian economy. While almost all sectors have been affected by varying magnitude, the mid-sized IT companies comprising of SIs and ISVs have managed to somehow hold on. Four CEOs of such companies, incidentally from Corona impacted hotspots, join heads to discuss the challenges and more importantly the critical areas that this sector should focus on going forward at least for the next few quarters.

Shantanu Som, CEO, Somnetics (Kolkata), Pranav Pandya, Co-Founder & Chairman, Dev Information Technology (Ahmedabad), Sunny Sharma, CEO & CTO, Foetron (Gurgaon) and Neel Shah, Chairman & MD, Insight Business Machines (Mumbai) all agree that notwithstanding partial or gradual lifting of restrictions, the challenges will remain and this phase will still be there for quite a long time. “The right way to look into this long term perspective is to hope for the best and plan for the worst. And the worst thing that you should plan for is about an year’s time. The planning should be all about that you will not be able to get back to the normal days that you had before 21st of March,” retorts Sharma.

Pandya concurs with Sharma. “We just cannot wish this away. With the varieties of the hot spots cropping up, the relaxation will be partial and lockdown also will be in a partial format. But no specific date or a time period can be placed beyond that for complete normalcy to resume.” Adds Shah, “COVID19 is going to last for days or months or it could be a year as well. The impact is going to be very high. The only thing which is going to help us survive and sustain is our attitude. That attitude only will give you that energy to move your business forward.”

It’s All About Employees—WFH, EQ and Salaries

The essence of success of any organization depends on its workforce and therefore Som strongly advocates focusing on the Emotional Quotient (EQ) of employees. “We all know that COVID19 situation almost came as a shock. We did not get any long term mental preparation that this is going to come and this is going to happen. What we now actually try to do is basically make an individual feel that he is not alone in this,” asserts Som.

Team meetings over Zoom or Skype is actually now a mandate in the evening at Somnetics. At the end of the day, that gives the employees a kind of satisfaction of being together and working together. They discuss a lot of things that are beyond business and this makes them feel they are not alone in this crisis but a part of the team actually. More importantly, Somnetics declared monetary incentives so that the employees get some kind of encouragement. These incentives are actually for good work depending on the feedbacks from the customers. Somnetics is also regularly sharing with its employees the best practices actually happening in other organizations. Best practice scenarios from NASSCOM and CII are also being circulated over Whatsapp groups so that the employees feel encouraged  about that.

With a predominantly WFH model now emerging even as the Unlock phase continues, the onus should be the organizations to make employees comfortable for WFH. In case there is any new recruit now, he/she should be asked to actually work from home for at least two to four days in a month so that he gets the feel and the practice of doing it. “We have got a couple of junior employees who never worked from home earlier but their seniors are always guiding them to do this and that now. In some cases, if the customers are getting annoyed and the junior employees are not being able to properly collaborate, the seniors are getting into the scene and holding their hands. This hand holding is very important in the current situation,” opines Som. “If the lock down continues we will definitely mandate people to work from home,” he adds.

In this scenario, home improvement and home auditing is very important. Organizations should actually audit the working environments of their employees at their homes. This includes even the quality of the chair, placement of the desktop, quality of Internet connection and everything. When the employees are working from home, there should be some minimum quality for that place. If any employee is not in a position to do it, the organization should actually offer him/her capex to do the necessary improvements.

Notwithstanding all these measures the organizations must ensure timely salaries to keep up the morales of their employees. Shah suggests that organizations could look at disbursing salaries in either of three manners. One could be performance based salary, the second could be deferment of salary and the third one could be on time sheet-based. All three are currently in the discussion phase at Insight Business Machines. “When we talk about time sheet-based salary, it will take you to a situation where you would be able to pay on an early basis to your employees. This will enable you to get part timers into your industry or into your organization having a performance majeure out there. That is one way of looking how the salaries are going to happen in the coming days, at least over the six months,” informs Shah. Time sheet model though needs to be adopted really fast. That is what European countries and the Western countries are doing wherein they are paying early basis salary or on a weekly basis.

The second point is going to be salary disbursement on a deferment basis. You create a slab within your organization. For any hypothetical purpose, say Rs 40,000 a month as one layer, Rs 1.5 lakhs as another layer or beyond that as the layer number three. Then you do a deferment of salary like up to some level there is not going to be any partial deferment, but maybe for 75k plus, you are going to release 70% now, and 30% later on and so on. The third model is basically going to be performance based wherein whichever employee you feel is a NPA, you ask them to move out of the organization and balance again. You relook at the kind of cash flow you do have and have a salary deduction and give it to the employees. The need is to remember that impact after COVID19 will be even longer than during COVID19.

Time for Processes–Digital Transformation, Change Management, BCP

Will COVID19 accelerate this process of digital transformation for these companies? Sharma feels there are two parts to it. One part is the digital transformation that has happened before this prior to COVID19 and what will happen from now on. The previous has been slow, especially in the mid-tier companies. Beside audio-video communication and moving certain workloads to cloud, there has not been a lot of transformation that these organizations have done in-house. They do have the talent to go through the transformation, but they do not have the mindset to do it.

Sharma’s advice to mid-tier companies is that they have to look at the triangle of people, process and technology. Buying technology is the easiest part, but what the organizations have to do now is  to re-skill and upskill their employees and set up processes in ways that can work and enable people to work. Many organizations still think that a lot of transformation might not happen, a lot of things might not change after all. They are just worried but they are not taking actions.

“My advice to them is that they have to start planning. They need not just look at the COVID19 situation, but there are some other business continuity planning that they must make because these types of situations can come back in the future,” asserts Sharma. Unlocking or not, there can be rules and regulations for everyone to operate. The planning has to happen now. “ Unfortunately I do not still see mid-tier companies in the planning and execution mode but they are still in the thinking mode, which is very dangerous,” laments Sharma.

On the contrary when these organizations are going through all these challenges, what they are looking at is only shedding weight possibly removing the senior people Sharma advises not to look at removing the senior people especially because these are the people who can only lead the digital transformation within their organizations. They should rather look at letting them go for certain courses online, and thereby re-skill them, and upskill them. Otherwise these organizations will be in a big mess if they let their important people go at this point of time.

As a result, there will be leaders and laggards, and you will continue to see this in the post COVID world. There will be companies who will transform themselves, change their business models, move fast and then there will be laggards who will not move fast and they will possibly see the downturn in revenue and outcomes over a period of next five years. Time would pass and as the time goes in, there will be platforms set for people who have transformed themselves to scale up and the others will not be able to do that, predicts Sharma.

The importance of BCP too has accentuated in the current scenario. One online survey about Indian SMEs actually showed that 80% of the SMEs had no Business Continuity Plan (BCP) and 50% of them never heard of BCP. Som therefore suggests that there should be a business continuity plan whether you call it BCP or any other name as otherwise there will be a big problem with your revenue because if you do not serve customers, you cannot sell to them. And if you do not serve your customers, then from where would the revenues going to come.

Somnetics has been completely aware that there is a requirement for BCP and took it very seriously. “We have to have some kind of pre preparation for that. Until and unless you do not have any preparation for BCP, you cannot implement BCP overnight. We understood that there can a lockdown, so we started our planning. The execution was complete almost 10 days back, on 19th March, four days ahead of when Government announced the lock down. That shows our preparedness regarding the BCP,” informs Som.

There are four important components of BCP. First is basically the awareness and re-creation of teams. A team should be there and that should be completely aware of their responsibilities, laid out plans and written plans and SOPs for BCP. The gap analysis should be there because when you actually want to implement that BCP overnight, it is not going to take place like that. There will be gapsand  there will be glitches. You need to completely assess that it will be glitch free while we are going to implement it. So there should be BCP audits and Somnetics used to have BCP audits every two months for the last four years.

After the implementation of ISO 27000 1& ISO 20000, this has become a kind of a practice for Somnetics. This preparedness is very important because lot of people were running helter-skelter buying laptops, desktops, RAM, UPS, on the last day when the government announced the lock down. That actually did not happen in Somnetics case, because it has been completely prepared for that. And last but not least the information security is important. “Since you are working with very high end clients, Fortune 500 companies, the governments abroad, o the information security team is important. That is why the site audit of homes is important. Our teams used to actually do site audit of homes, even much before the pandemic actually happened,” he adds.

Customer Engagement—Complete Shift in Dynamics

There are multi-fold impact as per as cash flow is concerned for mid-tier companies. Inward cash flow has completely dried off. There is no concrete forecasting which is happening as of now. Outward flow is fixed like electricity bills, salaries.  Then there is vendor payment. “Now when we talk about a payment going out from our side, there are always going to be PDCs (Post dated cheques) which are attached and which we have already handed over to our distributors or our OEMs. Having said that, there is uncertainty about your customer who is going to actually pay you. Therefore your outflow, which is fixed because you already handed over the PDCs to your OEMs or vendors and distributors will come under challenge,” explains Shah. Although currently distributors are facilitating extended payments, but still the major impact is going to be there because of this imbalance of your inflow v/s outflow.

With work from home getting established as the new normal, this undoubtedly changes the way we have drawn contracts till date. All the tech and non-tech requisites for such work model will become part of the contract and such requisites also need to be drawn out in a very elaborate way. The idea is to ultimately get the customer develop faith on us by encompassing all these aspects, looking at the new normal. Two sets of SLAs might come into existence eventually one in the normal operations scenario, which we were having before COVID and one involving WFH environment.

The scenario including partially WFH and partially normal operations will exist. So the SLAs will have two parts to it, one addressing to normal operation scenario and the other to WFH. “We are all  aware that this pandemic is not going to go just like that,” explains Pandya. The other specific SLA which will be drawn out around such pandemic situation will be the force majuere clause point of view which has acquired heroic status in the mindset of the legal fraternity. “As per the case might be, while we are all in the IT service provider category, the clients that we are trying to handle here have certain dynamics where a balancing needs to be done as much as a force major clause is concerned,” he advises.

All Before COVID19 strategy will have a dramatic and drastic change. Now we are coming into quarterly strategies and looking at how COVID19 is moving towards DC19 phase. Every time the strategy is going to be realigned with your business and your customer expectations. Shah suggests mid-tier companies need to adopt a 5E strategy. 5E for engage, explore, educate, encourage and evolve. What we need to adapt first is engage. Engage with your employee because they are your asset. Also engage with your customer. This is the first phase of engagement. The second thing is, once you start engaging, you will understand that there are some new areas, and new pain points your customers are going through and that will help you to explore, new business, new opportunities and new ways of doing business. So explore is the second E out of these 5Es that need to be in your strategy.

The third is educate once after you explore. Go and talk to your customer as far as collaboration tool is concerned, which is virtual meeting, video conferencing and there are multiple things that you are going to find. When you explore, you come to know about this and you start educating your people, your employees. There is going to be continuous skill monitoring and upliftment process that educate your people, and educate yourself to move to the next phase of your business area.The fourth E is encourage your people, your employees with some kind of reward and recognition. Let them earn when they do some kind of certification and keep on continuously upscaling their skill level. This is going to be a fourth E part of our strategy.

And the last E is evolve. Once you follow all these 4 Es, what will complete you 5 E is going to be the evolving of your organization What we were doing before COVID19, we used to sell and then service our customer and then after three years, we were going there for maintenance contracts and providing them services again. During COVID19, this is not going to help. Serve your customer, and though you may not be paid for that service initially, and then sell afterwards . So, serve and then sell is going to be a part of our new strategy. So in a way, this translates into service and cater today to your customers and sell later. There is going to be the next phase of digital transformation.

Influence of New Technologies to Change the Business Model

Pandya draws analogy with Alvin Toffler on this context, particularly Future Shock. Similarly in future, cloud and remote services might come in. In fact in this pandemic many of us really feel that jobs today require very few people who need to be physically present at office. “I know there are certain aspects because of which the office does not lose its sheen but overall we all realize that this might be the situation. And this is exactly what Alvin Tofler predicted. Tofffler in 1970, actually talked of the electronic home, the electronic cottages where people need not go out and work with the help of telecomputing. That was the word he used, which would be calling for the Internet, Internet power, cloud and remote services. These are all becoming hands down truth today,” feels Pandya.

Adoption of cloud and remote services is the model during this time of pandemic to a large extent and at the same time we will see more and more adoption in future because the business models are going to change. Pandya firmly believes that adoption of cloud and remote services along with digital transformation is here to stay. His opinion in terms of telecommuting or the WFH policies may be 50- 50 from today. But this pandemic is forcing us to see it as an established new normal while we go ahead.

Sharma asserts there are two parts to this entire change that we will see from application development and product side.  While organizations  have invested on products, there will be now more focus within their teams to adopt it better.  The second part is a lot of people will have something called RPA or Robotic Process Automation. A lot of these automation things with come into play that will be zero touch. But what will happen is you have to set the base right. At this point of time, the mid-tier companies do not have the right platform to build lot of such automation things in place.

First and foremost they will start with moving their ERP or finance system on cloud. They will focus on work from home environment with the project tracking and task management tools to improve the productivity and even track the outcome of their employees in the organization. As this would happen, then people would look at setting up security right which is beyond the network that they have. This is about mobile application management or device management coming into play.

The audio communication has seen a big jump in any case. Once they start getting this platform right, the automation would start from e-mail alerts to business analytics and even new ways of implementing the plan. Imagine, the organization releases certain compliance guidelines to manage that office work in a COVID environment. How do you even audit and adhere to those compliances? How do you even track it? For those compliances, there has to be agile development that has to happen and the platform has to be set. So it is more of adoption to setting up the base platform right to build something new is where the focus of organizations would be.

Sharma cites an example. “ In Foetron Academy that we run, we used to get about 100,000 or 200,000 people a month. Now in the last 40-45 days we have got two million people consuming our content on Foetron academy. So, imagine the rate of adoption got higher because people are now trying to learn these things that they did not know before and they did not value that much before. Now the focus is from employee side as well as the organization side on all fronts” he concludes.

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