Unshackled, CMC taps Govt market and moves onto global stage

The company set up by the government in 1975, renamed as CMC Limited in 1984, has been under the wings of the Tata Group since 2001. Tapping synergies with the group company Tata Consultancy Services, CMC Limited continues to do a lot of government projects, its sole domain in the past, but is gradually becoming a serious contender in the international market.

CMC’s business mix now has nearly 30 per cent foreign business, more than double of the 14 per cent share of international business in 2002.

This, even as it has entered the big league in the domestic market — TCS Managing Director and CMC chairman S Ramadorai reckons it’s now among the top ten players. Thrown into the business of maintaining and integrating computer systems that were already installed, when multinational IT major IBM left the country in 1978 and the government needed someone to maintain its 800-odd installations, CMC had done some pioneering work since then.

It diversified from pure maintenance to delivering end-to-end IT solutions as well as education by 1984, released the country’s first multi-lingual word processor (Lipi) in 1985, the same year it forayed into biometrics. In 1986, it set up the Indian Railways’ first online passenger reservation system. The online trading system used in the Indian stock markets, BOLT, was also created by CMC in 1995.

And while cross-border buyouts by Indian companies may dominate pink papers today, CMC was probably the first among IT companies to buy out a foreign company — it bought US-based Baton Rouge International with domain expertise in banking, in 1991 to tap the global market. Despite buying out an international IT company and setting up a branch office in London in 2000, CMC’s international business was marginal.

And therein lies the story of its transition since it was taken over by the Tatas. As Ramadorai says, “CMC’s Intellectual property assets were exciting… its expertise in automation of ports, transport and utility systems, government projects and creating systems for complex events like the Asian Games and the Afro games were very useful to TCS. But as a sales and marketing entity, it was reactive rather than pro-active, being used to working on projects assigned by the government rather than going out to seek business.” While the Tatas automated CMC’s manual-oriented systems — a drawback in a data-driven organisation — and inducted best practices from TCS, inducted independent directors to strengthen institutional governance, upgraded developers’ IT competencies, the transformation on the sales and marketing front wasn’t easy at all.

“Even as we hired fresh sales staff and trained existing managers, the transition has taken longer than we anticipated. There was definitely a mindset problem though we thought professionals could be made to see things differently a lot faster,” Ramadorai points out.

Along with re-orienting the employees, the Tatas took CMC out of some of the banal low-margin business it was active in — like procuring hardware for government departments. And with the education space getting commoditised as well, there is a move to reinvent the business by focusing on some specific areas rather than the ABC of IT education.

The market opportunity domestically and globally is huge and CMC has the capabilities, but marketing was the key issue and here, TCS’ international experience helped.

“Two key international deals that CMC could have never conceived or delivered in its PSU days gave the sales team a lot of confidence that ‘We can do it too.’ One of them was Charleston County’s entire IT outsourcing business – the first large international contract for CMC. With the 18-month contract already extended further by five years, our sales team is appreciating that for global deals, we have to respond fast,” says CMC’s Chief Financial Officer J K Gupta.

The government sold its 26.5 per cent residual share in the market in 2004, and CMC’s share price has gone up almost six times since the transfer of control to the Tata group. But Ramadorai doesn’t read too much in stock price alone. Though CMC’s revenue has doubled and profits and networth have more than tripled since its PSU days, Ramadorai says, “It has to accelerate further and has a long way to go internationally.”

However, it has already executed some significant global projects: Malaysia’s Penang port and all the 23 international ports managed by P&O are running on CMC’s systems, for instance. Digitising 228 million household forms for the 2001 Census was no achievement either. Even though the preferential treatment it received for public projects was done away with two years after the divestment, it is executing the 2010 Commonwealth Games system with TCS and several other large government projects.

CMC and TCS’ histories are similar — TCS also began by distributing hardware for Burroughs and integrating systems before scaling up the value chain. “CMC interested us because we saw synergies beyond our identical history, we believed in India as much as them. Today, we are tapping opportunities together as well as independently, while learning from each others’ strengths,” Ramadorai says.

For instance, in the computerization of all Registrar of Company offices undertaken by the Ministry of Corporate Affairs, better known as Project MCA-21 — the front office support and digitization capabilities came from CMC. Apart from lending its marketing leverage to CMC, TCS is helping the company figure out an outsourcing business model, while figuring out how its strengths in embedded systems can be commercially exploited further. However, there is no move to merge CMC with TCS. “We want to keep it independent as it operates in areas where TCS is not,” stresses Ramadorai.

So what can we learn from the CMC experience? “Public Private participation is going to be a fundamental necessity and can take us to new heights. The government embarking on mission mode projects like the MCA-21 with open, transparent procurement systems, an transform our nation and encourage the adoption of IT while delivering key services to our citizens. Some old habits like the Vigilance Commissioners may still be needed, but decision making needs to be speeded up so the country can move forward.”