June 25, 2001
/ Jerry Rao has been successful in amalgamating two loss-making
software companies into a single profit-making entity
combine together to make it a plus. This is not just pure mathematical
calculation but it is true sometimes in business with MphasiS-BFL
Limited being such a case in point. Yes, MphasiS-BFL Limited is
one company which converted two loss-making entities into a profit-making
venture in less than a year.
company was formed hardly a year ago by the merger of two firms
- the California-based MphasiS Corporation specialising in web-integration
architecture and the Bangalore-based BFL Software Ltd, which provided
Unix-based client/server solutions, brought together by Barings,
which held 52 per cent of BFL's equity and also a shareholder in
MphasiS. At the time of the merger, both the entities were in the
red. Post-merger, for the financial year ended March 31, 2001 consolidated
revenues were $64.3 million.
(Jerry) Rao was named the Chairman and CEO of the new combined entity
to address the high-growth 'interactive architect' segment. The
combined company will sell software to help other companies bring
legacy customer information systems onto the Internet. By 1999 end,
privately held MphasiS had revenues of $5.6 million but had run
into capacity constraints. "We needed an alliance with someone that
could bring capacity and quality processes," Mr. Rao says. He knew
listed company BFL Software was strong on the retail side.
could take our architecture and high-end development skills and
combine them with their software skills," he says. Now, MphasiS-BFL
helps clients draw up project specifications and then develop prototypes
in India. Adds Mr. Jerry Rao (as he is popularly known in corporate
circles), "We have been able to leverage the combined strengths,
without diluting the expertise that the individual companies bring
and still be in a position to address scalability and speed - two
critical areas for success in providing e-business solutions."
to the transaction, MphasiS became a wholly owned subsidiary of
BFL Software. BFL Software acquired MphasiS Corp, US for a consideration
of about Rs 864 crore. The merger happened when the industry was
witnessing a technology boom. With the company headquartered in
California (USA) with divisions in Europe and Asia, Mr. Jerry Rao
is enjoying the best of both of the worlds. Bangalore-born Mr. Jerry
Rao (48) spends equal amounts of time in India - Mumbai and Bangalore
and the United States.
CV is typical to that of any CEO or a business leader. Armed with
management degrees from University of Chicago and Indian Institute
of Management, Ahmedabad, Mr. Rao is proud of building and developing
consumer businesses of Citibank in India, Middle East, Eastern Europe,
and UK as the country/regional manager.
also proud of designing global MIS System and as steering Citibank
out of financial trouble as leader of one of the task forces. He
was heading the Citibank's Development Division and was the Chairman
and CEO of Transaction Technology Inc., and Head of the Global Electronic
Cards Division until recently. Mr. Jerry has testified before the
US Congress on e-Commerce on the legal framework.
Corporation, an e-business solutions company was started by raising
an initial investment of $4.5 million in October 1998 by Mr. Rao
along with ex-Citibankers with considerable experience in retail
banking, brokerage and cards. Mr. Jerry Rao hired 20 high-ranking
former colleagues to a company with a 'double-barrelled name' and
an admittedly humble-sounding mission of doing the 'plumbing' job
behind the websites. Mr. Rao was head of Transaction Technology
Inc., Citigroup's advanced-development centre in Los Angeles, before
he struck out on his own in June 1998. He and Mr. Jeroen Tas, who
had been chief operating officer of Citi's development organisation
for global electronic banking products, set up MphasiS Corp in Santa
Monica, California in the following October. MphasiS took the acquisition
route for growth. It acquired divisions of various companies and
also set up a subsidiary in Europe. Subsequently, the company did
go in for two rounds of venture capital funding.
MphasiS-BFL is ideally positioned today to serve the industry
and its global partners. It's mission is to build bridges; between
clients and their consumers, between existing systems and new technologies,
between older distribution channels and new generation platforms.
Mr. Rao says MphasiS-BFL's clientile list does not include the
fast fading all-virtual dotcoms but brick and mortar companies that
were extending their businesses across the Internet. The IT industry
is changing so rapidly and unpredictably so. At the time when the
IT industry is hit by the US slowdown, Mr. Rao says the slowdown
has to be seen from a long-term perspective because the industry
has seen a technology boom from 1997 to 2000, especially in 2000.
"The growth rates which would be considered fantastic in some other
industry is considered not so great in IT industry. The last 10
years has been a technology boom of unprecedented dimensions. These
things will settle down after some correction. It is a temporary
phenomenon that every industry undergoes. It is an economic cycle
that happens everywhere. In a market-driven economy we could continue
to see secular growth. It is good to cleanse the system especially
when there is a boom."
The last 10 years of technology boom has thrown up new opportunities
for Indians. But, Mr. Rao says, "India continues to remain a country
of great promise and potential that somehow doesn't get fulfilled.
Our reforms are half-hearted. If China can achieve 10-12 per cent,
we should be able to achieve the same given the enormous human capacity
for which we have to undertake real sector reforms. We don't have
labour market reforms and real estate reforms in place. We do not
have appropriate pricing for infrastructure - water, electricity,
transportation. India does not boast of even a single world-class
highway or an airport. We have not been able to change the law or
create a legal structure for any of the market reforms to enforce
contracts. We have also not been able to charge for public utilities
and attract investment in infrastructure. If a rich country like
US can achieve 2-3 per cent growth (because rich countries cannot
grow more), India could easily achieve a sustainable growth rate
of 10-12 per cent, as our per capital income base is small without
harming environment. Airport corporatisation and airline privatisation
has still not happened that continues to take up a huge amount of
fiscal slack for us. If deficits of the Central and State fiscal
accounts are added up, our deficit would be double digit as a percentage
of the GDP. India is in a decision-making grid lock and a country
of stay orders."
growth he advocates, property rights, labour market reforms and
contractual enforcements, real sector and human capital investment
reforms ahead of even financial sector reforms and address issues
of regional imbalances.
decade of economic reforms have fuelled growth in the Indian IT
industry. "IT is one good thing that has happened. It is not a panacea
and one should leverage IT as an opportunity rather than hold it
as a panacea."
seeks to remain a global, multi-cultural, solutions company and
not a products company with focus on areas - front-end backend messaging
system, due diligence on products, financial, logistics and technology.
keeps Mr. Jerry Rao ticking? Says he, "I never think about it really.
I do not have the time to sit back and think. One event flows out
from another. There are frustrations along the way, but I am enjoying
What does he consider as the secret of his success? Says he, "First of
all, success is a relative term. I don't consider myself all that
successful. I would ascribe it to two things: the right mentors
at the right time; and good fortune or God's grace along the way."