Back in 1992, when Henry Ross Perot Sr. ran for the American presidency, he was a staunch opponent of offshoring. Ironic for a man who rose from being a box seller at IBM to a billionaire entrepreneur simply because he spotted the IT outsourcing opportunity first. He launched Electronic Data Systems (EDs) in 1962 when his employer, IBM, refused to move from hardware to services. The rest, as they say, is history. Perot sold EDs to General Motors in 1984 for $2.5 billion, and four years later set up Perot Systems Corporation.

Today, Perot Systems has $2.3 billion in revenues and Perot Sr., who is Chairman emeritus (his son Ross Perot Jr. is the Chairman), is singing a very different tune. While Perot has always been for outsourcing, the company is now looking at offshoring with a vengeance. And the man entrusted with the task of turning Perot into another EDs is Peter Altabef, Perot Systems' 48-year-old President & CEO. A lawyer by training, Altabef joined Perot in 1993 and worked in different positions before assuming his current role in September 2004. In India recently to inaugurate a new facility in Coimbatore, Altabef spoke with BT's Venkatesha Babu on how his company plans to make up for lost time in India. Excerpts:

Where do you think Perot Systems stands in the global technology marketplace today compared to legacy players such as IBM and EDS as well as relatively new Indian vendors like TCS, Infosys and Wipro?

There is movement among all these companies. My perception is that everybody is moving towards the centre. The traditional multinational companies are hiring more and more people in what are called the low-cost destinations, whereas Indian companies are ramping up their international presence in other geographies. Perot Systems actually is (in one way) the leader among the multinational group. We have about 30 per cent of our (global) workforce in India and a little more than a third in all low-cost destinations. So, we have been at the forefront (of the movement). One of the things that distinguishes Perot Systems is that we have been a strong growth company. While we have grown our headcount in India, we have also grown our headcount in North America. This is not true (of some of the other multinational players). Since the headcount is also growing in North America as it is in India, there is a sense of collegiality among our teams, which is not true of some of our competitors.

The large Indian players say that they have reinvented the IT services and consulting game to suit the dynamics of a flat world. Would you say that companies such as Perot Systems were late in recognising the potential of the whole offshoring wave and is that the reason why you are now ramping up here furiously?

Let me put this in context. About re-inventing the marketplace. I think what they (read: Indian companies) have done in terms of increasing the volume of some of the goods and services in the marketplace is simply magnificent. It is to be treated as not only advancing our industry but the capabilities of all the customer industries. I don't want to take anything away from them. They have done a superb job. That said, the it outsourcing business was actually founded in 1962 by Ross Perot (when he started EDs). He was originally a salesperson at IBM and when he offered to take the IT outsourcing game to the next level, they turned him down. That is how he started EDs and sold it in mid-80s. He started Perot Systems in 1988. So, who understands this entire it outsourcing business better than Perot Systems because of our history and legacy?

Though Perot itself is a relatively new company, we started doing business in Europe in 1990. We started our operations in India in 1996 and work on it started in late 1994, though it took us some time to get the formula right. Today, we operate in 20-plus countries. So, I wouldn't say that we were late to the game. It is just that we are very focussed. One of the things, for instance, we are right now focussed on is not only service delivery from India to our international customers but on the Indian marketplace itself. I would admit that we are not early, but very focussed on that now. We are excited about the Indian marketplace, though we did have (Indian) clients, we had not focussed our sales and business development teams here, which we are doing now.

As a company with just over $2 billion in revenues, is Perot an attractive takeover target in this fast-consolidating market for either larger global rivals or fast-growing Indian vendors?

We are an attractive company (smiles) because we are in the right marketplaces, with right capabilities. If you look at Perot Systems, we get half of our revenues from the healthcare marketplace. We are the leader in North America in this space. Healthcare as a market is exploding not only in North America, but also globally. The rest of our business (the other 50 per cent) is also in other strong growth areas. If you just take organic growth, I think Perot Systems would have grown the fastest among all the multinationals. In respect to whether we are an acquisition target…we have a family kind of public company with the Perot family holding approximately 30 per cent of the company. So, realistically there is no way of us being acquired unless the Perot family wants to sell and they have never expressed an interest in doing so.

"We are excited about the Indian marketplace and are right now very focussed on it"

Despite being much smaller than competition, Perot Systems continues to be #2 on Fortune's list of most admired IT companies. So what are you personally and the company doing right to be rated so high up?

We did come in second for the second year in a row. Last year was the first time we had reached a size when we are eligible to be voted. In our very first year, we came in at #2. This year we were #2 again, but the gap between us and the #1 has narrowed. So, we are improving all the time. Perot Systems' goal is not to be the largest it company in the world, but to be the best. If you are the best, growth will come automatically. The important thing is to be a trusted partner for your customers. You mentioned about shifting dynamics earlier of the industry. One of them is long-term relationships. If you look at Perot, 85 per cent of our revenues comes from such long-term relationships. The reason why we come up so high on most admired companies is because of our relationships and the trust our customers have in us. By the way, these relationships help us whether the economy is going down or up.

There have been some worries over a potential slowdown in the US. If that happened, what would be the immediate and long-term impact on the technology market in general and Perot Systems in particular?

As I did mention, a majority of our revenues comes from long-term contracts. One of the things that Perot specialises in is improving efficiencies of our customers. So, if there is a slowdown, clients' focus shifts from growing topline by leveraging it to cutting costs using it and improving efficiencies. Since we operate in both ways, whether the economy grows or not, it has little impact on us. We do fine, regardless of the state of the economy. With regard to the state of the American economy, I would rather leave it to economists to interpret.

What I wanted to know was whether IT customers are planning to increase or cut back on their IT spend.

One of the things we are seeing is that clients are more cautious about the kind of contracts they are signing. They are looking for more specialised, best-of-breed solution providers. That is why those mega billion-dollar contracts are getting fewer. You see more action in the $50-500 million range. That is a clear trend. That is good news for us. Given our size, we have always been focussed on that market.

We've seen many large companies (ABN-Amro, General Motors) re-align their contracts, and a few Indian vendors such as Infosys and Wipro have benefited as a result. Do you think this trend of splitting work into the best vendors for each area will continue and do you think Perot Systems could be impacted?

Where the marketplace is going is towards firms that have specialised knowledge, domain expertise and experience in specific industry verticals. Given that we have developed deep domain expertise in areas like healthcare, Perot will obviously (benefit).

"Our goal is not to be the largest, but the best IT firm"

Perot gets bulk of its revenues from just two verticals: healthcare and government. What have you done to broad base revenues and dispel this impression that the company is a two-trick pony?

Quite a lot. I would agree that we are very strong in the areas you have mentioned. We are also active in other segments of the marketplace where we have been leading the marketplace. One of them is engineering outsourcing. This is not in software engineering but product engineering. We have taken our workflow systems and our efficiencies and are helping our customers. For instance, like designing pieces of washing machines and motorcycles. That business for us grew at over 50 per cent last year (though admittedly on a small base). Let me give you another example. We acquired a North American company in 2005 in the life insurance policy administration space. We are now in North America among the top 5 in its space. We have now brought those processes to India, which gives us an onsite and offshore advantage.

There have been some issues over loss of confidential customer data in the US government sector, where you and ACS lost some customer data. Given the large deals you've won in the government sector and your significant presence in the healthcare market, what are you doing to handle these issues?

Let me clarify that in Perot Systems' case, it was a single isolated event. Also the disc containing data was recovered and there was no leakage of data. But aside from that, (security) is always an issue. We have taken a number of steps to increase security. In some cases, there are no copy machines, in others, there are no recorders allowed, and access at terminals is limited.

Of Perot's 22,000 employees, around 7,000 of them are in India. What kind of expansion plans do you have here? Does Perot plan on buying a local firm or buying a global one with large Indian operations (like Capgemini did with Kanbay)?

We look for acquisitions strategically and not for scale, because integration challenges will be difficult. We have an acquisition pipeline, for instance, to further strengthen our already strong presence in the healthcare market. This is true both in the us and abroad. We are actively looking for acquisitions in application and more specifically financial services. You mentioned (EDs and Capgemini). We are in a different position. We already have a third of our workforce in India, which they (clearly did not). We are a fiscally conservative company. So we will look at the right fit, right company, right geography. At present, we feel that valuations are too stretched. In the US, for example, we were looking for two years in the government space. Only after the market cooled, did we make an acquisition.

Despite the growth of India as an offshoring and outsourcing base, a people crunch could potentially slow down the growth of the Indian IT story. Do you think this is a fair concern? Will the shortage of people make you look at other locations such as the Philippines or China as an offshoring base?

Yes, that is a concern, but Perot is doing its bit to improve it. We are working with institutions, universities here. However, unlike for some Indian players, for us it is best shoring and not just offshoring. We recently opened a centre in the

Philippines. Having said that, we continue to believe that the Indian marketplace and talent offer very good opportunities. Just look at our help wanted ads. We are hiring. India continues to be the heart of our global strategy, though it is becoming a part of a larger puzzle.

Away from the offshore presence Perot has in India, there have also been some reports that you are looking at the domestic IT business here, just as IBM and HP do. Why are you examining this sector now and do you have specific targets you could share with us for this segment?

India is very important to us. The head of our global consulting and business applications (Padma Ravichander) sits here. Head of our business process relationship and insurance vertical is Anurag Jain. We have leveraged India and Indian talent to serve our global customers, but as I did mention earlier, we want to tap the potential of the Indian marketplace. We definitely have certain numbers, but those are internal. We are bullish on our growth prospects in the Indian market.