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Diluting stake in GECIS was like a child growing up and leaving home, feels Scott R. Bayman, President and CEO of GE India. In an exclusive interview with BT, he speaks his mind on a wide range of issues. BT: First of all I would like to congratulate you on the Gecis deal... SB: Thank you ,we felt very good about it. BT: I would like to make a small observation. During the press conference I noticed that you were probably a little emotional... SB: Well I think that, that it's a bit like when your child grows up and leaves home but I think that the difference in this one and some others that I have been involved in is that GE is going to continue to be associated with Gecis. It's going to be a key piece in our continuing to stay globally competitive. One of the things that I said to a group of employees is that it is important to think about it this way--Gecis as a business is not strategic to GE but what Gecis does is very strategic to our strategy of being globally competitive. We do more business with software companies in India than we do with Gecis. We don't own most companies; so I think to affect our globalisation strategy of being the cost competitive in all of our products and services, India plays a real strategic role in that .In some instances we own the assets and in other instances we don't but I think that the key thing to remember is that what Gecis does is very important to us and we are going to have a long term association with them. BT: I want to ask you the same that I asked Pramod yesterday. Earlier Gecis was captive with GE. Now that 60% stake has been diluted, GE still has 40%, and it makes GE individually still the majority stakeholder. The senior management team is absolutely in place. So what has changed really? What will change in the functioning of Gecis? SB: I don't think a lot is going to change. I think 30 days from now people are going to forget... well they're not going to forget this happened, but it's not going to be a big deal anymore. The biggest change is not going to be in how Gecis operates, but the biggest change would be that its going to aggressively go after third-party work and it's not going to be constrained by the fact that GE has to approve an investment to expand its capacity or that a potential customer is not sure whether GE is committed to Gecis long term in there, are we going to sell it? Would we sell it somebody that wouldn't operate it as well? All these unknowns are off the table now, and I think that -well I made a big prediction in a party for employees last night -in the next seven to ten days Pramod's phone and email are going to go off the hook with companies interested in talking to Gecis about doing work with them. BT: In spite of all your other businesses in India, I suppose from a perception point of view GE India was more associated with Gecis than with anything else... SB: I don't necessarily agree with that. In the broad public perception probably and somewhat driven by the controversy over outsourcing in the last 18 to 24 months .I think if you go into the business community, we are very well known for our businesses here. I would say that there is not a hospital in a country that would buy a piece of diagnostic equipment where we wouldn't get a chance to compete for. There is not an airline in the country that would buy an engine without us having a chance to compete. I'm not saying that we would get the business, but the people that are in the business know us very well in India and the things that we do. So I would agree with your statement that from a broad public perspective Gecis has been very visible .We have been growing, we have been hiring. It's been a terrific story. We have talked a lot about it in the press; we've been very proud of what we did. But I think it's a piece of GE here, it's been an important piece. Now it's a relative but its still in the family. BT: Now that Gecis is an independent company, of course you still have a stake, so you are going to give a lot of business... SB: Certainly, absolutely, As you might expect any kind of arrangement like this would include some contractual agreements to keep business here. I wasn't part of those negotiations. I don't know what those agreements are specifically but I do know that we have got agreements that cover guaranteed amount of work for a guaranteed amount of time at a minimum. We certainly will fulfill those and my guess is that we'll probably do more that what we've contracted for. BT: What would this mean for GE's other businesses in India? Now that you don't have to really concentrate on Gecis, particularly since your revenues have been stagnant at around one billion dollars over the last 2-3 years... SB: I use a billion because it's a nice round number--plus or minus by a couple of thousand here and there. Our businesses in India will continue to grow faster than the market. This year we will grow 15-16% over last year. So I think that the impact of Gecis on our other businesses will be minimum. Gecis anyway doesn't do much local work. They aren't supporting the businesses in a significant way. So I don't see that this impacts us at all. We are going to continue to invest for capacity. We think that some of the things that are going on in the market place are starting to have more of an impact on our specific businesses. For example with the electricity act of 2003 we are seeing a lot more interest in potential customers in power. We are increasing our headcount for supporting our energy business. India has been recently designated a region unto itself in our energy business. It used to be part of the middle east .We are adding to our front-end commercial team in terms of our ability to serve customers in our gas materials business. We see that the impact of the automotive industries and other industries moving away from metal to more of plastics, so that is an opportunity for us, We think that our infrastructure businesses have great opportunity here .We have a very sophisticated securities business that unfortunately in today's world is a booming market. As the airports get upgraded we think we can supply security equipment, generation equipment etc. So I think that this whole market in India is booming and we would get opportunities that we earlier didn't even have. BT: Would you say that at this particular point, certain policies which are pushing us more and more towards liberalisation, which would obviously help you and other companies. It would help the public also to get better service and given that Gecis is no longer a prime concern of yours. Do you think it necessarily frees up some of your resources to concentrate on your cold businesses in India? SB: We weren't spending a lot of time on Gecis with our core resources, I did initially; I was helping bring business in, but I would say that that in the last two years I haven't spent even a total of a week on Gecis and the same with my team. Gecis has been pretty self sufficient for two three years. BT: GE would rank as the first truly global company with the globalisation model of sourcing from locations with markets elsewhere, not necessarily from the areas you are sourcing from. There is a lot of emphasis on offshoring of business processes. A lot of internal business processes were managed by Gecis; do you think this move of yours is going to impact your overall globalisation model? SB: No I don't think so. As I said its important to differentiate those activities that you need to do yourself from those which you don't need to necessarily do yourself and whether how that its into your strategic business model. Our strategy is to be a high technology company .We are going to be at the cutting edge in the products and services that we offer our customers. We're going to invest heavily in R&D to develop the products that our customers need and use technology in our financial services and our media businesses to be at the front end to serve our customers. And I think that Gecis is an opportunity for us to continue to use the capabilities in India for high value, high capability, low cost business processes and I am convinced that with the success we have had in software, we don't need to own this. If I look back when we started Gecis in 1997 what was the reason? The need was that we couldn't find enough people in the U.S. to do the backroom work to support our growth. Virtually no unemployment in the U.S in 1997.We wanted to take advantage of the low cost, high quality model that India offered, but contrary to software there weren't any suppliers in BPO back then. We had no choice but to do it ourselves. It's a speculation, but if there had been a Spectramind or an equivalent of Gecis, I'm not sure that Jack Welch would have let us start thing ourselves. I think he would have said that, that model has worked for software so lets try that first on BPO, but we didn't have that option. We didn't start out to create a business; we set out to creat a capability to do business in India .It so happened that we did it so well, we created a business. BT: So overall, in terms of sourcing and local markets, China would obviously rank much higher in terms of manufacturing hierarchy for GE. India is probably more of a component manufacturer than a capital goods... SB: There are a couple of reasons why China ranks higher. China got started earlier than India. China is further along on infrastructure, which fits really well into GE's businesses. China buys 15 to 20 gas turbines at a time. The airlines in China has 600 airplanes with GE engines--India has a 100.China has made a commitment to improving its healthcare delivered to its population, India is not there yet .So each of these businesses for us is much bigger. The other thing China has done with its establishment is that they are very aggressively going after exports with their special export zones which has attracted a lot of GE customers that we are serving in China. For example a lot of advanced materials that we do in china don't end up going into products that are sold in China, they end up into products that is sold around the world by people like Dell, HP, into compact discs. So when we view India and China we just have to accept the reality of where both countries are in there evolution. I am convinced and the company is convinced that India is going to be as important for us as China is. It's just going to occur at a later point in time. I look at what's happening in Asia and I see the potential of intra-Asian trade to just boom to rival the EU .Now whether there will be a comparable EU in Asia you can speculate that forever .But from the economic trading perspective you can get there. The cornerstones for this are China, India, Japan and ASEAN. And if you add in Taiwan, Australia, New Zealand and the SAARC countries you have lots of people. They are pretty sound solid countries .The initiatives that the Indian government has started with the BJP will accelerate with Dr. Singh's government on free trade agreements, open skies start to build the foundations for that. And if you go one step ahead, think about India as the bridge to the former Soviet states in the Middle east and asia. Let your imagination go. Its just a question of when not if but when. BT: At this moment, would you view China as more from a local market perspective or as a sourcing location for your capital goods? SB: I think it is both. It is a big local market for our products and its got some great manufacturing capabilities for components and finished goods that we need. India is a smaller local market, most important intellectual export market for us. There is not a country in the world that can rival or is going to rival India in the field of intellectual capabilities. If we look at the demographics of this country, they are different from just about any other important country in the world. India's population is getting younger; the rest of the world is getting older. India is educating thousands and thousands of bright young people. They're just going to keep coming. India's competitive advantage is going to be its people. BT: Do you see a situation where, for capital goods manufacturing, India's hierarchy in manufacturing will rise? SB: I think it will. In my view the reason that India is lagging behind in manufacturing are a few-one-The model that PM Nehru built was kind of the Soviet model and it didn't work; it didn't work in the Soviet Union, hasn't work here. Only recently when Dr. Singh was Finance minister and initiated liberalization has Indian industry really been unleashed and given some capabilities to people globally .And I think that we are proving that it can be done here--look at what Reliance is doing offshore , the automotives component business that has build up, TISCO is the lowest cost steel producer in the world .There is no reason India can't compete with anybody. The other thing that's holding us back, and I'll include GE in this, is the lack of infrastructure. The lack of power adds to our cost, the lack of roads, condition of the courts adds to our cost and to the time to move goods around the country and to export it to other countries and to get raw materials and components into the country .So as these get addressed and fixed India is going to be as competitive as anyone else in the world, probably more so than most. BT: You are pretty bullish about the prospects of you other businesses in India... SB: Yes, I am. As the country moves forward, so will we .We can compete with anybody in the world. We are well established here, we are insiders, 99.99% of our employees are local nationals, we understand the markets, we have been here a long time and so we are just going to move with the country. BT: Do you think this particular Gecis deal that you made is going to set a sort of a trend in terms of globalisation models? SB: This will make companies stop and think their strategies for BPO work. We tend to be the leaders in these things. When we came and started doing software in a big way and that came to be known, other companies followed. When we did BPO other companies followed. This is going to make people stop and think-hey ,do we need to own the world? It's going to change the equation of people wanting to come here for BPO. There are some other alternatives. There are a number of models; some may say I don't want to own any of them; outsource it all to multiple people; others might say we want one strong supplier, we'll go with him. Others may say that there are certain things that we want to have, so we will have our own operations and we'll outsource some others. Again I'll go back to what I said earlier; some of us who are in the business ourselves here earlier had no other alternative; the early entrants. You look at GE, HSBC, American Express, Dell and others, we had to pretty much do it ourselves. BT: How will the new partners contribute to GECIS? SB: I think the partners, and I'll include GE in this; I don't know Oak Hill well; I have worked with General Atlantic; I know some of the principals there very well; outstanding company. Typically, companies like Oak Hill and GAP aren't into managing; they're into supporting through boards; they're not hands-on. The contribution of the partners, including GE, we're going to help Gecis grow. We're going to use our contacts, companies and the people we know to get Gecis more business. And the second area that we will do is we'll ensure that Gecis has got the resources to grow. Those are the two responsibilities of the partners, and we're all committed to do. BT: Are you happy with the partners? SB: I don't think we could have found better partners. I talked to some of our employees now. They're relieved that it's over; they're relieved with who the partners are. With these kind of partners, the culture, the values of Gecis aren't going to change. How Gecis is run isn't going to change. If an operating company, an IBM, a TCS, an EDS, had bought Gecis, then you'd say how that's going to change the culture and the values and the way Gecis operates. With this situation, there's no question about it. It's going to remain Gecis. BT: Would the partners have any exit plans as of now? SB: None of the partners has any exit plans, and I think it's premature to speculate on who's going to exit and when.
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