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Archive for June 2008

Feature: Ambani and Tech Reliance

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Recently, I came across a piece on the Time Magazine website, authored by Simon Robinson (http://www.time.com/time/arts/article/0,8599,1817222,00.html), wherein Simon talked about Anil Ambani’s Hollywood dreams. The story talked of how there was a probability of Steven Spielberg and ADAG coming together, to be more precise; “Reliance providing between $500 million and $600 million to Spielberg’s Dreamworks SKG, financing that would allow Dreamworks to split from Viacom Inc’s Paramount Pictures.”

As, I went through the piece; my admiration for the junior Ambani brother went a few notches higher, not as much for making the phriangi Jurassic Park director indebted to us Indians, but more for the mileage that he seems to be deriving even before there was pen put to paper on the deal. Imagine WSJ and Time Magazine discussing the story and carrying them in their publications. The only other Indian businessman, who achieved this feat recently was Ratan Tata; but then he had to build a ‘Nano’ for the same after investing billions of dollars. And this is the very reason, I ‘kind off’ like Ambani, his media-savviness.

Unlike Branson (Vijay Mallya’s role model), Anil Ambani exudes a very no-nonsense business image. Each bit of news that emanates from his PR machinery subtly reminds that he is a “Wharton” MBA. The press handouts will have an image of him sitting in his corporate office, smiling benignly at you. He will hold joint press conferences with the Hoi polloi, be it Steve Ballmer or Bill Clinton. Then, of course, there are marathons that “fitness freak” Ambani runs and the innumerable trophies that he keeps accepting all the time. Some months back, there was immense coverage of the fact how Ambani Jr. had become a trillionnaire and also the 6th richest person in the world (based on the valuation of one of his company’s IPO, that tonked immediately after listing. So that was the end to that story).

There is a world of difference between how the two Ambani brothers carry on with their work. While the elder one (also the more richer) tends to keep away from media even though he owns a rather ‘costly’ IPL team. The only time Mukhesh Ambani was in news recent times was because of the $2 billion house that he is building. Meanwhile, ADAG’s public machinery seems to be working overtime, much like some 24/7 call center, trying to come up with some saucy and juicy bit.

So, there is Ambani Jr. investing millions in Fame Adlabs (a multiplex and film distribution chain in India). Or his Reliance Power is being listed (apparently, the very listing saw the end of the bull run and the return of the bears). Or how he aimed to be as big as TCS and the rest by launching a software firm Tech Reliance. Then, recently there has been these high-profile negotiations with MTN, the largest mobile operator in Africa. And finally, there’s Spielberg. He has even coaxed his good friend, Amitabh Bachchan to turn to blogging (he writes on one of ADAG’s online properties). Through all these stories, the official machinery will maintain a discrete silence. While some “informed sources” will keep the media wheels running with tid-bits and suppositions. Ask some one for a quote, and all you will get is hush-hush. Even the Time Magazine couldn’t coax them into commenting on a story.

Come to think of it, the raison d’etre of Ambani’s wealth are entities that he did not create himself, like Reliance Communications and Reliance Energy, the former was done by big brother and the latter was a PSU. And that is the reason, I like Anil Ambani; he manages to be there on my newspaper every morning somehow the other, talking of some fantastical venture or a success and when neither just plainly accusing his brother for some corporate misdemeanor. Bravo Ambani Jr!

The Time Magazine piece by Simon gives me a good excuse to post a small analysis that I had done at the time rumors were floating around on Tech Reliance. Sadly, I am only a tech journalist, so I need good “tech” reasons to write such features. I thank Ambani Jr. for giving me a reason to write such a piece and Simon for giving me an excuse to post it here. BTW, there seems to be little happening on the Tech Reliance front, the website is still a dead link. Hope the Spielberg is not another Tech Reliance story.
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And now comes; Tech Reliance
The industry is curious about the latest foray by Anil Ambani. But he seems to be keeping the cards close to his chest, at the moment.

The dawn of New Year is often associated with cheer and celebration. It is the time to party, to let loose. But, it is also the time for introspection and inference. Individuals and companies alike make plans and resolutions for the coming year and gear themselves accordingly. Surely even the mighty trillionnaire Anil Dhirubhai Ambani, chairman of Anil Dhirubhai Ambani Group (ADAG), must have made quite a few resolutions for 2008, ranging from garnering a few extra billions to running the full Mumbai marathon. But then resolutions are often a private affair, conceived in seclusion and its success celebrated in public.

Yet, barely had the sherry stopped flowing at the onset of 2008, there was a small bit of news that emanated from unknown quarters. The news concerned Ambani, and more so his proposed venture. After proving his mettle in the telecom and the entertainment sector, it seems that Ambani has resolved to take on the knights of the IT industry. Of the many, or even the few, resolutions made by 48-year-old businessman, Information Technology was one of them, and it was dubbed as ‘Tech Reliance’.

Little wonder, the industry was agog with excitement. There was lot of speculation and supposition about the viability of Tech Reliance. Discrete and unknown “company sources” kept feeding news bits to eager newspersons. There was talk about the how the group would take on the Biggies of Indian IT, or how determined Ambani was to make this venture a roaring success. Through all this, ADAG was mum. The official channels churned out the normal PR spiel, no confirmation was given and no denial made. “The group continuously explores new avenues for growth and we seek to enhance value for our stakeholders,” was the only word that came out.

The battle plans
The news went that Tech Reliance would have six development centers across India by the end of December 2008. Currently, the Group has IT centers catering to corporate needs in Mumbai, Delhi, Kolkata and Hyderabad. According to reports there are over 2000 employees working out of these centers, the numbers would supposedly double by March.

The Reliance – ADAG (R-ADAG, as it is called) happens to be among India’s top three private sector business houses, with a market capitalization of over $ 22 billion, net assets in excess of $ 7 billion, and net worth to the tune of $ 6 billion. Interests of the Group range from communications (Reliance Communications) and financial services (Reliance Capital Ltd), to generation, transmission and distribution of power (Reliance Energy), infrastructure and entertainment. In the last year or so, the group has forayed into numerous industries, for instance, acquiring stake in Adlabs.

It is estimated that Group spends anything between $400-500 million on IT services for all related ventures and the Tech Reliance could start up by serving the needs of the group at the onset, saving costs and also gaining experience. It is likely that Ambani desires to put all
his IT eggs in one basket. Amongst other things, Ambani also owns a BPO company, Reliance Infostreams, providing inbound and outbound customer support to India Mobile, Reliance India Phone subscribers and a few foreign clients. But at the moment, it seems that Infostreams would continue to exist as a separate identity.

Taking on the Titans
Till now the story read smoothly: Tech Reliance for Reliance-ADAG. But, the news leak went further. It would seem that Ambani is not only keen to save money (by doing it himself) but also earn big moolah through his new venture. Tech Reliance, supposedly, would be a challenger to the Indian tech giants like TCS, Wipro, Infosys and Satyam. According to ‘informed sources’ Ambani has kept aside some $2 billion for the tech venture and Tech Reliance would be in the big league in a couple of years by offering various consulting and other IT services to domestic and international clients.

In recent times, telecom services have become a big market opportunity. Quite recently Vodafone outsourced all its IT operations, with the exception of network service platforms, to IBM for five years. Earlier, IBM had won a 10-year, $800 million contract IT infrastructure for Idea Cellular. While in 2004, IBM won a 10-year IT outsourcing deal from Bharti Airtel, the deal was valued at about $750 million and has grown to about $1.2 billion currently. Meanwhile, TCS had won a 9-year infrastructure management contract from BSNL valued at around $140 million. Ambani could be looking at a piece of this burgeoning telecom pie.

The going won’t be easy, even for Ambani. TCS has been around for some 4 decades and has revenues of over $4.3 billion, Wipro Technologies with over $3.47 billion, Infosys with $3.1 billion and Satyam with over $1.4 billion. All these players have spread their operations globally, as well in India. Not to mention that MNCs also have a keen eye on India, with the Big Blue (IBM) clocking close to $1 billion in revenues from India. Breaking the stranglehold is tough, if not impossible.

To be a big player, Tech Reliance would need more than the Group IT revenues; it will need to win projects from Fortune 100 companies. But would these companies rely on Tech Reliance? Is a question that will be answered in the days to come. It is conjectured that Ambani would go the M&A way, pickup a single or a few ripe apples to expand. A joint venture is always handy in such circumstances, for instance the way Mahindra & Mahindra launched Tech Mahindra (earlier Mahindra BT) with British Telecom. Sometime back there were rumors that Reliance Communications (RCOM) was in talks with Accenture Consulting to float a joint venture to manage and operate the Group’s IT infrastructure services and processes. Somehow, nothing materialized. Maybe, Tech Reliance rose from the ashes of this JV itself.

Hot Air?
Nonetheless, media is having a field day, thanks to the innumerable anonymous sources. According to one such source, the company will be based out of centers in Mangalore and Bangalore, initially. Or the fact that Ambani has personally recruited a core team of 15 to overlook the operations and expansion of Tech Reliance. Yet, the official website of the Group does not even have a name of the proposed company. Of the numerous entities mentioned on the website (http://www.relianceadagroup.com/adportal/ADA/aboutus/companies.html) there is no mention of Tech Reliance.

Could it be that Ambani was testing the response to his idea before deciding to launch his venture? Many people (anonymously again) opine that this could be a smart way to drum up recruitment, by selectively leaking news bits. Indeed, on Orkut, a social networking website, many people are asking when, how and where is Tech Reliance recruiting. If indeed, Ambani wishes to ‘double’ his IT workforce by March, he must be making a big splash about it. But, there is a big under construction sign on techreliance.in, reflective on the state of the venture itself.

That is all there is about the venture at the moment. Till the dapper Ambani opens up about the venture, there will be lot of riff-raff about Tech Reliance. Hopefully in the days to come, there would be an end to news shrouded in anonymity and we could witness the birth on another IT company. A probable David that aspires to take on the Goliaths. Good luck, Ambani.
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Written by Shashwat D.C.

June 26, 2008 at 8:42 pm

Posted in Uncategorized