The Firefighter on Call

Calm, collected and credible. Kiran Karnik is the extinguisher of crisis the tech industry turns to

Published: Dec 25, 2009

This happened in late January, 2009. It was one of those hundreds of conference calls that the besieged top team of Satyam Computers was having with customers extremely nervous about the breakout of a mega scandal. In most of the calls, the customers would either be very concerned or irate; sometimes both. It was surprising, then, to see one customer become rather chummy. “Kiran, how are you doing? You remember we met during the Nasscom meet at Mumbai? I am going to be travelling to India soon and so let us catch up. And yes, we’ll stay with Satyam, but we hope the quality of delivery doesn’t come down,” he said.

A.S. Murty, Satyam’s interim CEO during those troubled days, was on that call. “Such was Kiran’s persona as the representative of the IT industry that most customers were ready to believe the assurances that we were giving at that time. They would have not believed anyone else at Satyam at that time,” says Murty, who is now the company’s chief technology officer under the control of the Mahindras.

KNOWN FOR:Grace and a quiet resolve that successfully intervene when nasty things hit the fan
Image: Dinesh Krishnan
KNOWN FOR:Grace and a quiet resolve that successfully intervene when nasty things hit the fan
The race for rescuing the world usually goes to the shrewd or the swift but in this instance, the grace and quiet resolve of Karnik won the day for Satyam. And Karnik is the first to point out that it wasn’t just him alone. “All the other people appointed by the government: Deepak Parekh, Tarun Das, Achuthan, Manoharan and Mainak were equally instrumental. Since the other five had a full-time assignment, I co-ordinated the whole thing,” says Karnik. That said, no one else had the relationship that Karnik had with large global companies like Applied Materials, Bombardier and Nissan. “He has been the face of the Indian IT industry and a very credible name for CXOs of these foreign companies,” says Tarun Das, former director general of the Confederation of Indian Industry (CII) who was also a member of Satyam’s government-appointed board.

After Ramalinga Raju wrote his mea culpa letter, there was little to prevent the company from imploding. Very few companies survive the double whammy of fake accounts and a body-blow to reputation. Enron collapsed after such facts came to light and so did Worldcom. On January 7, when Raju’s letter became public and the share price became a fourth of what it was the previous day, almost everybody believed that Satyam’s days were numbered. People who have been involved in the Satyam rescue assignment admit that no less a person than Prime Minister Manmohan Singh himself realised the grave danger to Indian IT industry’s image and to 40,000-odd people that were working in that company. If such a large number of people were to lose their jobs in the thick of recessionary winter, the human and political costs could be catastrophic. The government reacted very swiftly after being nearly comatose for three days.

Karnik can’t really remember when the rear-guard action started. “I think it was on Sunday morning, January 11th when I received a call from the government,” he says. The caller whom Kiran doesn’t want to name had a simple assignment for Karnik: be a part of the new government-appointed board.
“When do you want me to go there,” said Kiran.

“In the evening. Will that be a problem?” asked the caller.

“But give me some time to set a few things in order in my house and book my tickets,” said Kiran.
By late afternoon, tickets had been arranged and Karnik was on the evening flight.

What he encountered in Hyderabad was not something he had ever tackled. “You can never prepare for such an assignment,” says Karnik speaking with the benefit of hindsight. And he had handled some very tough assignments. Karnik had spent the past seven years heading Nasscom, the IT Industry’s premier lobby organisation. In 2004, he had mounted a very intelligent campaign to negate the anti-outsourcing wave unleashed by the Democratic presidential hopeful John Kerry. Kiran is a very decent, genial and reasonable man. His affable demeanour and rational thinking swung it for Indian IT. It was exactly this combination of qualities that Satyam needed after its fall from grace.

Once the three members of the official crack team — Parekh, Karnik and Achuthan — went in, they realised that Satyam was like a battle field. “You could not be sure of anything,” says Karnik. Since Raju had confessed to cooking the books there was total confusion over how many genuine employees and even customers the company had. And then came one of the most testing moments. “Salaries were due on 15th and we had no money. If we hadn’t made the payments, people would have left us and if that happened customers would have pulled the plug,” says Karnik.


Fortunately, the Deepak Parekh factor worked and Satyam was able to get a loan of Rs. 600 crore to tide over the cash crunch. Once salaries were paid out, the employees became a little more comfortable. But many customers did not want the uncertainty. Coke pulled out. Cigna went away. Telstra said bye. One of the potential bidders for Satyam and a rival later admitted: “We thought “what’s the point of buying this company!” All the customers will desert it en masse.” And they would have. Except that Karnik and the senior management decided to do two things. One, they spoke repeatedly to every single customer and two, they had a daily call for about 100 managers of Satyam to monitor progress and also to solve any dicey problems they were up against.

Over the following month, every customer was encouraged to call and talk to Karnik and the top management. This was critical as any significant drop in revenues would have been the end of the line for the company. “It didn’t matter when the call was—11 p.m., 1 a.m., 3 a.m. or 5 a.m., Kiran was available to be on the call. We just had to tell him,” says Murty. For each of those calls, Karnik got the management to give him a comprehensive snap-shot of the customer indicating the level of business, profitability measures, and resources employed to service the customer. Armed with the knowledge, Karnik would be there trying to answer all their questions.

“Once I interacted with the company staff, I saw some statistics and after first few conversations with Key customers I knew that Satyam’s delivery had actually improved after the crisis. This was really helpful because I could then promise most clients that our quality would not drop,” says Karnik. But not every client was convinced. “There were some companies that said their brand could not afford to be seen with a company that had been hit by a serious fraud. We had no choice; we let them go. But we ensured that the transition was smooth,” says Karnik. This in some ways worked like a money-back guarantee. “Customers thought that if we were assuring hassle-free transition, then it was quite possible that we could live up to our promise of unwavering quality,” says Hari T., chief marketing and people officer, Satyam. It also put an end to senior people walking out of Satyam with key accounts; something that had started happening increasingly in late January and early February.

Much of February and March was spent arresting customer attrition. Every Saturday night, all the other directors would fly into Hyderabad from different parts of the country. “We used to book this private room at ITC Kakatiya and discuss all the issues threadbare. This allowed us to have a very quick board meeting on Sunday morning,” says Karnik. By Sunday evening except Karnik, most directors would have flown back to where they were working. And Karnik would continue with his routine.

Once the revenues stabilised, Karnik faced his next challenge. There were rumours that no company would want to buy Satyam, what with its dodgy accounts and sullied reputation. “It was the day of the auction and all of us were sitting when some local journalists remarked that it was too bad that no buyer would be turning up but the bright side of things was that tea and snacks were good,” says Karnik. The board had the last laugh though.

By April 14, Tech Mahindra had acquired control of Satyam. And Karnik’s job for all practical purposes was over. Anand Mahindra, vice-chairman and managing director, Mahindra & Mahindra, says that he was keen on Karnik staying back but Karnik wanted to move on. “Kiran is an excellent professional and a man of enormous integrity. He knew that once you complete a difficult assignment, you must bookend it,” says Mahindra.

By June second week, Kiran had left. Unfortunately there were no farewell parties. “Actually we wanted to get all the board members together but their schedules did not permit. It is a pending item in Satyam’s to-do list,” says Hari. Karnik, too, has pending matters of his own to tackle. “So much paperwork has piled because I had not been able to tend to it over the last six months. I am busy trying to finish them off,” he says. They say doing the mundane stuff can sometimes be therapeutic. Karnik surely wouldn’t want to live in an “interesting time” too soon.

 

(This story appears in the 08 January, 2010 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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  • Ashwin

    Very well written! Precisely brings out the enormity of the role played by Kiran Karnik in helping Satyam stay afloat in troubled times.

    on Jan 11, 2010
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