10 min read.Updated: 30 Nov 2020, 06:09 AM ISTR. Gopalakrishnan
The inside story of the moves and strategic vision that led to the birth of India’s software industry
Kohli’s out-of-the-box thinking made TCS the first Indian software and services company to set up an overseas unit in New York. Over time, it would become a global IT giant
Faqir Chand Kohli has passed on. He seeded one institution, but with that, helped birth an entire industry. The Indian software industry these days vies with the aggregate of the steel, automotive and electricity industries in both size and employment.
Kohli has earned rich tributes from people who have worked closely with him. I have not, so mine is a commentary, partly personal and mostly as a management professional. I started at Hindustan Lever in 1967 in EDP (electronic data processing), the predecessor of what we nowadays call software.
Those days, nobody understood what EDP meant. Managers understood what a comptometer or a Facit machine was, but what did it mean to operate an ICL 1901A or an IBM 1401? In 1971, after four years of EDP work at Hindustan Lever, I came to a crossroad: should I make EDP a career or should I switch to business?
EDP professionals advised me to meet the head of Tata Consultancy Services, one F.C. Kohli. I was warned that he was a tough technocrat, a person who was cut and dry and with the reputation that he could grill you. While I struggled to decide, Hindustan Lever offered me an attractive switch into the business. I was convinced that EDP would take decades to come of age, so I plumped for the marketing offer.
So, I missed meeting Kohli—until 1998, when I joined Tata Sons. By this time, TCS was a flourishing division of Tata Sons with sales of $160 million and with 8,000 employees. I had misjudged the future of this business, among other misjudgements which occurred in the future.
As I got to meet and know Kohli, he took me to the US Club to play golf. One day, he asked me with a wry smile, “Why did you move away from computers? You should have just come and met me." I told him how I was put off by the LIC employees’ strike against computers at Ilaco House, Calcutta, where I appeared for my Hindustan Lever interview.
“Oh, you should not have been put off by that, you see, TCS bought their brand new ICL machine soon after," he quipped.
After his retirement from directorships, he would periodically invite me for a cup of tea at his office at Bombay House. Although he was growing older biologically, his mind was getting younger, bursting with the energy of a 500-MW thermal power station: adult literacy, retail accounting packages, Indian language interface for computer diffusion, improving micro-electronics education, improving agricultural productivity, making farming viable, purifying drinking water, all of these and more.
I was 20 years younger but had not thought about this range of subjects until then. I was happy to get educated. Two years ago, it struck me that Kohli had helped to create a $200-billion industry for India within the time span of my professional career.
I wondered what it takes to transform a good company into a great institution. So, I teamed up with an academic, Dr Tulsi Jayakumar of Bhavan’s SPJIMR, Mumbai. Together we researched what leaders of institutions do differently, especially in the Indian business and social context, and we termed it “Shaper’s mind-set, behaviour and action". The book How TCS built an industry for India was published by Rupa earlier this year.
Our research involved conversations about TCS from its earliest days to the colossus that it became under S. Ramadorai’s leadership, and further ahead. The fathers of the Indian steel, automobile and electricity industries have passed on, but the father of the Indian software industry was around for us to meet and write about how he created the institution.
Kohli’s protest about our excitement was: “What a fuss you people make? I just did what seemed right at that time -- get great people, think of all possible alternatives for success and think long-term about the business. It is that simple." He would reminisce and narrate why he held a tight fist over costs at TCS because “an entity that could not make a profit in a reasonable time frame would have no future."
We learnt numerous lessons about the simplicity behind Kohli’s wisdom. For instance, we asked him about the feeling that TCS is full of Tamils. “Now. don’t waste your time over such a trivial matter," he replied. “I wanted analytical and numerate employees. If Tamils turned out to be so, I recruited them. I was not bothered about anything else."
That became the definition of meritocracy. Here then is the F.C. Kohli story.
In the late 1960s, Kohli’s move to enter into a joint venture (JV) with Burroughs allowed TCS to import and distribute Burroughs computers. Burroughs, too, was driven to the JV because of the strict Foreign Exchange Regulation Act (FERA) restrictions in India, under which the government had imposed regulations on cross-border payments.
Kohli ultimately wished to use such access to manufacture computers in India itself. Burroughs had also agreed to sell them a B1728 ‘small system’ computer that was expected to help TCS facilitate training of its engineers to programme and write software applications, which could be used to sell software services in foreign markets. This, in turn, could help TCS earn the foreign exchange to buy more computers.
However, the stringent import restrictions on the private sector meant that TCS received permission to import the computer only after committing to export twice its import value over the next five years. The entire process of importing the computer, with the requirement of clearances at both ends—from the Indian government as well as the US defence department—was time consuming, taking between nine months and a year.
To access foreign exchange to pay for the import, TCS then had to borrow in rupees and convert the loan into foreign exchange—all of which worked out to be much costlier. TCS finally managed to import the computer only in 1974. The B1728 cost them $340,000. However, due to the exchange rate volatility, TCS ended up paying twice the amount on account of the import duty.
Worse, exemplifying the unpredictable policy changes, just the day after TCS managed to import the Burroughs mainframe computer, the finance budget announced a dramatic reduction in the import duty on computers from 101.25% to 60%.
The export commitment attached to this import meant that TCS, per force, had to look outside to drive its business. It was the beginning of the Indian outsourcing model. TCS perfected the art of carrying out part of the development work in India, and then sending its programmers to the US or other foreign locations to install system software and help clients migrate software running on IBM and other systems on to its own hardware platforms.
TCS thus began to take up outsourcing contracts for Burroughs. The very first contract involved converting a hospital accounting package called the Burroughs Hospital Information System (BHIS), written in Burroughs medium systems COBOL, to Burroughs small systems COBOL.
An unused ICL 1903 machine acquired from a Calcutta (now Kolkata) Life Insurance Corporation (LIC) branch at a fraction of its purchase price was used to write the assembly program. The communist trade unions of LIC had blocked the use of this machine over the threat of loss of jobs, and the machine sat in its covers, unopened.
While it suited TCS to buy this machine off LIC and made eminent economic sense, this was a manifestation of the business challenges that computer manufacturers faced in India. The Indian mindset was against automation and computerization, which were seen as Western tools to substitute human labour with machines.
Thus, it was not surprising that when Tata Sons finally received the licence to manufacture Burroughs equipment in India in 1977, they decided against entering the computer manufacturing business. The risks of such business in India were perceived to be very high. Even IBM exited India in 1977, citing concerns regarding protection of its intellectual property based on dilution of equity.
However, in 1978, Tata Sons formed a formal JV with Burroughs called Tata-Burroughs that sold and maintained Burroughs computers in India. The new company put TCS, then barely 10 years old, into a challenging and awkward situation. It had two choices: either it could choose to be enfolded into the Tata-Burroughs entity, or it could continue to exist independently.
In the latter case, however, it would have to seek and bag non-Burroughs business, and in doing so, would have to compete with Tata-Burroughs. It was a tense period between TCS and Tata Sons. Kohli, however, stuck to his belief that TCS should continue as a separate entity.
Shaping an institution
It was at this point that Kohli really started exhibiting the traits of a Shaper, as enunciated in our Shaper’s MBA grid. Gone was the reluctant CEO of TCS, who had gone and requested JRD to send him back to Tata Electric! The ‘critical thinking’ mindset, so characteristic of Shapers, was clearly visible here—a mindset that considers options and their pros and cons through mental evaluation.
Kohli understood the challenge that he faced by working in a Burroughs-dominated environment; and yet, he knew that TCS would need to start from scratch, if need be, and work almost as a start-up, just to not succumb to the temptation of being merged with Tata-Burroughs. At the same time, a Shaper’s mindset evaluates the short-term and the long-term carefully. While short-term considerations may have dictated TCS to merge with Tata-Burroughs, Kohli knew that was not what long-term interests demanded.
Finally, Minoo Modi, the chief executive of Tata Sons, blinked; he allowed Kohli to have his way, with the understanding, however, that TCS would transfer 25 of its key people to Tata-Burroughs. This was again a tough clause, as most employees would have preferred the relative safety afforded by the Tata name—especially when combined with the formidable multinational, Burroughs. How could Kohli prevent some of his best brains from seeking sanctuary in the known and the comfortable?
Again, we see another crucial Shaper mindset, that of ‘people relations’, coming into play. Shivanand Kanavi, the well-known technology journalist who was then vice-president, TCS, has known Kohli for two decades and describes him as a “man of very few but carefully chosen words". Although known as a man who spoke little and who did not suffer fools gladly, he had the ability to impact people around him enough to heed his clarion call.
Kohli’s out-of-the-box thinking made TCS the first Indian software and services company to obtain permission to set up an overseas unit in New York. Leading this journey into the first world was S. Ramadorai, Kohli’s peerless soldier.
When Ramadorai was sent to New York in 1979, his mandate as the first TCS resident manager was to build a new revenue stream for TCS from IT software and services. Thus began the journey of a group of Indians in search of elusive markets that would allow them to conquer the ‘First World’ and transform a small Indian IT start-up into a global IT giant. India had come full circle!
What was it about Ramadorai that made Kohli root for him and choose him even when the former had no sales background? Kohli had built his opinion of Ramadorai through his multiple interactions with him. He felt there was no one else whom he could trust more—a faith that re-emerged when he had to anoint his successor, almost 17 years later.
TCS, under Kohli, had ridden against all obstacles to make its entry into the First World. It had no choice but to be a ‘global’ company when it was time for a change of guard. The formidable Kohli anointed his successor CEO, the unassuming Ramadorai (or Ram as he was popularly known), in 1996.
Like everyone else, Kohli had to pass on. To quote a Greek tribute at the time of Pericles: “What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others, for famous men have the whole earth as their memorial."
The author is former director, Tata Sons, and former vice-chairman, Hindustan Unilever