IndiaTechOnline Special: The people and the companies behind the Polaris acquisition by Virtusa
By Anand Parthasarathy
Bangalore, November 6, 2015: The sale of majority stock of Polaris Consulting & Services Ltd to the US-based IT services company, Virtusa, marks the end of an era for the Chennai- headquartered global financial services specialist. The transfer of control is mostly driven by divestments by Polaris co-founder Arun Jain and a few other promoters. That may soon signal the end of Polaris as we have known it since 1993. But the company's DNA lives on -- in the entity that was hived off the parent in December 2014: Intellect Design Arena, a separate company, now specializing in digital technologies for Banking & Insurance, rather than pure-play services. Jain continues to mentor and head Intellect, though he gave up the day to day responsibilities of a CEO.
The story of Arun Jain and Polaris is central to the making of India's reputation as a destination for world-class IT innovation and services. Jain's transition from student to employee to entrepreneur was telescoped into a few months in 1983. Fresh out of Delhi College of Engineering,with a BE (EE), he took up his first job in Pune with TELCO, the automobile arm of the Tatas but left very soon for Delhi to join two of his college seniors and start a company, International Information Systems. In 1986, they got a contract from Citibank to provide support to their consumer banking division to manage vehicle loans, loans against financial assets, ATM management and other banking services that at the time were unheard of in India. Jain and his partners set up a separate company, Nucleus Software to run this business, competing against the likes of TCS to bag this contract Nucleus Software set up the back-end system for the first ATM in India in December 1987 .
In 1990, Jain came to Chennai to help set up India's first credit card system for Citibank (which had its back office in the Tamil Nadu capital ). Seizing the opportunity provided by the Citibank contract, Jain built up Polaris to become a global powerhouse of banking and financial innovation and deftly moved beyond services to solutions specialising in technology solutions for financial services. In 1993, he founded Polaris Software Lab with 120 people in an office near the historic Thousand Lights Mosque, just off Mount Road ( today, Anna Salai) in Chennai and it still remains the company's global headquarters. Polaris acquired Citigroup's software business in India, the largest transaction of 2002 in the country.
"We are proud to be known as an Indian product company creating great world-class products", Jain told me recently, when I interviewed him for a book on India's IT Icons, that Prof S. Sadagopan, Founder-Director, IIIT Bangalore, and I are writing, due for publication in a few months time, "At Polaris, we have invested heavily in intellectual property and morphed over the years into an entity that is today more innovation than services."
Another IT Icon
Now he has handed over the baton to another IT icon -- with roots in India's neighbour, Sri Lanka. If Jain is an Indian IT Icon, Krishnan ( "Kris") Canekeratne is a Lankan one, perhaps the best known head of a global infotech company from the island-state.
A computer science graduate from Syracuse University (US), he co-founded Virtusa and headquartered it in Massachusetts, US, just 3 years after Polaris was born.
"The founders were my wife and I, close friends of ours from Westborough John and Sandy Gillis, and my parents", he said in a 2001 interview in WB Journal, " ... The experiment that we started back in 1996, which eventually became Virtusa, was to see if we could innovate using a global team. We wanted to see if we could actually build, create, innovate and bring things to market faster by using a global team where team members were in an office park here in Massachusetts and an office park in Asia." They succeeded .
Though technically an American entity, with a global presence in nearly a dozen countries, Virtusa has most of its 5000-strong team in India and a team in Colombo, Sri Lanka, headed by Madu Ratnayake, a leading voice of the burgeoning Sri Lankan IT industry. The company straddles India with offices in Hyderabad ,Bangalore, Mumbai, Pune and Chennai.
Striking parallels
There are other striking parallels in the Polaris- Virtusa stories. If Polaris helped one US-based bank, Citibank, to launch credit cards in India, Virtusa was similarly helpful to JPMorgan Chase... by creating a mobile-banking app that changes how people can do certain mundane tasks like depositing a check. Instead of going to a bank branch to deposit a check, they can take pictures of the front and the back of the check with a smartphone or iPad and use the Chase mobile app to deposit it. The app was a huge success, and other retail banks have since developed versions of that service, says Hansa Iyengar, an analyst at Forrester Research. (Reported in Forbes )
Today's Times of India quotes Arun Jain as suggesting what he will be doing with some of the cash that his personal sale will generate. He intends to create a Rs 1 billion corpus to fund two trusts in education and health. That would be entirely in character of the Jain I have known for 17 years. Why 17 years? In 1997, Jain put his personal money into a corpus that today funds the annual Rs 100,000 Polestar awards, arguably the best-known award for IT and business journalism in India. This is by no means the only instance of Jain putting his money where others put their mouth, but you can see why for an IT journalist this has more meaning!
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DETAILS OF THE DEAL:
Polaris Consulting and Services Ltd. has entered into a definitive Share Purchase
greement (SPA) with Virtusa Corporation, whereby a subsidiary of Virtusa will acquire
approximately 53% of the paid up share capital of Polaris from certain promoter
entities led by Arun Jain and certain other shareholders, including OrbiTech Private
Ltd. In addition, Virtusa will make an offer to the public shareholders of Polaris to |
purchase up to an additional 26% of the outstanding shares of Polaris. The worth
about $ 180 million is expected to close during the last fiscal of 2015-16.
Upon closing of this transaction, Citigroup Technology, has agreed to designate |
Virtusa and Polaris as a preferred vendor for Global Technology Resource Strategy for
the provision of IT services to Citi on an enterprise-wide basis. The parties agreed to
amend Polaris’ master services agreement with Citi such that Virtusa Corporation would
|also be deemed a contracting party.
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