Outsourcing: Raju Reddy, Chairman And CEO Of Sierra Atlantic (Part 1)

By guest author Tony Scott

From Intel to Outsourcing

Tony Scott: Before we talk about where you are today, can you tell me a little about how you came to found Sierra Atlantic?

Raju Reddy: Sure. I spent about ten years at Intel in a variety of engineering and marketing management roles before I started Sierra Atlantic.  My background is engineering, and I later moved into marketing. I helped to start marketing programs for the first generation of Pentium processors.

While at Intel, I had managed an outsourcing relationship with Wipro around product development. Intel was one of Wipro’s first Fortune 100 customers. The kind of work Wipro was doing then really led this wave of outsourcing that we see now. At the time Wipro was about a $20 million company. Out of that, probably nineteen and a half million was in the domestic Indian market selling computer software. Off-shoring was really in its infancy.

Before the Pentium came out at Intel, I thought to myself that if Wipro can do this, I can do the same. So, ultimately in 1993 I left Intel and started Sierra Atlantic.  I had helped some of the other Indian companies start up business between the United States and India through my involvement with a nonprofit organization, the Council on International and Public Affairs (CIPA). CIPA promoted business between India and the United States. I don’t know if you have heard of an organization called The Indus Entrepreneurs (TiE)?

Tony: Yes, I know it very well.

Raju: CIPA was very much a precursor to TiE. I was an early charter member for TiE here in Silicon Valley, and one of my board members and mentors, Kanwal Rekhi, is the chairman emeritus for TiE and one of its founders.

Tony: So what was did you think would be your point of differentiation for Sierra Atlantic compared to other outsourcers in India?

Raju: From inception we had a strong emphasis on building intellectual property (IP) that we could use as a differentiator. Throughout our history that’s been a core strategy. Some years that works out in that it pays great dividends, and some years it is more of an investment, just like anything else over a fifteen-year period. But overall, the fact that it continues to be a significant part of our strategy and core element of our approach suggests that it’s worked out very well. I think this relates back to one of your themes of how do companies differentiate.

Tony: How did you go about building Sierra Atlantic – did you have any outside funding?

Raju: From 1993 to 1999 Sierra Atlantic was bootstrapped, and I tell my people there is a benefit to being undercapitalized in the early stages. [Laughs.]  It teaches you some good habits and teaches you to focus sharply on the customers.  If you do that, you know you are really delivering value.

In 1999, we raised venture money. Kanwal – the guy who started TiE – was my mentor and a board member. He would say that you can’t launch a rocket unless you burn enough fuel, and so that’s when we went out for outside funding.  It was a great time to raise venture money. We raised  $17 million, and that’s the last time we raised any capital. We have made three acquisitions since then and built a campus.  We’ve probably invested about $30 million over the past four years just in acquisitions and infrastructure, and we did all this without having to raise any additional capital.

We like to think we have been fairly capital efficient, and we feel that we are also one of the emerging best-in-class services companies. Today we have about 2,000 employees, with about 1,500 in India, about 250 or 270 in China, and the rest in North America, Europe, the Middle East, and Southeast Asia.

This segment is part 1 in the series : Outsourcing: Raju Reddy, Chairman And CEO Of Sierra Atlantic
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