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Some companies are so personality driven that the CEOs are more popular than the company. Sify is one such company, and was synonymous with R Ramaraj, the charismatic former CEO of Sify who parted ways with the company a few months back in a major top management overhaul. Ramaraj, who was credited for many firsts like launching India's first private ISP to pioneering the concept of iWays (Sify branded cyber cafes) to listing the company in Nasdaq (first Internet company to do so). Strangely, Ramaraj left Sify at a time when the company started showing profits after years of ailing bottomline. A breather came in AMJ FY '07, with the company posting a net profit of $1.36 mn as against a net loss of $2.14 mn in the corresponding quarter of the previous year. But it seems the turnaround was just a silver lining as one takes a closer look at the scheme of events leading to the management overhaul.

The Old Order Crumbles
When Raju Vegesna of Infinity Capital Ventures bought around 40% stake in Sify from Satyam Computers for $100 mn, in November 2005, analysts expected organizational change. Post the buy out, Raju Vegesna was named as chairman of the Board and in July 2006, became the company's CEO and MD. The top management shakeup has indeed come as a surprise. Vegesna, who started ServerWorks in 1994 with just around four people, was instrumental in making ServerWorks a leading company in the Intel-based PC server chipsets in just seven years. More impressive was Vegesna sold ServerWorks to Broadcom for $1.8 bn.

When Vegesna came on board, his expectations were very high due to his successful entrepreneurial record. Industry watchers see this as the starting point of friction with the existing management team headed by Ramaraj. But when Q1 FY '07 results saw Sify recording net profits created an impression that all is well. In July 2006, Ramaraj and some of his fellow senior colleagues like Rustom Irani, CTO exited the company for better opportunities.

It becomes clear that Vegesna should have done some kind of due diligence of the key people on the existing set up at Sify and the deliverables over a period of time. Another question is that Sify's consistent top line growth was not in sync with its bottom line. Is it lack of business focus or a strategy? This is the bone of contention that many analysts see for the sweeping changes.

The New Order Charges In
Currently, the company is going through a transition. The profitability momentum is maintained and when we look at Q2 FY 2006-07, in which Sify posted a net profit of $1.49 mn as against a net loss of $1.34 mn in the corresponding quarter the previous year. Both Q1 and Q2 of the ongoing fiscal have been good for Sify and indicate its bottom line is on the threshold of better times ahead. Reflecting on the financial performance, Raju Vegesna, MD and CEO of Sify says, "We are beginning to see the effects of the business analysis and structuring conducted during the first two quarters of this year in the form of improved margins and better cost management."

Vegesna intends to usher in profitable growth through a unified strategic approach that is expected to bring in greater synergies across business lines and better-cost management. Commenting on the second quarter results, the company's CFO, Durgesh Mehta says, "The last two quarters have set the stage for profitable growth with better management of bandwidth and other overheads costs. The continued focus on synergies across businesses for better productivity and leveraging scale should also contribute towards this objective."