February 18, 2013 | last updated February 18, 2013 8:30 am
2013 Large Business Leader Of The Year

Canekeratne Leads Virtusa Into Key Role Aiding IT Transformations

PHOTO/Matt VOLPINI
Kris Canekeratne, Chairman & CEO, Virtusa Corp., Westborough

VIEW: Business Leaders of the Year 2013 - Kris Canekeratne, Virtusa Corp.

An up-and-coming generation of consumers that Kris Canekeratne calls "digital natives" is changing the types of services large companies feel compelled to offer.

For Virtusa Corp., the Westborough-based company Canekeratne founded 18 years ago and now leads as chairman and CEO, the trend has meant big business.

"We believe, and analysts believe, that we are just about (to embark) on the largest application modernization initiative in history," Canekeratne said in an interview at his company's headquarters, nestled in a wooded business park at the intersection of Route 9 and Interstate 495.

What that means is that an entire generation expects services to be online and mobile. And that has meant big business for Virtusa.

For instance, in the banking industry, Internet and mobile are driving the largest change since the automated teller machine.

Even the smallest banks have felt the pressure to offer online banking services to their customers, lest they lose them to banks that can. And with many of those customers holding smartphones, banks have also had to build apps for mobile banking.

"Just imagine, think back about all the transformation that has taken place for a bank to be able to offer these services to consumers," Canekeratne said.

And though it counts some of the largest banks among its core customers — J.P. Morgan Chase was its largest client in its most recent fiscal year — Virtusa hasn't limited itself to one sector.

The company builds software platforms for large companies in insurance, telecom, health care and media, too. Some of its other customers include British Telecom — which has operations in nearly 200 countries —Truven Health Analytics (formerly Thomson Reuters Healthcare; Aetna Life Insurance Co. and Iron Mountain, the Boston-based information management firm.

As an example of how software platforms matter for telecommunications firms, Canekeratne said it's not uncommon for a telecom to have dozens of billing systems built over time as it expands its territory.

"You sit back and ask yourself: 'Why do you need 10 self-service systems, or 100 billing systems?'" he said. "It's not because someone sat down one day and said 'This is how we're going to architect our service delivery.' It's just what happened."

Impressive Growth

If Virtusa is on the cusp of a boom in customer-facing IT modernization, it'd be hard to know it by looking at its financials.

The company's revenue — which was $277.8 million in fiscal year 2012, has grown substantially over the past eight years. It dipped just 5 percent in the recessionary year of 2010, before rebounding to new highs in 2011 and 2012.

In the past two years, revenue grew 27 percent and 33 percent, respectively. while profits grew 24 percent and 34 percent.

No business is 100 percent recession proof, but large enterprises think long and hard before cutting services to end customers, opting to instead trim internal costs.

"Even in a recessionary period, it's probably one of the few areas where they continue to spend," Canekeratne said. "And that's boded well for us."

Talent Twofold

John Gillis, a co-founder and executive vice president at Virtusa, began working with Canekeratne in the early 1990s at a company in New York City called INSCI, which built systems to store computer data on optical or magnetic discs.

"My initial impression is he was obviously a very, very talented engineer," Gillis said. "But in addition to that, he had a level of business acumen that was uncommon, in my view, from folks that came up on the engineering side of things."

Gillis quickly put Canekeratne on the customer pursuit team, which went out and chased new business.

INSCI eventually moved to Westborough, where Gillis has a home. Not long after, the two began talking about starting their own company.

Many tech firms at the time were focused on preparing corporate computer systems for the much-feared Year 2000 date changeover, but Virtusa founders decided to concentrate on delivering emerging technology through an outsourcing model.

"Instead of doing things the old way, which was really a labor arbitrage play, Kris had this idea coming from the engineering side that looked at platforming — developing software such that it could be reused," he said. "So you had common functionality at a very low level, and then you would have the individual customizations for industry or various clients that would be up on the top level."

Thomas Holler, executive vice president and chief strategy officer, said that when he first met Canekeratne in 2000, he found him inquisitive and energetic.

But Holler admits he was a bit nervous about joining a pure-play software services company. The ones he knew of didn't have scale.

"But Kris convinced me this was a different type of business model and he was right," Holler said.

The vision Canekeratne outlined to Holler during those meetings was that the company wanted to reduce IT costs for clients, help them speed products to market and gives clients' customers a better user experience.

"That vision, while it's still relevant today, is going to be delivered in a different way tomorrow," Holler said. "Because the demographics of our clients' consumers have dramatically changed."

Virtusa is a global company, with operations in India, Sri Lanka, Europe, The Netherlands and Singapore. But many of its publicly traded competitors are much bigger. Companies like Infosys Technologies and Cognizant are in the $6-billion to $7-billion range; Accenture and IBM are far bigger.

Virtusa's focus remains on combining multiple separate applications into a software platform on which companies can plan growth.

"We can't be everything to everyone," Canekeratne said. "But when it comes to launching global platforms as opposed to disparate applications, we are a tough act to beat."

Virtusa has a large and geographically diverse workforce, but Canekeratne said the company works hard to instill several key values in management and workers. The company also faces intense competition from other companies looking for skilled IT workers, he added.

"It's a competitive space, so they can pretty much go anywhere," he said.

His workforce is surprisingly young. More than 85 percent were born in 1985 or later. Managers maintain leaderboards to track employee progress, and they can earn badges for certain accomplishments to help employees feel a part of a "social ecosystem."

And Canekeratne feels strongly about giving credit to employees.

When something goes well, managers are supposed to give credit to their teams, rather than take it for themselves, he said.

And when things go wrong?

"We ask: 'What could I have done differently or better to avert this?" he said. "It's easier said than done, but we've had a head start doing it since we were very small."

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