Story Highlights

• There was internal turmoil in Mu Sigma. At the core of all troubles seemed to be the divorce between Dhiraj and Ambiga
• There was a rift in the senior leadership and several top executives had left the company. Revenue growth had started slowing
• Mu Sigma’s early backers seem to have faith in the company and in Dhiraj’s ability to bring it back from the brink of a crisis

In the last week of September, tech journalists in Bengaluru got a call inviting them for a press conference by data analytics pioneer Mu Sigma. The company, once a darling of the press for its stellar growth, was in the news over some internal turmoil and the invite had the reporters curious.

On October 4, the day of the press conference, about 20 journalists were herded to the seventh floor of the analytics company’s office in Whitefield, an eastern suburb of Bengaluru. A quick lunch was followed by a guided tour of the office. “We were struggling to understand what the point of it all was,” one of the journalists present at the conference told FactorDaily, asking for anonymity in exchange for honesty.

Everyone had the background: the CEO Dhiraj Rajaram was splitting up with co-founder wife Ambiga Subramanian. This had created a rift in the senior leadership and several top executives had left the company. Revenue growth had started slowing. The press had been following all this diligently — after all, Mu Sigma is India’s only profitable unicorn.

Was Mu Sigma going to survive the storm? This is the story that attempts to answer that question. FactorDaily spoke with about 20 current and former Mu Sigma employees to find out what went wrong and how bad is it for the analytics company. Answer: It appears that Mu Sigma may yet survive the setback but not without bruises to show. Want to know more? Read on.

Good publicity, bad publicity

Back to the October 4 press conference. Dhiraj, who splits 25% ownership of Mu Sigma with Ambiga, was clearly unhappy with the bad press around Mu Sigma and his personal life. Inside Mu Sigma’s demo room on the 14th floor of Aviator building, Deepinder Dhingra, who heads products and strategy for the company walked the journalists through what the company did.

An hour later, Dhiraj entered the room in a dark blue t-shirt and blue jeans. (It was a Tuesday but the tee and jeans is not unusual in Bengaluru, India’s tech capital and Silicon Valley wannabe in more ways than one.) The scribes were then ushered into a large conference hall, where dozens of Mu Sigmans, as the company employees call themselves, were seated.

It was an unusual setting for a press conference and this is where it started getting uncomfortable for the reporters, used to company and PR executives gravitating towards servility while dealing with them. “If you ask me any tough questions, they will abduct you and make you go through Mu Sigma college,” Dhiraj told the journalists in jest. One of the journalists quipped that they already felt abducted. “What are journalists afraid of the most, it is maths,” Dhiraj said pointing to what he thought was the inadequate numeracy among most storytellers. (Admittedly, he said that with some accuracy.)

Next, the reporters were asked to introduce themselves. When Shadma Shaikh, a reporter from The Economic Times introduced herself, Dhiraj made it a point to intercede loudly: “How are you, my best friend?” Everyone could see that there was no love lost between the two; at least from Dhiraj’s side. Less than a week ago, the financial daily had reported that Ambiga was about to strike out on her own with other Mu Sigma veterans.

The journalists were then handed out a copy of printed statements. For good measure, Dhiraj made Dhingra read it out aloud. “And we are going make sure that we are going to read it loudly so everybody hears,” he said.

The message? Dhiraj would come back as the CEO of Mu Sigma. Funders General Atlantic and Sequoia Capital would continue as investors in the company. Ambiga’s shares in Mu Sigma will be transferred to Dhiraj.

Ambiga and a group of top Mu Sigma executives, who’ve spent nearly 10 years at the company, were conspicuously absent. The statement also contained quotes from Ambiga as also General Atlantic and Sequoia Capital to the effect that everything would be back to normal soon.

Trouble in paradise

Mu Sigma — whose name with its roots in Greek, a summation of a million parts, is as apt as it comes for a data analytics company — wants to be like the fabled data sciences company Palantir. The two companies were founded around the same time and investors saw Mu Sigma as the next Indian unicorn. Palantir, Silicon Valley based big data analytics specialist, has cruised past $1.7 billion in revenues, according to reports. But for Mu Sigma, that looks like a stretch as it battles senior level attrition and Dhiraj struggles to keep the ship on course.

It won’t be that easy for Dhiraj to build back what he has lost.

Dhiraj likes to call Mu Sigma a man-machine business. Since last April, many of its senior level executives have quit, threatening to shake the very foundation of the company.

To get a sense of how tough it is for Mu Sigma right now, you have only to take a look of its P&L. For the first time ever in its history, the company is likely to clock its revenues flat or even report a contraction, according to a top source. Its revenues were in the range of $180 million to $190 million in 2015. This year, it is likely to shrink to $160 million to $170 million, the source said. Last year, Mu Sigma lost part of its business from pharma company Sanofi to a rival. FactorDaily could not independently verify this.

At the core of all troubles seems to be the divorce between Dhiraj and Ambiga. The husband-wife couple worked alongside at Mu Sigma for years in various leadership roles as the company grew from an idea to the unicorn it is now. But in recent quarters, that changed.

“For almost a year now, we felt like Dhiraj had lost focus,” said a former Mu Sigma top executive. Losing the Sanofi business had clearly upset the management. In between, rumours surfaced that Dhiraj was in an affair and a blog, Truth Vs Hype, had many anonymous comments about the affair and how Dhiraj was losing the grip on his company. All this was later reported in the press.

Ambiga had become the CEO of Mu Sigma in February, stepping in the role that Dhiraj had managed until then. But in March, Dhiraj told his top leadership that he was coming back going to be back as the chief executive officer. That didn’t go down well with the senior management.

“Ambiga was going to be removed as CEO for Dhiraj to come back and the leadership challenged the move,” said one of the top leaders who quit the company.

Goutham Ekollu, the head of operations and a company veteran, quit in March. Ambiga had been CEO only for about a month then. (She officially resigned from the company only a few days before the October 4 presser.)

There is much speculation about Ekollu’s exit in the press, sometimes even contradicting each other. But it is not clear what transpired in the Mu Sigma echelons. “What exactly happened in Mu Sigma’s boardroom between Dhiraj and Ekollu is still a mystery,” said the source cited earlier.

Ekollu’s fall out with Dhiraj also shocked many Mu Sigma employees. “It was like Ferguson had left the team,” said a former employee. The reference was to Alex Ferguson who managed English football club Manchester United for many years and is known as one of the most successful managers.

At Mu Sigma, Ekollu and Sayandeb Banerjee, head of delivery, ran the show mostly. After Ekollu left, the domino started collapsing. The latest to jump ship was Banerjee, Mu Sigma’s first employee, who quit the company mid-August.

Soon enough, many delivery managers quit the company. To handle the crisis, the company called back to Bengaluru some of its employees in the US. That led to further attrition as many were not willing to uproot themselves to come back to India.

Among those who reported to Banerjee and Ekollu who quit were Anuj Krishna, Aditya Kumbakonam, Manu Sharma, Adarsh Kumar and Sankar Sekar. Sharma and Sekar have started a new analytics company called Ugam. Kumar primed an internet of things startup TagBox.

“Adarsh (Kumar) was like the Beckham of the team. When he quit, the rest of the middle management lost faith,” said the earlier source. At the the level of Kumar, there are nearly eight engineers and most of them have quit.

The pyramid

To understand why this is bad for Mu Sigma, it is important to understand what the classic outsourcing model is. At the top of this model, is the company’s management — usually the head of delivery, client servicing, and sales. The sales and client servicing teams typically sit in the US, where you also have an on-site team comprising of onsite delivery managers. These managers are paired with delivery managers in India, who form the core of the offshore centre. Each delivery manager is in charge of smaller teams and they all report to the head of delivery. Almost like a pyramid.

Losing the top leadership and the mid management (mostly delivery managers) meant losing control over a company’s ability to deliver on its promise.

“It would not be correct to say that there has been no impact on the business,” Dhiraj said at the press conference. “There has been impact because of the fact that there are lot of personal distractions,” he said, adding that while the supply side has taken a hit, the demand side remains unchanged.

Dhiraj is correct there. The data analytics industry is expected to grow to $16 billion in revenues by 2025 from about $2 billion currently, according to predictions by Nasscom. There are more than 600 data analytics companies in India, but only a handful have revenues more than $100 million from the business. This includes Mu Sigma and services outsourcing company Genpact. Most of the 600 have revenues less than $20 million.

“We hit our first 100 million in seven years. We know that a small unit can build that for sure. If we do (as much as) 10 of these, that’s a billion dollars,” Dhiraj told FactorDaily in an interview last week. More from that interview later in this story. (Ambiga declined a call and questions from me asking for an interview.)

Mu Sigma, structured almost as a self-fulfilling prophecy, is split into 10 different functional units. Each of which Dhiraj hopes to scale into $100 million businesses.

In the past, much of Mu Sigma’s success depended on how the company was able to quickly train fresh graduates to work on massive amounts of data and make sense of it for clients. This was emphasised by Dhiraj himself in various interviews to the press. “Universities are running business and we are a business that is running an university. And, so it’s a very coveted job. We say we do not hire talent, we create talent,” Dhiraj told reporters at the press conference.

The company employs over 3,000 people currently. Mu Sigma has devised frameworks around the data analytics value chain that helps beginners, often picked from the best universities in India and the US, to become productive quickly.

At $160 million revenues, that works out to over $53,000 per employee, beating blue chip companies. India’s largest outsourcing company TCS’ revenue per employee was $46,758 in 2015-16. Wipro reported revenue per employee of $42,485 and Infosys’ revenue per employee is $48,963.

Can he pull it off again?

Dhiraj, 42, is one of the few entrepreneurs who saw the opportunity in data sciences early. At the age of 28, in 2004, he left his job at management consulting firm Booz Allen Hamilton and started the data sciences company. Ambiga left her job in Motorola in 2006 to join him. (Dhiraj and Ambiga met in the College of Engineering, Guindy, and later went to study further in the US.)

The company takes its names from the Greek letter ‘mu’ and ‘sigma’ signifying the summation of the millionth measure — alluding to the big picture keeping with the tiniest detail.

Mu Sigma cornered a chunk of the growing the market, thanks much to Dhiraj’s persona and sweat, as well as the hard work on the ground in Bengaluru put in by Ambiga and her execution team. Ambiga was the director of innovation, head of talent management, and chief operating officer at various points of time in her career at Mu Sigma.

Back in 2004, ‘big data’ and ‘data analytics’ were not buzzwords, though there were many companies in the space already. Mu Sigma notched up big brands like MasterCard, Walmart and Pfizer as clients. The promise was that data analytics could help them save money and invest in the right direction.

Does the fact that Mu Sigma has lost many of its senior leaders affect the company? Depending on who you ask, you might get a different side of the answer. But the truth is somewhere in between. “It’s a big company and it shouldn’t be affected if one or two of us leave,” said a senior employee who didn’t want to be named. “But if all of us leave at the same time, I’d like to believe that there’s going to be a vacuum.”

Mu Sigma’s success is largely attributed to its ability to sell to big brands, culture of go-getters, ability to train fresh hires and make them punch much above their weight. But all this has taken a hit recently.

“Dhiraj was like Don. Bhai ne bol diya to karne ka hai,” said a former Mu Sigma employee, who moved on two years ago from the company. People who have exited the company recently said: “That culture will be hard to build back.”

“These are people who used to swear by him,” said a senior Mu Sigma employee. “The inner circle of loyalists used to speak the same language and with them gone, that ‘will do anything for the company’ attitude is gone,” he said.

With senior leaders leaving the company, Mu Sigma’s ability to train young talent is what takes the biggest hit. “It’s like you have a school where you have a students but no teachers,” said another Mu Sigma employee, who quit the company in April.

General Atlantic, Sequoia Capital and Mastercard, among Mu Sigma’s early backers, seem to have kept their faith in the company and Dhiraj’s ability to bring the company back from the brink of a crisis. “It is a reality check for him. But if sales happens, all the problems will take a back seat,” said a top executive at one of Mu Sigma’s investors, requesting anonymity.

Dhiraj’s ability to sell to big brands is no secret. According to former MuSigma executive Fred Neil, quoted in Chicago Tribune: the Mu Sigma co-founder travels tirelessly and “will take a meeting with a client at any time”.

“He’s made a commitment to being very visible to his clients, and he’s still a big part of the business. He was personally responsible for signing on a lot of the big clients he has, and he still goes and sees them,” Neil told Chicago Tribune in 2013.

The investor quoted earlier believes Dhiraj is firmly back at the company now and given his track record with sales, the engine is likely to start revving again. If the plan to buy his ex-wife’s stake goes through, he will become 51.6% owner of the company. According to an Economic Times report, Rajaram has been working to finance the deal while investors including Canada’s Ontario Teachers’ Pension Plan (OTPP) and Canada Pension Plan Investment Board (CPPIB) as well as private equity funds such as Blackstone and Bain Capital are looking to acquire a stake in the company.

What’s going to be difficult for him, though, is to build his team back up and to keep former employees from starting their own rival businesses. Over the years, half a dozen former Mu Sigma employees have started similar businesses.

The way ahead

On November 29, as I walked into the company’s office on the 14th floor, I brace for a repeat of the October 4 press conference. Dhingra, MuSigma’s head of products and strategy, sat with me for over an hour to explain how the company functions. In its 12 years, Mu Sigma has built solutions to help retailers sell more, casinos to become more profitable and reduce accidents for maintenance companies. Prototypes of such solutions are on display in the room.

The core idea, Dhingra explains, is to make clients understand their company through data and then look at problems that need to be solved. In short, developing consciousness within an organisation. “We believe this is the single most important aspect that differentiate organisations that develop competitive advantage in long term,” said Dhingra, who is part of the founder’s office, aka Mu Fo. That means working with Dhiraj on things he considers are important. Dhingra, a thoughtful mild mannered executive who worked with Spotfire Inc and i2 Technologies earlier, has been at Mu Sigma for over seven years.

On my way to meet with Dhiraj, Dhingra introduces me to Anila Rao K P, one of the apprentice leaders at Mu Sigma. She’s running a new campaign called ‘Bengaluru, let’s wish’. The idea is to get residents of Bengaluru to make a wish for the city and then the company wants to use data analytics to propose solutions to the government. “This year we thought let’s do something for this city.” She seemed unperturbed by the recent string of changes at the company.

Inside the conference hall where I meet Dhiraj, the CEO with his leadership team are in good spirits.

After introductions, I start telling Dhiraj and others what FactorDaily does.

Dhiraj cuts me short to ask me if I’m a ‘Mallu’, short for Malayali.

I reply in the affirmative.

Then comes the obvious question, “Evideya naadu (where’s your native place)?”

Dhiraj then recalls the names of some Kerala towns and vegetarian dishes olan (a dish with ash gourd, coconut milk, black-eyed peas or lobia, and coconut oil) and kalan (a dish with vegetables, coconut, and curd). He has a thing for cooking and vegetarian dishes. He once likened Mu Sigma’s edge — “a collection of stochastic processes and elements that come together to deliver a powerful whole” — to the sambhar his grandmother made.

Lest I am unsure why he’s making small talk about my roots and Malayali cuisine, he jokingly says that he’s doing whatever he can to influence my mind.

His brand of humour is self deprecating in parts and in parts uncomfortable. Once all of us are settled in, he tells me: “I’ve been through a very tough year. If you want to beat me in the end of the year, you also do that. I mean tu bhi maza le le. (I mean, ‘You, too, can have your fun.’)”

I try to discount his equal parts swag and mercurialness, but don’t quite get it. He sounds, if anything, anxious and eager.

We get on with the interview.

He rattles off names on his new leadership team. Impressive names and backgrounds.Sundareshan M R is going to be looking after quality for the company; Sridhar Turaga, who leads delivery for India; Subba Rao Telidevara, a private equity veteran as CFO; Ashish Sawant, formerly President at HR consulting firm QSource Global Consulting; Nat Iyer, who heads strategic hiring; and a few others who have moved up the ranks. M A Ravi Kumar, formerly the CEO of philanthropic organisation American India Foundation and a relative to Dhiraj as an adviser.

About people leaving the company, Dhiraj had this to say: “It is a very hard company to build. Some people leave because it is too hard. Some leave because they think they can also do that. Some people leave because I’m not an easy person to work with. Most entrepreneurs worth their salt aren’t easy to work with. These are the realities are of the world.” He has been spending more time in Bengaluru lately.

He says his bet on young talent was a calculated risk. “We know the chances that we are taking when we do that. That’s how we built the company. The advantage is you get tremendous energy to the table. The disadvantage is that when you face a problem you get rattled. Last year was our first hit. We lost a lot of people in the 33-34 year belt.”

That brings us to the next question. How does the new leadership, which is older than most of Mu Sigmans, going to deal with young talent. “What we needed was maturity and wisdom to surround myself personally to maximise Mu Sigma,” says Dhiraj.

This would essentially mean he would be taking a backseat from several functions which he earlier says ‘he learned on the job’.

“I don’t want to not take all the onus of various failures on myself. Let others take more responsibility,” he says. He also plans to focus on his health, throw in some swimming and yoga into the routine. “I want that the concept of Mu Sigma can be sold without being in person and shaking hands. It can’t be one man shaking hands and going to dinners.”

To that end, he says the company is likely to hire more senior leaders. “Baahubali Part 2 has not been released yet.”

Baahubali is a two-part bilingual epic film made in Tamil and Telugu. The first part, Baahubali: The Beginning, created box office history. The second, Baahubali: The Conclusion, is to release in April, 2017. Time enough for Mu Sigma to get back its mojo.

Update (5.37 PM, IST): An earlier version of this story mentioned that Sundar Bhuvaneswaran is going to be leading delivery as part of the senior leadership, which should have been Sundaresan M R. We’ve made the correction.

Other #longforms from FactorDaily’s Unicorn Coverage

1. India’s first Unicorn InMobi is staring at an uncertain future

2. Project Fixkart: Binny Bansal & Co.’s last shot at turning around Flipkart

3. Project Fixkart (Part Deux)

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