The woes of the middle market companies in the software segment never seem to end. After the dotcom bust and the waves of consolidation in the industry, the recent fall of the dollar against the rupee has been crippling for many small players. It could not really have come at a worse time as the industry is going through a massive shortage of people and rising salaries.

Yet amidst these trying times, there are success stories from mid market and even small companies that have taken up the challenge and built defensible business models that can withstand the ever changing business environment.

Among such companies is Hyderabad-based Tanla Solutions that has focused on a few areas where, due to its domain knowledge and intellectual properties, it has been able to create a small niche for itself in specific markets.

Founded in 1999 by a group of professionals, Tanla Solutions is a profit making company with its software development center in Hyderabad and Andhra Pradesh in India, and worldwide marketing office in the UK. The founder and CMD of the company, D Uday Kumar Reddy, is an MBA from UK and leads the management team. The promoters of the company hold 35.53% shares of Tanla. Private corporates own 12.47% while foreign institutional investors holding stands at 34.49%. The Indian public and others hold 15.9% and 1.61% respectively.

The company specializes in developing mobile applications and platforms for the mobile telecom, media, and digital communications sector. The company has partnership with mobile operators across Asia and Europe to deliver and bill mobile content over SMS, WAP, MMS, and video applications. Tanla Solutions claims to be Indias first company to make short message service center (SMSC) and voice mail server (VMS). Its clientele includes leading cellular operators from India and abroad. Their SMSC has been deployed with clients like Reliance, BPL, Hexacom, Airtel, and Essar. Even as telecom remains the companys core area, the company has diversified into new areas using both the organic and inorganic route to include offshore development and maintenance, and infrastructure management services in its portfolio.

The financial results for the year ended March 31, 2007 reflect the significant progress the company has made in penetrating new markets and clients, though at the cost of margins. Turnover for the year was up 252% at Rs 222 crore against Rs 63 crore last year. Net profits grew by 207% to Rs 93 crore against Rs 30 crore last year. The main growth driver was the mobile transaction and billing aggregation business, which grew from Rs 33 crore in fiscal 2006 to Rs 157 crore in fiscal 2007. The offshore services business, which grew from Rs 8 crore last year to Rs 26 crore this year. The operating profit came at 110.5 crore. The operating profit margins stood at 49.8% against 56% achieved in the previous year.

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