"In 1985, seven young men got together to write 272 words—words that would go on to become the foundation of their business objectives, ethics and strategies. It took them six months to do it. They wrote this ‘Rule Book’ three years after they set up the company, for they felt they needed one—they were growing rapidly, and needed central defining principles and guidelines to chart the future. In the three years before those 272 words were written, not much changed, except company size. Today, 17 years after, everything has changed… those words are the only constant. They are among the straws that they hang on to in stormy waters. Increasingly, in troubled times—in the last two years—they have gone back and looked at those 272 words to take some very tough decisions. Those words are the cement that keeps them and their vision together"

Vijay Thadani
chief executive officer, NIIT, on the company’s mission statement, Our Vision

It’s a ship that’s been cruising along for 20 years now, but ask the men at the wheel to put their finger on the turning point—the one defining moment when the rudder shook itself free, the corkscrews bit into the water, and the bow rose above the water, propelling them into business fast-forward—and it’s flashback to Year 1990.

"The country was facing an acute foreign exchange crisis and the oil pool deficit was crippling. When the crisis hit, the first thing the government said was ‘export or perish’. We joined the band of corporates who decided to chip in, and targeted the US and Singapore—the US because it was the biggest market, and Singapore because that was a country where everyone had access to hi-tech devices, but few knew how to put them together. That also marked our entry into the solutions space," says NIIT chairman Rajendra S Pawar.

CEO Vijay Thadani remembers that it was around this time that the management realized that there was a world "outside the little well called India", and tried to figure out what to export. "We had two core competencies we could sell—the obvious one was software development and services. The other, which we discovered that we had built ourselves, was a pleasant surprise—knowledge solutions. In those days, we used to call it educational SW development. We had unique capabilities—we had been building courseware for years, and CBTs helped us tremendously. The market gobbled it up."

The market is still gobbling it up, notwithstanding the hiccups of the last year-and-a-half of the slowdown. And the same ‘training company’ status that saw it bear the brunt of the slowdown much before the rest of the industry, is not helping pull NIIT out much sooner than other segments of the industry. "It’s a typical ‘In First, Out First’ syndrome. The slowdown and the resultant general lack of interest in IT saw us take a fast and big hit, but the intrinsic training strengths and expertise we built up over the years are helping us ride out the storm well before others," says Pawar.

NIIT, the exporter
There were three stages that saw the domestic training major metamorphose into a global training and software services player. First, NIIT set out by becoming an exporter. Second, it did what an MNC does, and for a few years even called itself an Indian MNC—where things are centralized back home, and the overseas body works like the foreign station of the mother company. Third came the stage of being a global company with a local flavor—with products customized to suit that particular market’s requirements, a local company with a global presence. "A local company with a presence in 32 countries is what we like to call ourselves, and that’s really helped us, even in these tough times," says Thadani.

	Rajendra S Pawar Chairman “Our larger goal has remained unchanged over the years—to redefine the market and our reach in it. For over five years, our goal has been to become the ‘World #1’ in training and the ‘World's Best’ in software services”

And just before the onset of the slowdown, NIIT entered what is perhaps Stage IV of its evolution. "In the first 18-19 years, we had organic growth. Every brick had the blood, sweat and tears of NIIT-ians attached to it. We built the company brick by brick by brick. It was in 1999, when we were looking at moving faster into the international terrain, that we realized that our single-largest challenge would be customer acquisition, and the fastest way of doing that would be inorganically. Buy the company, bag their customers, attach our value-add, and start servicing them—it would be good for us, good for the acquiree, and good for the customers. The challenge here was the integration process, and the need to prove that it was good for the acquiree as well," says Thadani.

Cash was not a problem—the company had built up a strong balance sheet over 18 years and was sitting on over Rs 300 crore in cash. What needed to be worked out were the math, physics and chemistry. The numbers had to work (math), the two gears had to mesh together and work smoothly (physics), and the people’s aspirations and hopes had to be lived up to (chemistry). These parameters were hard to come by in any one given company, especially the math. It was when the slowdown hit and valuations crashed that the company went ahead and acquired three companies in quick time (see box, Math, Physics and Chemistry).

	Vijay K Thadani President & CEO “In the early 90s, we realized that there was a world outside the little well called India. That’s when we tried to figure out what to export, and it was at around that time that our core competencies came to the fore”

"In the heydays, we were making steel. In the slowdown, we have been tempering that steel. And like all good steel, if it isn’t tempered, it doesn’t have the strength to withstand pressures. As a company, NIIT is coming out stronger after the slowdown," says Thadani. "It’s also given us direction to chart out a roadmap to get to our long-term goals—that of emerging as the world’s #1 IT training company and as the world’s best software services firm," adds Pawar (see interview, Target World #1 in Training). "And throughout, it will be acquisitions that will be the real growth driver," he adds. So are there more quick acquisitions around the corner? "History proves that 70% of all acquisitions fail. We have been lucky thrice. We don’t want the fourth to join the failed list. We will buy when the mix is right," says Thadani.

In the organic part of the NIIT spectrum, there’s a curious twist to product fortunes. The geographies where software services sell more are the same geographies that the education services sell less. Thadani explains—"In the developed world, development has already happened, and therefore, software services sell… but since they are developed, education services do not sell well. The reverse holds true for the developing world.

The fall and the resurgence
Chief operating officer P Rajendran explains how the reversal first boxed in the company, and then brought it around to coin stronger strategies for the future. "After 18 years of getting ready for next year’s growth, NIIT, in the slowdown year, was suddenly forced to think of how to turn around. Registrations fell and that was dramatic—in July last year, we started dealing with the bad times. Our strategy was clear—reach out to the world. We had to, for a student customer is different from any other. Our customers never bought "off the shelf". It was obvious that students were delaying their decision to join courses—instead of just counseling those students who came to us, we became proactive, went to schools and colleges and talked to prospective students. Initiatives like technology seminars were revved up. We also managed to reduce costs by 29%. Changing the marketing strategy boosted confidence in the system."

	P Rajendran, Chief Operating Officer “Though China and the rest of the world account for just 15% of revenues, with 85% of our numbers still coming from the domestic market, it is these new markets that have immense potential and need to be attended to closely by our thinktank”

 For the first time in the history of NIIT, operating profits in the April-June quarter of 2001 were negative. "By JAS, this was revved up to just below negative. In OND, we were just above board. JFM was positive, but nothing to write home about. Finally, in AMJ 2002, we could really start talking to shareholders again," says Rajendran. Going ahead, the company is planning to play the geography card very carefully. "It is true that our Indian operations account for 85% of overall revenues, but China and the rest of the world (though just 15% of revenues) have immense potential. We already have a presence in most of the developing world—centers in Nepal, Bangladesh, Sri Lanka, Vietnam, West Asia and Indonesia. We have three centers in Columbia as well. The white space is the developed world—in about a a year from now, we want to explore that space, perhaps with the corporate training market in Europe and the US to begin with.

Managing software services
Moving away from the bought out, a look at the newly-created—NIIT Technologies, the company’s recent move clearly targeted at establishing it as a serious software player. And that, in a year in which software revenues exceeded those from training for the first time, ever. "In order to differentiate ourselves from other players, we focused on increasing the effectiveness of end-users. We had a headstart—we were already focusing on end-users insofar as our training business was concerned. We tied up with IBI and brought in the technology of 4GLs," says NIIT president Arvind Thakur, and the man who manages the software services business.

Tracing the path that led to NIIT Technologies, Thakur remembers—"This goes back years and years. Many companies that we did software deals with liked the concept of implementing executive businesses, but some had their own data processing organizations. They asked us for our tool—Focus—and we had no problem with sharing that, and that’s how we started SW product distribution. Most recognize NIIT as a training company, but few do as the pioneer in the SW product distribution space." But SW product distribution was extremely difficult—in the late-80s, people were not used to paying for software. The reason was simple—hardware vendors dominated the industry and when people bought machines from them, they expected them to do what they wanted them to do. Software was already installed—bundled—and no one had a clear perception on its value.

	Dr Sugata Mitra, Chief Scientist and Senior V-P “Being literate is not about being able to sit and take a test and clear it. Being literate is all about being able to do”

In 1995, NIIT’s software services division went in for a more robust model—as a software company, it was dealing with emerging technologies; and as a training company, it became more focused on new technologies. But this saw the company ill-equipped to deal with legacy. "When the Y2K phenomenon happened, we stayed out of it—we saw Y2K as a temporary phenomenon, while enterprise apps and integration was seen as the hot thing of the future. In hindsight, we missed out on a brand-building opportunity. On the whole, the 90s went off pretty well and we were moving globally, investing in the front-end and giving a local flavor to all our geographies. It was around this time that we were confronted with a series of external events—economic recession, dot-com meltdown, 9.11, geo-political instability," says Thakur.

To deal with these events, NIIT’s software services division
n Expanded its portfolio to include legacy and build an annuity scheme—so far dormant as an activity in the organization;

n Brought in a sharp focus on specific domains and verticals—clearly, customers valued domain competence more than technology expertise;

n Put into place a significant cost-reduction program—even going through the process of "rightsizing" the organization; and

n Put into place an inorganic program for growth.

	Arvind Thakur, President “NIIT Technologies was a move toward establishing us as serious software players as well as the leader in IT education. Our software revenues exceeded those from training for the first time this year. This is the real opportunity, and we have strategies in place to tap into this potential”

Currently, NIIT Technologies is involved in four service practices—legacy modernization and maintenance, knowledge management solutions, customized SW development, and enterprise integration. As for the hot focus areas, there are three—financial services, transport and retail. "We aim to target under-penetrated geographies, verticals and service lines, for instance insurance. The reason we bought Osprey was because it would give us a lead in the package implementation space in the US. DEI gave us domain expertise and customers in the US. Pieces of the larger strategy are falling into place."

B2B2C: The new push
The acquisitions are also targeted to help out the knowledge solutions business. Ashish Basu, senior vice-president and global head of the knowledge solutions business, reveals how the Click2Learn division buyout brought in 12 customers—sic of these were inherited along with the deal, three came in as repeat business for Click2Learn, and three were signed up after the acquisition.

The acquisitions are also targeted to help out the knowledge solutions business. Ashish Basu, senior vice-president and global head of the knowledge solutions business, reveals how the Click2Learn division buyout brought in 12 customers—six of them inherited with the deal, three came in as repeat business for Click2Learn, and three were signed up after the acquisition.

	Ashish Basu, Senior V-P & Global, Head, Knowledge Solutions Business “Let’s face it.E-learning is hot with corporates today. And with no real transactions as such, security in also not much of an issue. It is only the low level of Internet penetration in India that rankles”

"With KM, the need was to offer a wider range of services and multiple solutions. In keeping with that need, we operate in the customized space, and not off-the-shelf. We are working on alliances, but our central strategy is to tap the B2B2C (business to business to consumer) space. For instance, we have developed training modules for Microsoft, which it uses to cater to its own clients. We have done game design work for AI Online and have a partnership agreement with Riverdeep—both these deals are valued at over $4.5 million each. Other clients include Edutech, ITT ($13 million), Novell, PeopleSoft, General Electric, Reliance Industries, P&G and Bharti Enterprises," says Basu.

Rajeev Narayan in New Delhi

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