17 – Surviving The Chaos

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The intended strategic shift to solutions is now
show-ing results. Profits are only marginally higher than last year though, confining CMS
Computers in the one-to-two percentile range of profitability. Affected with the malaise
of wafer-thin margins, the company has been engineering a gradual shift into more
solutions, centered around specialized high-value equipment and systems integration
services. As MD Ramesh Grover puts it, “We are well-entrenched in the systems
integration market, now we have begun moving into solutions.”

System sales continued to be the major revenue earner, with
nearly Rs 124 crore-58 per cent of the total revenue. Server-class machines raked in Rs
84.5 crore, a major share of which came in from non-Intel servers. Pentium and PII
desktops brought in Rs 28 crore, which includes CMS’s own brand of desktops and servers,
apart from the Digital, HP, Compaq, and IBM range.

Cms2.jpg (7341 bytes)The year 1997-98 saw the company executing many
large networking orders. CMS bagged the order for networking the whole plant at Reliance,
Jamnagar. However, commoditization of the networking business has made it less profitable.
Even branded cabling has become a very competitive market. There was also a slump in the
market momentum for internetworking and wide area networking due to an economically bad
year with some policy mishaps.


  • To address the large corporate user segments with total
    systems and services portfolio and offer specialized solutions in specific niches. Topline
    growth comes from the former, while the latter is more soothing on the bottomline.
  • To seek out newer areas in specialized solutions.
  • To perk up the software business.


  • Managed to grow the business through network servers.
  • Stayed away from many a large unprofitable deal.
  • Going from AS/400 to open systems.
  • Self-made systems to rescue bottomline.
  • Has decided to be active in the domestic ERP market with JD
    Edwards for open platforms.


  • To grow at 50 percent in topline and have healthy
  • To focus more on self-made systems like kiosks and
    time-attendance recorders.
  • To diversify into new areas like credit-card authorization
    and personal banking products.
  • To increase the size of the software organization and grow
    by at least 30 percent in revenue.


  • Grew by 15 percent, to reach Rs 214 crore in revenue. Profit
    growth marginal.
  • Systems sales contributed 58 percent of the revenue.
  • Sold 12 units of mid-range servers like AS/400 and Alpha for
    a value of Rs 20.30 crore.
  • Low-end servers including PC servers sold for a value of Rs
    64 crore.
  • 18 JD Edwards sites in the country, all on AS/400 platform.

The company’s investment in smartcard business has
started paying off, with the installation base expanding. This space will witness a major
boom once the requisite financial reforms are put in place by the RBI. Presently, the
hospitality and finance industries are attractive. Similarly, solutions that involve the
integration of cards-based systems are another opportunity. The company has bagged a Rs
3-crore order from HongkongBank for a project to integrate the credit card database with
the production of cards. Specialized printing solutions have also taken off, with orders
coming in from the finance and telecom segment like Citibank, HDFC Bank, and Birla

What, then, would determine the direction of the company in
future? Clearly, serving markets for specialized solutions while continuing its systems
business and a special thrust on software both in domestic and global markets. Systime,
the company’s software division, has been maintaining a low profile till now-so much so
that it may virtually seem that the company failed to catch the bus during the boom in
software exports.

Now, all that is set to change. First, there is a shift
from AS/400-based development to open systems both in domestic and international markets.
A product addressing the enterprise needs for human resource information systems for the
domestic market is being developed. NT will be the preferred platform for many of the
projects. A software for express depository machines for banks is being developed solely
on NT. Most of the smartcard installations will also be on NT.

Services industry like shipping and construction, in
addition to hospitality, would be addressed from an ERP point of view. A pilot project in
Dubai has already been bagged. Y2K and euro-currency-related work will be another focus
area. In the application management area, the company will be developing tools for BMC
Software for platforms like Stratus and Tandem.

But the real action is going to be the JD Edwards ERP
business in the hotly-contested domestic ERP market. Presently, there are 18 sites for JD
Edwards but they are all AS/400 sites. The ERP solutions team has been increased to 65
people-25 application consultants and 40 technical consultants. Competency centers will be
set up shortly. The company is investing nearly Rs 1.5 crore into the JD Edwards business
and is expecting handsome
Cms3.jpg (23642 bytes)returns.

The question that is often asked of CMS is why it has
maintained a low profile with JD Edwards, as it has in the past? When the entire ERP
market was getting ignited, JD Edwards was conspicuous by its low-decibel presence. In
fact, in the current year, JD Edwards could actually be the dark horse of ERP. With the
rising count of many an ERP horror story, JD Edwards could quickly maneuver itself into
the slot of being a low-profile performer.

Grover puts the next year’s target growth for the company
at 50 percent with good profits. He is pinning a lot of hopes on the services-oriented
businesses and software. Plans for addressing new areas like back-up solutions, platforms
for disaster recovery systems, credit card authorization, and personal banking-related
products are being chalked out.

The task of aligning the organization to adapt to the
services business rather than being a sales-oriented one is keeping the top brass at CMS
busy. The past three years have been increasingly difficult for the company and its
business. And it has proved that it can stay on and win.

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