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Follow UsWith offshore product development maturing as a trend, Aztec is
making a mark for itself in this space even as its Disha acquisition further
bolsters its fortunes
Notwithstanding
the frenetic debates surrounding it, the outsourcing paradigm only seems to
mature and strengthen as time passes by. And whatever new wave emerges in this
domain, India seems to remain at its epicenter. Therefore, it does not come as a
surprise that offshore product development (OPD), the new poster boy of the
outsourcing world, too has found several interested Indian takers. Aztec
Software, Symphony Services, Aditi Technologies, Aspire Systems, Persistent
Technologies-Indian companies seem to zealously embrace this new trend wherein
software companies are outsourcing chunks of their product development functions
to specialist partners and are making greater efforts towards marketing and
branding their products.
“This is just the
beginning of a new era of software product development,” says V Chandrasekaran,
MD and CEO, Aztec Software. He would know: since its inception in 1995, Aztec
has till date executed more than 50 OPD projects with globally known software
companies such as Microsoft, Cadence, IBM, JD Edwards, Novell and many more.
Though currently India has very few software products in the market to claim as
its own, the IT industry here could probably take comfort from the fact that
specialist firms like Aztec are slowly beginning to play a critical role in the
new product releases, in the middleware and back-end infrastructure and
applications of global firms.
In fact, this Bangalore-based
company, one of the biggest 'pureplay' OPD companies in the world, has seen
its quarterly revenues rising at an average of around 25% q-o-q for the last two
years. Result: After two relatively flat years in 2002-03 and 2003-04, Aztec
revenues jumped by 139% to Rs 98 crore in 2004-05. The growth has continued in
2005-06: With the first three quarters already contributing more than Rs 142
crore, Aztec expects to close the year with around Rs 200 crore in revenues. And
primarily the twin pillars of OPD and testing services have supported this
substantial growth.
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Feathers in the Aztec Cap |
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"This is just the beginning of a new era of software -V Chandrasekaran, MD and |
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The biggest feather in
Aztec's OPD cap has been its relationship with Microsoft-it has been engaged
in development work on its database products. In addition, in recent years it
has handled several phases of the software product development lifecycle for
vendors like Hyperion and Dendrite. Chandrasekaran informs that in OPD, the
company has been successful in leveraging its competence in core technologies
like data management, integration and Web services, mobile applications as well
as security and identity management.
And it has added to
this portfolio in 2005, wireless networking and embedded devices technology. The
results have been quick in coming: In four months of commencing services for the
wireless domain, the first client has been signed up during Q3'06. In fact,
with the addition of 10 new clients during this quarter, the client roster now
includes 68 active clients. The future too looks bright. In the words of
Chandrasekaran: “With the Indian IT industry witnessing its third wave with
OPD, Aztec as a pioneer of the offshore delivery model in this segment is well
positioned to take advantage of the opportunities going forward.”
Though OPD has been
Aztec's biggest claim to fame till date, its foray into testing services
bolstered by the acquisition of Pune-based Disha Technologies in 2005 for $12 mn,
has opened up new avenues for the company. On the testing side too, Microsoft is
a significant client even as Aztec has obtained expertise in test strategy
formulation, scooping, planning, execution, automation and reporting. The Aztec-Disha
combined entity has helped the company leverage its strengths in the ISV market
and its expertise in the QA services market.
In fact, the expertise
on testing services obtained through the Disha acquisition perfectly complements
Aztec's OPD skillsets. “The Disha acquisition has helped us emerge as a
complete lifecycle services provider for our OPD clients,” informs
Chandrasekaran. The company now offers services that include development,
testing, professional services and sustenance engineering covering the entire
product engineering lifecycle.
| Indian companies seem to zealously embrace this new trend wherein software companies are outsourcing chunks of their product development functions to specialist partners |
With OPD expected to
gain further traction, Aztec looks to be on a strong wicket in the near future.
However, financial analyst Krishnan Thiagarajan warns that the risks for Aztec
stem from high client concentration, threat of customers moving
product-engineering services in-house and a slower-than-anticipated integration
of the Disha acquisition. The top five and 10 clients of Aztec contributed 54%
and 81% of revenues in the latest quarter, marginally lower than the previous
quarter. Though in line with some of its mid-sized/small-cap peers, it exposes
the company to risks arising from R&D spending slowdown by ISVs in different
stages of the cycle.
Such apprehensions
about slowdown in OPD, however, are not intimidating the company. Instead, as
part of the plans to diversify into segments complementary to its existing
service offerings in OPD, Aztec is even looking to acquire small software firms.
It has identified allied areas in storage management and embedded systems where
it plans to acquire expertise either through the inorganic or the JV route. And
like Disha, these are also likely to be India-based services companies.
Rajneesh De
rajneeshd@cybermedia.co.in