Big Dreams for a Toddler

Not that it matters much now, but V Srinivasan is still wondering where he

lost them...the two valuable marks nearly 30 years ago, when he ended up scoring

698 out of 700 to emerge as a topper in mathematics at Madras University. Many

such stellar academic achievements followed–being a rank-holder in chartered

accountancy, clearing his cost accountancy and company secretaryship with flying

colors...V Srinivasan plunged into a career in finance and systems and amply

proved his mettle in all his assignments over the next 18 years. Three years

ago, K V Kamath, the famed chairman of the apex financial institution ICICI,

picked him to head ICICI Infotech Services as the company’s managing director

and CEO.

In

the early 90s, ICICI chose to use IT to provide better services to investors and

achieve business efficiencies. The attempt was to transform itself from a mere

financial institution into a virtual universal bank. Resources within the

company were regrouped to form ICICI Investor Services. In 1999, it was decided

that all IT initiatives across various ICICI entities would be consolidated and

the group was re-christened as ICICI Infotech Services. The period from 1993 to

1999 saw the group strengthening itself in three ways–a wide array of

contemporary technology skill sets could be amassed, mission critical project

management experience accrued, and domain knowledge of the full-spectrum

financial services got assimilated. Combined with the illustrious parentage in

the form of the NYSE-listed ICICI, the company got a jumpstart into the IT

business.

Avoiding the pitfalls



The company could easily have been lured by the dot-com and e-business mania

worldwide-setting up portals and building pure-play Internet businesses. After

all, the company successfully launched several e-initiatives for the ICICI group

entities— ICICIMarkets.com. a financial B2B site; ICICIConnect.com, a personal

finance portal; Infinity for Internet; and ICICI Direct.com, an online

securities trading platform, amongst others. Neither did it get lured by the

ebullient global IT services market of 2000 for what it required then was a gang

of programmers who could code in languages of every ilk. Consciously, ICICI

Infotech limited its exposure in many ways and avoided the unholy rush into both

these areas. This is where focus counted and the company went about executing

projects selectively within the financial domain. For instance, there was an

Index website for a prestigious investment banking firm in the US, an

application integration project integrating core banking, trade finance, and

settlements for a large Gulf-based bank, amongst others.

Nor did the company rest only on the ‘assured’ business from its parent

group. Yes, these entities provided ICICI Infotech the runway to launch its

expertise in areas, which would not have been possible otherwise. These included

the building up of world-class data centers and disaster recovery centers,

large-scale business process outsourcing, knowledge management, data

warehousing, CRM and other such technology areas. Business from the ICICI group

in the start-up year 1999-2000 was to the tune of Rs 38 crore, nearly 90% of the

year’s revenue of Rs 41.8 crore. For the year ended March 2002, the share of

business from group entities would be down to 35% while the revenue is estimated

to cross Rs 250 crore. This means that over Rs150 crore of ‘new’ (read non-ICICI)

business was generated in the current year. This goes to show that the company’s

strategy did not rest on ‘getting business from ICICI-and- a- little- bit-

more’, as is the case with other subsidiaries.

Leadership by acquisition



ICICI Infotech was a forerunner in the trend of Indian software companies
acquiring US-based companies and adding scale to its operations and gaining

strong foothold in the US market. The company acquired NJ-based Ivory

International Inc, in an all cash deal. The acquisition has helped ICICI

Infotech significantly ramp up its operations in the US. Further, prestigious

accounts were bagged by acquiring the business rights of Object Xperts, a

software consulting company also based out of NJ. To get a pie of the IT

services opportunity in the mature US insurance industry, ICICI Infotech

acquired CT-based Command Systems Inc and all its subsidiaries. The company now

boasts of insurance accounts like MetLife and NY Life. ICICI Infotech also

completed the acquisition of Insyst, an ERP product company in the Middle East

recently.

ICICI Infotech set up a joint venture with Emirates Bank Group, a UAE-based

banking conglomerate to tap the nascent West Asian and North African software

and IT services market. This is in addition to an acquisition of a Gulf-based

company called Insyst. A wholly-owned subsidiary ICICI Infotech, has been formed

in Singapore to cater to the Asia Pacific market.

Products make a big story at ICICI Infotech and are at the center of its

strategy. Realizing that a pure services focus may only scale up revenues but

will not help the move up the proverbial value-chain in the software business,

in the second year of operations, ICICI Infotech acquired Mumbai-based Ajax

Software Solutions in an all-cash deal for Rs 17.7 crore. Two products were

added to the stable- Kastle for treasury management and Pinnacle for asset

liability management (ALM)- both very key areas in running a bank. The

acquisition was fruitful. Out of the 18 deals in ALM and treasury management in

the country, 17 have been bagged by ICICI Infotech. An entire suite of banking

products called as Vertical B have been built. Similarly, Premia, the insurance

product suite covers general, life, and non-life insurance segments.

Identify, negotiate, team up...



What the company did in the core banking product area is interesting. Rather

than develop a core banking product that would have delayed time-to-market, it

shopped around for a product that was robust and comprehensive. It didn’t

exactly buy the company out but forged a strategic alliance with IMS System,

Korea for Newton, a highly-scalable core banking solution. This alliance allows

ICICI Infotech to have access to source code and exclusive rights for the

marketing and distribution of the product in India, Sri Lanka and Bangladesh,

with non-exclusive marketing rights and cooperation in other countries. The

estimated potential and market opportunity is $ 100 m over the next five years.

The duo is also exploring other strategic options including using ICICI Infotech

resources in India on IMS projects worldwide and promoting ICICI Infotech

products and services through IMS’s strong channels in Korea, Japan, Taiwan,

and China. These are markets that would have been otherwise difficult to tap.

But ICICI Infotech is not all about the banking and financial segments alone.

The company has smartly identified a niche in the ERP segment and here too, the

strategy is product-led. From the Insyst acquisition, it got a product Orion,

which has been positioned as a mid-market ERP for SMEs in the FMCG, trading,

retail and distribution, manufacturing, and the oil/gas segments. The company is

confident of abundant market potential for enterprise solutions and hopes to

garner at least a 5 % share of the Rs 650 crore ERP market in 2002-03. For the

Middle East market, a special shrink-wrapped ERP called Merlin is marketed. The

product leads the way for ICICI Infotech’s foray into the non-financial

segment.

The future’s in futures



A lot of development work on future products is taking place as well. Along

with domain expertise and specific technology skill sets, ICICI Infotech is also

looking at applied research in leading-edge areas. A recent strategic alliance

with Fraunhofer ISST, Germany — a leading institution for applied research in

information and communications like MIT Media Labs, has been struck at CeBit

2002. Says V Srinivasan, " This alliance will focus on developing

technologies for tomorrow’s markets. This will also help us have greater focus

on Europe and build confidence with customers and partners in that region".

Under software development and consultancy, the company focuses on enterprise

application integration, smart cards, .NET , data warehousing, and mainframe

technology. But here again, vanilla is out.

In each area, differentiators have been developed. Says Manoj Kunkalienkar,

joint president, "In the mainframes area, our specialty is production

maintenance. This is different from application maintenance and has a turnaround

time of minutes". In the smart cards area, the company has developed its

own host and boasts of a tie-up with Schlumberger. For .NET, it has tied up with

none less than Microsoft Consulting India. And for data warehousing, the

differentiation is in handling massive data to the order of multiple terabytes.

Security consulting and deployment, systems integration, infrastructure

management and consultancy are the other key delivery areas. The gamut is

complete with business process outsourcing focusing on the financial services

industry to start with.

There are lofty ambitions at ICICI Infotech. Growth rates have been tempered

to align with the industry standard growth rate of 30% for the coming year. For

the first year coinciding with the boom period, it grew nearly four times to

attain revenues of Rs 163 crore in the fiscal 2000. Fiscal 2001 is estimated to

end at Rs 260 crore, up 59%.

For now, ICICI Infotech is waiting to grow in scale. Says V Srinivasan,

"We need more of the $ 1m kind of projects. But I understand that it will

be a while until scale itself becomes a strength". The company recruited

aggressively even through the slowdown and currently staffs over 1300 people.

More offshore projects are being sought. On the quality front, the company has

been progressing well and is currently at SEI CMM Level 3. Here again it is

waiting for time to grow. Quips V Srinivasan, "Quality certification takes

time and we are only three years into the business". Actually, new markets

would open up once the quality frontier is reached. For many of the global IT

services projects, a Level 5 certification is a sine qua non even for bidding.

Add to this the inorganic growth that the company has already demonstrated and

expect that to continue.

Mutual funds top target list



Continuing its focus on the financial services market, the company is

planning to pursue new areas amongst which mutual funds is top priority. With

phenomenal IT infrastructure under its control, services such as an ASP would

also become revenue generation mechanisms in the future. Global geographies have

been covered well and new market niches are being explored. Though only two

years old, the strategic business mix of ICICI Infotech reflects maturity. The

three principal activities of the company — products, IT services, and BPO

fall in line with the success models that any mature IT company, which has

evolved over the years follows. It has an expanded services portfolio with clear

differentiators, a products portfolio which is getting continually added to, and

an IT-enabled services offering ready to handle scale. This is a company to

watch out for.

Easwardas Satyan in Mumbai