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Follow UsWhile Indian
services vendors are lauded across the world (even during the
slowdown), the limelight has always remained on the biggies like TCS or
Infosys and at most the top Tier 2 players like
or Patni. This has often kept the performances of smaller companies
(especially the non-listed ones who are not even courted by the
investors) away from the public gaze; but in many cases even these
companies have fascinating stories to be told. Especially, if the
stories involve their plans to devise growth plans for themselves to
carve out their own niches.
The story of the $120mn
the IT venture of the CK Birla Group, is one such. Despite being in
circulation from 1992, the company has never come anywhere close to the
limelight; some would say it has deliberately shun away from all sorts
of publicity. Apart from the fact that it is the IT arm of the CK Birla
Group and till an year back had nearly 80% GE dependence not much has
ever been written about Birlasoft. However, a spate of management
restructuring over the last two years indicate that Birlasoft is
looking to shun its relative ennui of years and chart its own growth
story. A public announcement that the company, wholly-owned by private
promoters,was aiming for a 25-30 % growth in revenues with a 13-14 %
profit margin in the next eight quarters, before going for an IPO
vindicates these management re-jig.
The ball was set rolling in Q2'09 when the then chief delivery officer
J Ramachandran (Ram) was appointed as the new CEO, replacing the long
time incumbent Kamal Mansharamani. Sanjay Gupta's appointment as the
new head of global delivery subsequently was also significant. Ram
helped launch the growth momentum, but unfortunately his tenure
coincided with the recession. Result, was despite attempts at a fresh
start, the situation was not up to expectationsfurther to absorb the
slowdown woes, Birlaoft laid off about 500 people and implemented an
overall 3-3.5% salary cut.
With recession gradually receding to the background, FY10 has seen
another attempt to gain momentum and this time with another new
leadership team. Arup Gupta, who has held senior positions in Polaris
and TCS, took over as the CEO and MD with the mandate to restructure
the company that would help it grow to a decent size over the next
eight quarters before it goes public. Meanwhile, the company is
consolidating its foreign holdings into its Indian parent to brace up
for this IPO. And rather than depend on a few clients (read GE),
Birlasoft is going for a verticalization approach.
We will have domain focus on banking, insurance and manufacturing and
leverage our horizontal strengths in testing,
computing, Agile methodology and ERP and CRM deployments across
these verticals, informs Gupta. The management rejig under Gupta was
planned with this verticalization strategy in mind. Domain experts were
brought in to head these practicesDeepak Marwah, formerly of TCS and
Microsoft, took over as the manufacturing head while Basu Dutta, the
ex-head of IT at Standard Chartered and also of iFlex) has taken over
as the banking head. Birlasoft is about to announce a new insurance
head in the next few days and he would most likely be based out of
London. Considering, Birlasoft's insurance client roster includes the
likes of UK biggies like MetLife and Genworth, that doesn't look too
much out of place.
Like many other IT services vendors, the over-dependence on GE has been
one of Birlasoft's main sore points. While biggies like TCS and Wipro
have brought it down significantly, it's the Tier 2 vendors like
Birlasoft who still seem to be suffering. Now, at least with the
biggies, the sizes of the GE contracts are significant and that
somewhat offsets the over-dependence impact. However, other than
none of these Tier 2 players has been able to bring down this
dependence significantly. While for Birlasoft, this was hovering
dangerously around 80% two years back, it has thankfully now come down
to about 55%. But, if you look at it the other way that for a $120mn
company, the GE engagement brings in close to $65mn, the picture
doesn't look that rosy anymore.
Gupta stresses on increasing focus on the next 50 customers. His
gameplan is simple: have about 8-10 customers in $3-5mn bracket and
another 20-25 in the $2-3mn bracket over the next one year. While that
should help in giving us a 25-30% growth, we are also looking at
leveraging some of our solutions with some marquee customers more as
niche products, he adds. For example, the company plans to leverage
its relationship with DTCC to establish a footprint in derivative
services; or, its acquired automobile engineering expertise from
another CK Birla company (Hindusthan Motors) to support many of its
global customers.
Increasing productization strategy is also part of Gupta's gameplan.
While the derivative services through DTCC has helped Birlasoft with an
application on information warehouses for insurance companies, the
company now plans to resell Opensolutions DNAa retail banking product
for SMBs. This will be targeted primarily at the co-operative banks and
compete against the likes of products from Polaris. Or, it could be the
solution for Gemco, who incidentally distributes Caterpillar in India.
Another growth strategy for Birlasoft involves its increasing focus on
the domestic market. Birlasoft has now been mandated to look after and
support the entire IT infrastructure for all CK Birla group companies.
It is setting up a data center in Noida from where over the next 4-6
months it will support SAP services for the CK Birla companies. There
are rumors that within the next 12 months Birlaosoft would be handling
the shared IT services for the other Birla groups too. In fact,
foundations for that are supposedly being put in place. However, Aditya
Birla group already has the BPO entity Minacs and another IT services
entity called PSI Data Systems, so how much this mechanism will work
out in an year's time is anybody's guess. Though, presumably PSI
besides being a much smaller entity currently is handling the IT for
the BPO company Minacs only.
Birlasoft Shuffles Top Management, Plans New Growth Strategies
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