Starting up and staying on

Vipin Kumar

NOVEMBER 2000. Arjun Malhotra is meeting journalists at the redbrick TechSpan building in Noida.

The company is planning an initial public offer in India next year and for that he has to recast the firm's structure. Everything is hunky-dory. ''We will be spending about $4 million in research and development during 2001. We have about 700 employees now and we are adding 30-50 people every month,'' Malhotra, who co-founded HCL Group 25 years ago with six others, is bullish on the future of TechSpan, an e-biz integration companyProjected turnover for 2000: $70 million. Growth forecast: 50-70 per cent.

December 2001. eWorld catches up with Malhotra, the Chairman and CEO, in the same room. He looks slimmer than last year. Just like TechSpan, which has shed some 266 people. Plans for IPO? Uncertain now. Number of people? Down to 400. Revenues? $65 million last year. Forecast? Around the same for this year too.

Much water has flown under the bridge in the past 13 months.

And like many other technology firms, TechSpan too has seen the highs and lows of the digital world. But how did TechSpan, started in January 1999, manage to weather the effects of a slowdown that has beaten the hell out of many a start-up? What were the steps it took to come through this phase? Let's hear the story from the horse's mouth.

''In July 2000 itself we felt that we were growing too fast. We were 700 people and revenues were to touch $65 million by the end of the year,'' he says. So TechSpan decided to stop further recruitment and decided to focus on putting processes in place. And by December, the pall of gloom was beginning to appear on the horizon. And it decided to part with the 266 people on contract as a drastic step to cut costs. Come March 2001, and TechSpan asked all its executive staff - Vice-Presidents and above - to take a 20 per cent salary cut. ''We decided that no one below a salary of $50,000 should suffer. So we spared them from the salary cut,'' Malhotra says. The next step was to re-locate 47 people in the US to India as it became apparent that the slowdown was forcing American clients to prefer outsourcing their software work. ''My people were really happy when we gave them the option to join our team here rather than chucking them out,'' he says. Since then, the onsite-offshore revenue mix has changed considerably in favour of the latter.

During the difficult times, TechSpan decided to concentrate more on its existing clients rather than acquiring new ones. And that strategy helped. Not only did the clients give more work to TechSpan, who stood with them in their trying times, but also offered contracts of long tenures. ''We may have had to slash our rates a bit, but that helped us get long contracts. For our people, this meant that assured jobs for a longer period.''

This phase has also made TechSpan institutionalise the expertise it has developed. ''A lot of expertise is created within a company but most of the times, it remains with individuals. We have now captured this knowledge so that others in the company can also benefit from that,'' Malhotra notes.

So TechSpan has created a data base in verticals like B2B, Enterprise Application Integration and Application Management and put it in the intranet. The Chief Technology Officer vets and edits the database before it is released on the intranet. ''We would have done this earlier also, but this slowdown has accentuated this process,'' Malhotra explains.

After these measures, TechSpan is now again back to its self. It has started the recruitment process again, almost after a year, aimed at doubling the number of consultants to 200 in the next two months. The company recently bagged five contracts worth $1 million each. A new facility is also being planned nearby, which should be complete by July next year. The number of active clients now stands at 80.

Could a start-up have fared better than this?

Pic.: Mr Arjun Malhotra, Chairman & CEO, TechSpan.

vipin@thehindu.co.in

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