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Krishnan Thiagarajan

Geometric Software offers eWorld some insight into its strategies for survival and success.

A view of the Geometric facility

UNDERSTANDING the business model of Geometric Software holds the key to unravelling its future. In the three years since its IPO, Geometric has gone from being a product-focused company to a services company, operating in the specialised Product Lifecycle Management (PLM) space. It has struck relationships with software OEMs and established a string of strategic partnerships to offer offshore software services in this space. Shashank Patkar, Chief Financial Officer of Geometric (and till recently head of their Geometry Division) spoke to eWorld on the dynamics of their business model.

Shashank Patkar

How has Geometric managed to stick to its core competence of PLM, when most players in the market have broad based across different verticals?

Customers are demanding cost-effective solutions. And today, India Inc. has established itself as a preferred outsourcing partner, not just on a cost basis, but even in people, processes and relationships, we have established high repute.

With Geometric, we have specialised as a company in the product life cycle management (PLM) space. There is no doubt that there have been many attractions in the market and everybody is growing by leaps and bounds. But we have stuck to our core competence, because we feel that there is enough market, which is as yet untapped. We feel that we could give the best return for the dollar our customers invest in the PLM space.

In the past three years since your IPO, you have migrated through several business models. Starting from the product model spelt out in your IPO, you have shifted your focus to software OEMs and partnerships/strategic alliances last year. And this year you plan to take a leap as a systems integrator. What have been your lessons from this change?

Our differentiator has always been our strengths in building our own technologies, our own IP (Intellectual Property). That helped us in entering into relationships with (software) OEMs. OEMs felt that Geometric understands CAD, CAM, geometry and mathematics. We established ourselves at the OEM level. Then, we also started developing our own products, which OEMs were comfortable in co-branding. Take for instance, our Feature Works product. The IP is owned by us, but it is branded by Solid Works. We've graduated into that area.

However, we found that though there was consolidation within OEMs, their licence revenues were growing by single digits or on the lower side of that scale. Hence, OEMs decided that they would start including services in the portfolio of offerings to their client. As long as they were in products, they had fixed R&D budgets, people and the peaks and troughs were under their control. But the moment they (these OEMs) entered into services, they wanted a partner who could manage their peaks and lows. They did not want to hire permanent employees and burn their fingers in services. That is when we came into the picture. And the idea is to service end-users (say, in the automotive, aerospace or manufacturing domain) through these OEMs with a range of service offerings. This relationship made sense because we did not have the bandwidth to go on our own and start establishing sales offices across the globe. Today, some of our partners are OEMs themselves such as EDS, Dassault Systems or IBM Global Services. For us, it was a logical extension of our strengths established in software writing to move into services and go to the end-users through these partners.

Your stated intent is to bring in more predictability in your revenue streams through services. And to convert these OEMs and partnerships into offshore development centres. How has this worked so far?

Your assessment is right. But I would say, we see partnerships in two ways. For some partners, the engagement will be mainly at the resource augmentation level. Basically, they do not involve us pre-sales, project mapping and all. They do everything on their own, close the orders and approach us for resources to fulfil these project requirements. To some extent, Wipro, HP or IBM Global will fall in that category. Mainly, our traction will start at the resource augmentation level and grow from there.

At the second level, there are solution providers who specialise in providing PLM solutions in the local markets. Take SoftLab, which is a 100 per cent owned IT provider for BMW. They provide this auto major with everything in the IT domain, which includes PLM solutions. Or take Volvo IT or Ford's Information Centre at Chennai or even focused PLM solution providers such as Agrographics in Japan. All these players require partners like us. These are large players who have 50 or 60 people serving in the solutions market. And cost-cutting has become an imperative for them.

So, some of them are looking at the offshore model and running pilot projects with us. If these projects are successful, they will start forming ODCs (offshore development centres) with us. It will thus, be a win-win for both. They feel that rightsizing with a smaller company will be better as closer interaction is possible. And the end-users working with solution providers are demanding partners who are focussed on PLM solutions. The design community has remained quite conservative so far. Basically, because of IP issues. And they were the last to outsource. But they are slowly opening up.

How are you using your product expertise to complement your projects and services strategy?

We have now given products a special focus. We want to monitor our R&D and utilise our IP or products or mini frameworks or whatever we develop in improving profitability in our solutions. When we develop say, a mini product. There may be two or three partners looking at solutions in the same area. What we say is that we have our mini kernel available. We will sell this on a licence fee basis or as a solution, while we retain the IP. Hence, our profitability improves, while the benefit for the customer is that he gets it at a comparatively lesser price.

maverick@thehindu.co.in

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