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Vipin V Nair

These two players came together to make one big entity. eWorld tracks the post-merger scene where size could make a difference.

IT'S been many years since Arjun Malhotra got to celebrate his birthday in India. Yet, instead of taking an off on that cold January day, he was at the Techspan office in Noida, working as usual. You can't spot any change at Techspan's red brick building - it functions the same way as in the past. It's only when Arjun hands over his new card, which declares him as Chairman of Board of Headstrong, that you begin to feel the change.

Arjun and his team have a lot of work to do in these days. Techspan, the company that he built in the heady days of the Internet economy, which was into software implementation, support and maintenance, got merged with Headstrong Corporation, a US-based IT consulting company in November 2003. The new entity has over 900 people and revenues of $100 million. It has a global footprint with offices and development centres in many countries and can offer services ranging from offshore software development to technology services to consulting.

What made Techspan merge with Headstrong? "We felt that we needed to have a critical mass - of about $100 million in revenues and 1,000 people - to grow. We were about $35-40 million with some 400 people. We would have taken at least another two years to reach our present size through organic growth," he says. Along with the urge to grow in size, the demand from customers also led to the merger. "Many of our customers were demanding we should have offices near them," he recalls.

Arjun says the proposal for the merger came out of the blue. Techspan was in talks with Headstrong, (Formerly James Martin Associates) for some offshoring deals as the latter did not have a presence in India. (Headstrong had a facility in Manila). "They wanted to get some development work done from India but could not find the right partner to do that. Then we happened to meet up," Arjun says.

Both the companies found out that there wouldn't be much overlapping of work, if they were to merge. Techspan was into areas such as software implementation, support and maintenance while Headstrong was engaged in customer relationship management (CRM), supply chain management etc. While Techspan had 56 customers, Headstrong had 57 and only two customers were common for both. "This meant that our customers would double after the merger and allow us cross-selling to them. Today everyone in the new entity will have a bigger suite of products to sell. We are already handling 22 accounts jointly", he says. Arjun says more than thrashing out the financials of the deal, what takes a lot of time and effort is integrating both the companies. "It is the toughest part of a merger," he says. For instance, both Headstrong and Techspan had different rules regarding leave for their employees. "We used to let our employees accumulate their leave, while in Headstrong, their employees had to exhaust the leave before the year end. Now how do you tell a guy that he has got to exhaust all the leave he has accumulated all of a sudden?" Also, things such as pay roll, provident fund schemes etc had to be made common. Use of technology - for instance Techspan was using Peoplesoft while Headstrong was on Oracle - also had to be made the same. "The Headstrong people also didn't understand jargon such as `people on bench' that we use frequently," Arjun points out.

Going forward, Headstrong plans to have a new facility in India, which will come up in Bangalore. More people will be added in the coming months and consequently, offshore revenues will get closer to about 40 per cent of the turnover from the present 18 per cent of the combined entity. And the integration of the two entities into Headstrong should be over in the next few months. Hopefully, Arjun will be able to take an off on his next birthday.

vipin@thehindu.co.in

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