The Hindu Business Line : Hitching up for an easier ride

CALL it old wine in new bottle. In their enthusiasm to capture the global market, Indian T companies are now pitching forward with `strategic alliances'.

That seems to be the new buzzword after `mergers', `acquisitions', `joint ventures' and the like.

But their significance doesn't lie in being catch-words alone. Before we get on to what `strategic alliance' means, let's take a look at what kinds of companies opt for such partnerships. ICICI Infotech has forged an alliance with Veritas and Hitachi to offer integrated disaster recovery solution. This would help the firm to tap the $1.3 billion disaster recovery Asia-Pacific market.

The Pune-based Kanbay has teamed up with Kabira Technologies Inc., Partners Consulting Group LLC and Centerpost Corporation. Kabira would focus on supporting the development and deployment of advanced payment services for financial institutions around the world. The company's alliance with Partners Consulting Group LLC will help offer clients' financial services knowledge and a full lifecycle of services.

Kanbay would provide multi-channel notification service to help increase customer intimacy strategy in the global financial services market through its alliance with Centerpost Corporation.

Staffware partners has joined hands with ICICI Infotech to provide Business Process management (BPM) technology in the finance sector. There have also been instances when strategic alliances have turned into a total buyout. An example is Tracmail. How does the industry view this trend of alliances? Manoj Kunkaleinkar, Executive Director and President, ICICI Infotech, commenting on the tie-up with Veritas and Hitachi says, "Organisations have started realising the importance of disaster recovery (DR) and there have been attempts to put solutions in place, especially in the BFSI sector." He says that there is no single vendor who provides a complete solution. Issues that arise due to multiple vendor engagements are crucial to the success of implementation. "Our tie up with the likes of Hitachi and Veritas is to address this urgent market requirement as we see immense potential for DR in India, which is growing at 36 per cent compounded annual growth rate (CAGR)."

According to a survey by the University of Texas, Centre for Research on Information System, of all the companies that lose data in a disaster, 90 per cent are out of business within two years and nearly 50 per cent of organisations never re-open after a major disaster. Global incidents such as 9/11 and other catastrophes have made organisations realise that DR is not just an IT requirement, but a business requirement as well, since disasters can impact the overall business of the company and credibility with customers.

Besides business compulsions, there are regulatory guidelines prompting organisations to deploy an effective DR Plan in India. For example, the Reserve Bank of India has issued guidelines recommending implementation of an effective DR Plan for the banking industry.

Is this an emerging trend?

Paul Maguire, Country Manager, Staffware India says, "Yes. I strongly feel this trend will continue to grow globally." Anand Ramakrishnan, Vice President of Card Services for Kanbay notes that alliances are an important component of every company's business development strategy today. "Companies such as IBM, Oracle, and Siebel utilise the alliance strategy extensively as a business development channel. Kanbay utilises alliances as entry points into new clients and as an alternate channel for developing new solutions," he says.

Most financial services institutions are looking for a comprehensive solution from their consulting partners so that they do not have to manage multiple vendor relationships to ensure the success of a project. This trend is one of the drivers behind Kanbay and other consulting companies seeking out strategic alliances, according to him.

Arjun Vaznaik, Chief Executive Officer of Tracmail, notes that there are multiple ways of reaching the end goals — strategic partner, joint venture, direct acquisition, mergers, management business maturity — and he is following all of them. There is no particular methodology or any particular route to follow, so this is also an emerging trend in the industry. Maguire says that according to research firm Aberdeen, worldwide spending in Business Process Management (BPM) would increase to $6.32 billion by 2005 from $2.26 billion during 2001 at a CAGR of 29.3 per cent.

The market for BPM solutions in the Asia Pacific region is expected to grow from 20.7 per cent in 2003 to 36.1 per cent in 2005.

"This is a huge market opportunity, but it is not possible for us to tap opportunities that exist without assistance," he says. He says, being a global organisation, its market spans continents and in order to tap these markets optimally the company has adopted a two-pronged approach — direct sales method under which it provides the Staffware Process Suite to its customers. After this, the implementation is completed either through the client's partner of choice or the internal IT department.

The other alternative is to forge marketing and implementation alliances with local partners happens to provide a `glocal'— or a combined global and local — approach. Kunkaleinkar is quick to point out that a strategic alliance is one of the ways in which a company can catapult itself to regions that are still green territory.

"Alliances would have an impact especially when companies who have a great product are unable to reach the masses just because they are not `known' in the circles."

But, will the next logical step be the buyout of the partner? Not necessarily. How can a comparatively small company in India think of buying out alliance partners who are many times its own revenue? Make the best use of resources available from the business partner and use that to rein in more customers, seems to be the writing on the wall.

Though acquisitions are not ruled out there are some specific conditions that are to be met before it materialises. Staffware has no immediate plans for an acquisition, but Maguire points out that as a company focussed on product development, a company that adds value to Staffware's core strength would be a target.

However, Tracmail has become an exception after it acquired alliance partners, Webhelp and Spherenomics. According to Vaznaik, Tracmail had formed two strategic alliances; one with a US-based company which has domain expertise for financial services and another for telecom. Tracmail is India's first call centre and offshore outsourcing provider and has recently entered into an agreement to combine operations with its partner firms, Webhelp and Spherenomics, to form TWS Holdings.

This merger would help strengthen the client sales support as the company has offices in San Francisco, Seattle, Chicago, Toronto, Montreal, New York, New Jersey and Boston. The combination along with major call centres in Montreal, Mumbai and Hyderabad allows offshore customer service alternatives and us to provide near-shore." Thus far, what has been the benefit from such alliances? According to Maguire, the answer to that question includes shared business plans and review process, key account co-ordination teams, education and training programmes, Market Development Fund (MDF), Online Staffware Partner Directory listing and to Staffware, greater reach, local expertise and increased client satisfaction. Vaznaik also echoes the same view and noted that the benefit for his company is extended new domain, his personnel's have gained expertise and have landed up with new clients and thereby has created centres of excellence.

Ramakrishnan notes that Kanbay's core competency is not product development, but IT strategy, application architecture and package integration and implementation. "We rely on alliances with product companies to provide an end-to-end solution to our customers," he says. The benefit is that its current and potential client base benefit from the alliance's product solutions and "Kanbay aligns with companies who look at us as enablers, not as competition. It also tends to look for technology applications in other industries which can be adapted to solve similar problems faced by the financial services sector."

He says that Centerpost Technologies is a company that develops products for companies to provide customer service via multi-channels, alerting via e-mail, voice-mail, pager and the like. The technology was proven in the airline and transportation industry. Kanbay and Centerpost's alliance help develop solutions for credit card companies and banks to enable customer service alerts.

Similarly, Kabira Technologies is a market leader in the telecommunications industry; our alliance is to leverage their real-time platform and adopt it for transaction switching in the financial services sector.

Commenting on the alliance Kunkalienkar, says, "Confidence in the software market in India suffered along with the global technology slump but, in recent months, it is showing signs of recovery. We have found that major banks and financial services companies are looking to revamp their offerings and hence upgrading their IT systems in line with new services being offered in the market. That's where our alliance helps. "

Maguire says, "What we see in India is an evolving financial culture where consumer attitudes to spending are beginning to change. As part and parcel of this, banks are able to offer a greater variety of products and services, and it has been interesting to note that the take-up of these new retail finance products has seen national banks significantly outstripping foreign banks in popularity. With banks now looking to expand further on finance initiatives, it is technology and the need for greater process control that is underpinning these services. For Staffware, this is an ideal opportunity to deliver workflow technology into a market where it is of considerable benefit."

Looks like the Indian software industry is still testing waters to see which of the options would deliver better results.

rsavitha@hotmail.com

Picture by K. Pichumani

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