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Bharat Kumar

A niche player is focussed on its goal and its way to it.

B.V.R. Mohan Reddy

FISCAL year 2005 was a year of change for Infotech Enterprises. It began to see clients through a newly established vertical organisation.

It sold off part of its stake in a Puerto Rican subsidiary, made an acquisition of Tele Atlas India. It ended the year with an about 37 per cent growth in revenues to Rs 257.13 crore and an about 60 per cent operating profit growth to Rs 46.97 crore.

eWorld caught up with B.V.R. Mohan Reddy, chairman and managing director, for an update on his vision of reaching $100 million. Excerpts from the conversation:

In the last five years or so, even given the IT spending slump in the US, large IT companies have grown at a faster clip than smaller ones. Where do you see the future leading us to?

The difference is certainly there. But given those constraints, smaller companies that have survived are the ones who have demonstrated niche strengths. In our case, we use our GIS skills to integrate processes in industries that few others specialise in. In the power utility industry, our software helps integrate billing systems and say, GIS requirements or even use software to track transformer blowouts. For long, pure digitisation has taken place amongst departments but integration is only now catching up.

We understand that clients are now looking at more vendors to deal with, so as to reduce risk of dependence on a handful. What do you see in the marketplace?

In my opinion, two vendors are good enough per client. But, in several cases, we see security issues influencing the decision to go for three vendors. For those who have been dealing with one or two vendors, we do not see that rising to five. Every vendor relationship requires an investment of time and effort in bringing him onto your (the client's) wavelength.

Automotive is one of the verticals you service. Do you see a slowdown in IT spending among auto giants?

If you notice, GM has a captive unit in Bangalore. Daimler Chrysler has its unit in that city too. We see the growth of captive units.

In a conference call recently, you had indicated that the `harsh winter weather' affected your subsidiary Vargis' performance but that it would not be an annual recurrence. Why is that?

For our photogrammetry service, we need to make aerial surveys before we sit down to integrate the data captured. We only get certain windows of time in which to make those surveys. Now, if we see that we have three months in a year to make that aerial survey, we do as much of it as possible before getting back to processing that data. In that sense, we are getting more efficient.

In the December 2004 quarter, you had indicated that you wanted to bring down receivable days from 107 by about 15-20 days. Has that happened?

It hasn't. We are not fully happy with the receivables situation. We have now put out metrics to measure our collections, such as reason for not collection; action plan to ensure full collections; identifying individuals who are responsible for collections; and the date of collection.

You have said you have a vision to make Infotech $100 million by March 2006. What strategies do you have in place for that?

We are working on it. We have realigned the company into two verticals - one which looks at utilities, telecom and government; another which looks at engineering, manufacturing and industrial products. This has given us a customer-centric focus. Second, we are also drawing up profit and loss responsibilities for 40 senior managers. That is, sales is not the responsibility of the sales manager alone, is the message. For instance, it is important to realise that a delivery made late or that of poor quality is simply unacceptable. More of our employees are now sensitised to that goal. And third, we have made human resource development every manager's responsibility, with respect to his or her team. We are keen to improve knowledge in the domains we operate in. We are roping in more and more experts in these domains.

In the December quarter again, you had indicated that sales, general and administrative expenses (SG&A) would come down from the then figure of about 15 per cent. What is the progress?

We have a dual strategy: to improve the denominator, i.e. the revenues. We now believe that tolerance to inefficient makes the efficient person intolerant. So, we have started to judge those 40 managers again by around 12 different line items.

For example, the vice-president of sales is judged by sales revenue, profits (both numbers and as a per cent of revenues), per cent of revenues from existing clients and new clients, the ability to bring in one new service offering to clients every quarter and so on. We also measure the employee satisfaction index in that manager's group.

You had sold part of your stake in the Puerto Rican subsidiary. The layman's view is that you either find it attractive or you don't. Why do you retain 49 per cent?

We do some export control work in that facility. We do not have access to certain data there. You need to be a US citizen to be able to access those pieces of information. I was uncomfortable having a subsidiary under those conditions. But, the business is very good and growth is high. Hence our desire to retain 49 per cent. We have about 350 people there now. That should grow to 600 by 2006 December.

What is the manpower strength at the Noida centre of Tele Atlas India that you acquired recently?

We already have 600 people there.

bharatk@thehindu.co.in

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