The Hindu Business Line : `Elixir' of business

Elixir, Mastek's component-based solution for the insurance sector, has opened up a new window of opportunity. And the recent 10-year licensing agreement signed by Mastek with Capita Life and Pensions, UK, for Elixir, ranks as one of the significant deals struck by the company. eWorld spoke to Sudhakar Ram, Chief Executive Officer, Mastek, on how this solution gives it competitive advantage vis-à-vis the company's offshore peers, and other related issues.

For the US operations, the sequential growth seems to be strong, but the profitability still remains weak. What are the factors at play here?

There are two factors to consider. One is our basic IT operation in the US. The other is Carretek, our BPO operations, which is still incurring a loss. And we do not expect it to turn around through this year. So, that (the BPO) is distinct from the US operations. The US operation has moved considerably positive. The last two quarters have been good. We are on track to meet our numbers. The growth has largely come out of our existing accounts. We are consolidating our position and increasing the share of wallet in each of those accounts. The key challenge in the next six months is to add the new accounts. We have added an insurance account in the last quarter and do expect quite a few insurance accounts to get added in the next two quarters till June.

What has added to this confidence in the last couple of quarters in the US?

What we have there is a very unique value proposition (in the form of Elixir, the component-based insurance solution). First, if you look at companies that provide insurance product solutions, they are all very small. This is apart from CSC, which is an 800-pound gorilla. All the other players are in the $30-40 million range. Compared to them we are much larger. If these companies spend 15 per cent of their revenues on R&D, it works out to $4-5 million. Our Elixir platform, with rich functionality across different modules and product lines, can easily match up to any of these products and do far more. Our edge today is not in standard operational products, but it is about components that help configure solutions for the specific or unique requirements of customers. To that extent, the fact that we have an enterprise platform, good architecture and a component framework to support that architecture is unique. The second thing is that all these insurance projects turn out to be large. Even though it is a product implementation, the fact that you have to integrate and connect them together and plan for the future are all 200-300-man team kind of efforts. . For most product companies, the entire staff is 100 people. But we can take on these because we have 3,000 people. Moreover, they do not have the process maturity or project management capability to carry these large projects to completion. We have a good track record. Eight of the top 20 insurance companies are our customers. We can give them a solution not only for today, but a solution alive, up-to-date and on a customised basis for the rest of their lives.

From the time you went to the US last time and this time around, how has your approach changed?

Our understanding of the market has changed. Last year around the same time, I didn't think people would want to replace their existing legacy systems. But the same companies are willing to talk today, even though these involve long decision cycles, typically taking six to nine months to close. Second, we have cut out on the number of alliances we had and other distractions and put the team completely behind insurance.

How do you see your positioning in the insurance space vis-à-vis other offshore service players focussed on this vertical?

We are not playing in the services space in insurance. What we provide is solutions. For instance, we will not pitch for a large maintenance engagement with an insurance company. Even for development, we would lead with our component framework and go with our architecture.

In this space, who are the competitors?

Someone like Accenture, because of the size and complexity of these projects. This space today is contested by the Big Five and the product vendors.

For Elixir, what is the scale of investments that has gone into it and how will it impact top line and margins?

We started work on Elixir in 2000 and today it is 2006. More than the margins, it is the top line that will see improvement, to start with. As we do more of solutions work, our margins will also improve. But more than that, this will help us win new business. It positions us differently and it is a key competitive advantage. Components are an overused term, but what we have are business or functional components. We have components for handling agency, portals, channel compensation, underwriting or new business. For somebody like Capita group to select us is something. For BPO operations, every business that they take on is completely different in terms of products, lines of business, workflows or processes. They evaluated all that and reached a conclusion that Elixir is something that meets their requirements. It validates our own internal assessment.

What is your agreement with Capita Life and Pensions?

Like a product model, we will get licensing revenue, customising and implementation; generate transaction fee and annual maintenance charges. It will have the benefits of a product and a solution. It will be an annuity kind of relationship, but there will also be lumpiness in revenues due to customisation. What will smoothen it out is how many customers they (Capita) win. If every year they win one new customer, it becomes smooth for us. But if they win three customers in one year and no customer in another year, then it creates lumpiness.

maverick@thehindu.co.in

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