The Hindu Business Line : More nests for your eggs

The US economic slowdown indicators may not have impacted revenues of most large Indian IT companies but they have certainly made them more cautious in designing their future strategy — seeking a few, in some cases, new verticals.

eWorld spoke to some tech companies on where they see markets of the future.

Infosys Technologies sees opportunities in retail, manufacturing, energy and utilities, transportation and logistics. Currently, a large portion of the company’s growth comes from financial services and telecom. “We are hiring domain experts for these (new) verticals to strengthen the front-end,” V. Balakrishnan, Chief Financial Officer of the company, says, without putting a number to the proposed headcount increase.

The company is creating industry-specific solutions to move up the value chain and drive growth. Over the last two years, it has developed and filed for 95 patents to protect its intellectual property. It will begin commercialising these patents next fiscal onwards, although it is not known how much revenues these will generate.

MindTree Consulting has seen growth in the retail, media and construction sectors in the last few quarters and is planning to apply expertise from its existing verticals such as Hi-Tech and Research & Development to develop applications. “Traditionally, these industries focused on spending money for customer acquisition and not on technology. As a result, their rate of technology adoption has been low. But today, customers are demanding niche products. To make them available for a vast population, these companies need technology to map data,” explains Salil Godika, Chief Strategy Officer, MindTree Consulting.

In retail, the company will focus on multi-channel commerce, analytics around point of sale data, merchandising and back-end supply chain. “Our work in areas such as mobility, wireless and RFID (radio frequency identification) will be applied here,” he says.

In the media vertical, the focus will be on content management, including managing front-end customer interfaces. Coming to the construction vertical, Godika says though scope is currently restricted to Asia, demand is tremendous. “We are working on developing a SAP module for the construction industry so that clients can manage projects,” he says. To gain footing in these new markets and differentiate itself from the competition, MindTree will focus on providing ‘first time right’ solutions rather than only delivering projects on time. “We will also develop productised solutions that are repeatable,” Godika says. The company is hiring domain experts and putting employees through relevant certification courses.

Polaris Software Lab, known for its focus in the banking and financial services space, plans to remain rooted in the area. Instead of focusing on other verticals, the company will look at ‘micro verticals’ in the banking space. These include areas within investment banking and wealth management, such as delivering a complex derivatives project for a Wall Street bank, designing the cash and liquidity platform for a UK bank or a risk management solution for a global bank. These projects will be billed higher than the regular IT off-shoring services.

R. Srikanth, Executive Vice-President and Chief Financial Officer, Polaris, explained the strategy. Initial reports on the sub-prime crisis pegged direct losses of $50-100 billion (Rs 2 lakh crore-Rs 4 lakh crore) on the banking industry in 2007. They also predicted a possible slowdown in 2008.

”However, recent reports predict that technology spends by banks will increase as they will offshore more complex work related to micro verticals and use Indian IT companies for high-end consulting, besides regular application development work,” he says.

The company has over 70 clients and about 80 per cent of revenues come from existing customers, whose collective IT spends are close to $60 billion (Rs 2.4 lakh crore). Polaris will bank on this situation by growing its product business called Intellect and will see more product licences this year. (From contributing about 8 per cent to revenues two years ago, Intellect today contributes 20 per cent to revenues).

NIIT Technologies too will focus on existing verticals and offer solutions that are ‘non-linear’ — where revenue growth is not proportionate to headcount growth. This includes services such as remote infrastructure management, IP-asset based solutions and offering software as a service, says Arvind Thakur, Chief Executive Officer, NIIT Technologies.

Growing tall to forestall fall

HCL Technologies has been talking of a ‘vertical strategy’ for some years now and is betting big on emerging verticals such as life sciences and aerospace. “We expect these verticals to do well because there are business pressures to become more efficient and stringent regulations — both of which can be handled through IT adoption,” says Suresh Sundaram, Vice-President-Marketing, HCL Technologies.

In the life sciences area, the company will focus on sales, marketing, plant automation, regulatory compliance and clinical trials management, while supply chain (original equipment manufacturers (OEMs) and tier-I supplier integration) and pre-product development will be key in the aerospace industry. “We would like to deal with customers wanting significant change in their IT landscape — not those who want to maintain status quo. We will partner with companies looking to reduce their technology complexity and increase focus on business needs,” Sundaram says, outlining the company’s differentiating factor in the light of competition.

Satyam Computer Services would like to increase focus on the banking, financial services and insurance (BFSI) and the travel, transportation and logistics (TTL) segments.

The company has traditionally looked at a ‘markets’ strategy (combination of vertical and geography) rather than a vertical strategy. For instance, the automobile sector in the US constitutes one market, while the automobile sector in Japan is another market. The company has 150 such markets and depending on economic indicators, it would pick and choose where the next year’s business may come from.

Explaining the rationale for being bullish on BFSI and TTL, Shailesh F Shah, Chief Strategy Officer of the company, says “In BFSI, we are currently in a cycle where interest rates are at a low. But it will not take long for the cycle to be up. When that happens and banks bring in profits, they will be keen on cost reduction. This translates into increased automation.” Applications around managing risk, serving retail clients and consolidated solutions encompassing Internet banking would be part of this.

Similarly in the TTL segment, a lot of energy has been spent on sourcing goods from developing nations to developed nations. “In the future, people will look at deriving an arbitrage benefit from this and look for appropriate cost-cutting solutions in areas such as transportation,” he says.

archana@thehindu.co.in

More Stories on : Business Models | Trends

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Modern face of historical city

Wave the Web wand

Nurturing talent and health

System trouble

Optimistic note

‘Improving by the day’

More nests for your eggs

Quiz

Cartoon