8th September, 2003
We had been trying to meet Mr. S. Srinivasan, CMD, SRA Systems, for about a year or so. Every time Business Line made a request for appointment, the stoic response would be that there was nothing new to talk about. Finally, last fortnight, when Mr. Srinivasan himself called for a briefing, we knew some news was on the way.
According to Mr. Srinivasan, “We had 16 new clients in the period between October 2002 and August 2003.” This is significant because, in the previous 18 months, the company had no new client additions.
So, are small and medium-sized businesses heading for better times?
Clearly, bringing home the bacon is less difficult. But is it because the biggies have kept off smaller deals that they fought for in the past and are now confining themselves to the big-ticket orders? Yes, say some. Mr. Srinivasan feels, “IT majors used to pitch in even for $200,00 size orders. Now that is not so.”
His reasoning is that for orders of smaller sizes, the client was not certain if a big IT vendor would devote the same attention accorded to a client with a bigger order size. “So, smaller clients with small deals prefer smaller IT companies,” said Mr. Srinivasan.
However, most others in the industry disagree. “IT majors are there even at the $50,000 order levels, leave alone $200,000!” said Mr. Giri Devanur, Chairman & CEO, Ivega Corporation. But he does agree that more and more small clients, who had not looked at India as an outsourcing base, are now doing so. Mr. K. V. Ramani, CMD, Future Software, feels, “Some of the biggies have dropped prices below cost, to get orders from medium and small sized companies.” He said that his company obtained a new order, which was, “within a few days, given to a biggie, since they dropped prices very low! (sic).”
Mr. Ramani said, “They are desperate to show 30 per cent revenue growth at the cost of profits.” Ask Mr. Anand Sudarshan, CEO of Bangalore-based Netkraft, about this and he said, “Small companies are not any more or less hampered now than earlier. Post-2001, large companies, Indian as well as global, reflexively competed on terms that were simply not sustainable for them. Companies have become used to the slowdown and the sales compulsion or the desperation is not there any more.”
On his company’s performance, Ramani says, “Year ending March 2003 was flat over the previous year. The current fiscal looks promising. We expect a 30 per cent growth in revenues.” The company has seen more new client visits so far this year – in five months – than the whole of the last year. Future has 4 more new clients this year as compared to the last.
Mr. Anand Sudarshan, said that his company doubled revenue in the last year compared to the previous one. He added, “We have entrenched ourselves in enterprises that we had begun doing business with. That is a good sign.” Which brings us to the question: What have small companies done recently that they fare better now than in the last two years? A common answer to this is that companies have developed domain focus and expertise that help them garner orders against biggies who might have a finger in every pie. Netkraft said its expertise is in retail and distribution and in healthcare, while SRA Systems’ focus has been on developing proprietary tools that are used in the healthcare and financial services sectors. Future Soft has been focussed on telecom solutions’ space. Mr. Ramani said, “We now use the royalty model for revenues. This gives clients the advantage of lower cash outflow, as they pay us as only they sell.”
The Chennai-based Megasoft Ltd, which made a net profit of Rs 28.39 lakh in the year ended June 2003 compared to a net loss of Rs 1.04 crore for the previous year, is looking at the “consortium approach.” Mr. Naresh Nagarajan, Chief of Operations at Megasoft, said, “Today’s CIO has three priorities: application outsourcing, business process outsourcing and managed services outsourcing.” Megasoft, in partnership with InterPro, a BPO player and with an infrastructure player presented solutions as part of a consortium. He claims it helped him win a project with a large financial clearinghouse in the US.