Big deals are becoming less prevalent

Written by Sudhir Chowdhary | Monalisa Sen | Updated: Feb 26 2013, 02:27am hrs
A leader with vision has a clear, vivid picture of where to go, as well as a firm grasp on what success looks like and how to achieve it. Arvind Thakur is one such leader. As the chief executive officer and joint managing director of NIIT Technologies, he has played a key role in positioning NIIT Technologies as a leading software solution provider in select industry segments. The BFSI vertical, which is one of the mainstay of the Indian IT industry, has seen softness due to overall economic uncertainties. Under its IIT bred CEO, NIIT Technologies has been securing fresh orders at a steady rate in the travel & transport, manufacturing/distribution and government segments, in addition to the BFSI segment. Arvind joined NIIT in 1985 as a member of the core team handling key organisational roles. He was the president of the software business before it was demerged to form NIIT Technologies. He is also director of Hole-in-the Wall Education, an innovative venture, which enables technology to be deployed to educate masses. In a recent interaction, he tells Sudhir Chowdhary & Monalisa Sen that customers earlier used to look for a tech partner who could help reduce cost, but now are looking for a partner who could provide business enhancement. Excerpts:

The macro-economic challenges notwithstanding, the Indian IT industry demonstrated resilience and sustained growth in recent quarters. What were the factors that contributed to this

Last year was slightly challenging primarily because of the macro economic situation. But we have seen recovery in the US, seen the euro zone issues upgrading their growth by the European stability programme being put in place. While the environment is turbulent, we have seen signs of positive improvement.

Different industry segments have had different impact from what happened in the environment. The segment that got affected the most is the financial services segment and the BFSI segment where the large financial institutions were most affected.

However, we have been seeing a strong traction in other segments like travel. If we look at our profile vertical-wise 33% revenue came from travel and 40% came from BFSI until a year back. Currently, 33% comes from BFSI and 40% comes from travel. So we have seen softness in BFSI and growth in travel. Overall we have seen strong growth and post the slowdown we have seen 30-35% CAGR (NIIT Tech) in the last two years.

Talk to us about some of the business trends in the market.

Big deals are becoming less prevalent and are broken up into smaller deals. The $100 million-plus deals are on the decline. Studies show that $25-100 million deals are growing excellently. These are opportunities for organisations for the mid-sized companies who are less likely to operate in the $100 million plus. This creates a better pipeline.

Larger financial institutions are under threat in terms of their outsourcing and off shoring. A new segment we have been focusing on is the tier-II financial services organisation. These are typically first time outsources and by virtue of being smaller in size, they have a preference of engaging with smaller specialist players. So that is opening up as a new segment and is contributing to the growth.

The value proposition in the market is shifting in terms of customer expectation quite dramatically, from a proposition which was just around cost arbitrage, to propositions looking at business value. Cost is important, but the important thing is whether we can provide business value. We have been able to put together solutions in engaging our customers in providing that shift for our customers.

Do you think the worst is over for Indias IT & BPO industry

I definitely feel the coming year will be better than last year. The stress that we saw in the environment is easing.

Do you see enterprises trying to invest in growth, instead of cutting back on spending

Yes, like I mentioned earlier, the focus is not on cost arbitrage, but is on business value. Can the tech partner help me in generating more revenues Can my tech partner help me provide a better customer experience, because that helps me generate more revenue The orientation from cost arbitrage is turning to enhancing business. Customers earlier used to look for a tech partner who could help reduce cost, but now are looking for a tech partner who could provide business enhancement.

How was the quarter (ended December 31, 2012) as a whole for NIIT Technologies

Very good, we grew 19% last quarter basically maintaining the growth momentum. In fact, NIIT Technologies has had a robust financial performance in 2011-12. The company has performed consistently over the last seven consecutive quarters despite all odds beating the industry performance. This fast track growth has set it on the path of higher momentum for coming quarters.

Brief us about your international operations.

What is unique about NIIT Technologies is that business is balanced across all geographies. 36% revenues come from US, 40% from Europe and Middle East and the balance is from Asia and Australia. So it is relatively balanced across all geographies, and that provides us a good platform for growth because the risk associated can be mitigated. Our business continues to be good and balanced across all geographies. We have seen all our top clients grow, across all geographies, and that is a good sign because in the services business particularly it important for major clients to grow and we see that happening well in the travel space in US and Europe.

The new geography that we have opened up and gained good traction is the Middle East and we would like to consolidate our presence there for now. The acquisition of Sabre Holdings Philippines development centre reiterates NIIT Technologies expertise in the travel segment and global delivery capability showcasing our deep domain knowledge. Manila is a proven destination for BPO services and the Manila Centre is the hub from where NIIT Technologies will provide services to Sabre and its other customers.

Everybody is talking about cloud computing. Is it a reality now

Yes, cloud is an absolute reality. It is a fairly thriving business with a new model. Its adaptation is more relevant and prevalent in the small and medium enterprise (SME) space. Many solutions are offered in cloud, opening a whole new segment. As a business, so far we were focused only on large customers. If you look at the business model of software services companies, they go after large customers; investors also want to know how many Fortune 500 customers you have. But cloud, gives you the ability to go after small customers.

For example, we have taken many pieces of software and made it multi-talented. So we have a core banking solution in cloud, where many small banks are customers. We have many co-operative banks as our clients who cannot afford a full blown core banking solution. But they use our service and they get all the core banking done by services that we provide. Another is the e-procurement space where the customers engage with us and the business model is a commercial model and is based on usage. It can convert a capex model to an opex model.