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Small IT firms go for focus in a fight for survival

Subir Roy in Bangalore

How are small software companies surviving the slowdown and price competition from large integrated software companies which are able to offer themselves as one-stop outsourcing partners to global companies?

Mindteck (India) Ltd, with a 2001-02 turnover of Rs 14 crore and 350 people, is seeking to fight the slowdown (its Mumbai listed share is trading at low - for an IT company - PE multiple of 10) and make good the way analysts say such companies should - by becoming clearly focused, in terms of technology and geography, and also having a minimum cash flow from conventional services.

Mindteck, which acquired its present form as a result of consolidation in 1999-00 of several acquisitions by Taib Bank EC of Bahrain, is also actively looking at inorganic growth.

It has "multiple merger plans and strategic partnerships" on the anvil which, as and when they come through, can change the nature of the company.

Sumit Ganguli, group CEO who took over last August, identifies the technology focus areas as embedded systems, test and measuring equipment, semiconductor tool manufacturing and wireless.

The geographical opportunity is dictated by Mindteck's parentage, Taib Bank EC of Bahrain, which holds a 74 per cent stake, and has prompted the company to look at the banking and financials sector there.

Business in the region is relationship based and the company is already executing a data cleansing order in a regional bank.

Ganguli is upbeat for having tied up with eight new customers in the last three months in the technology field.

They include two large global semi-conductor tool manufacturers and a player of similar standing in electronic components.

He attributes this to the emphasis in the company on marketing. He himself is based in the US.

"We have a strong sales engine and have been talking to customers and doing pilots. We have a consultancy approach and focus on forward looking technologies and build around them."

Explaining why companies which have invested upfront heavily in technology are in trouble, he says, "acquiring a client takes longer than creating an IP."

Technology is a dynamic field and the idea is to be in the space, like web based services, which will rule the roast when the next upturn comes.

The embedded capability comes from Hinditron with which Mindteck performed a reverse merger in 1998 and accounts for nearly 30 per cent of the company's revenue.

Manpower placement, onsite supervision and software development (business applications) accounted for the rest of the revenue.

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