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Mindtree to spin off an independent subsidiary

Last updated on: May 22, 2014 10:17 IST

Mindtree, the mid-size information technology (IT) services company, is in the process of spinning off a start-up venture begun by a group of its employees and incubated by it over the past two years.

The start-up, yet to get a name, has developed a solution called VMUnify, enabling unified clouds. 

It helps organisations in delivering infrastructure-as-a-service with secure virtual data centres and unified cloud environments.

“While a company like Mindtree can incubate an idea, it becomes hard to help in scaling up the company.

Hence, it has been decided that it is best to let VMUnify become an independent company,” a senior Mindtree official told Business Standard, requesting anonymity.

“The new company will function independently and won’t even be a subsidiary of Mindtree. In all probability, Mindtree will only hold some minority stake in the company. In the future, if VMUnify becomes extremely successful, Mindtree will get its returns back.”

The VMUnify cloud enables commodity hardware to turn into public and private cloud infrastructure, and gives the feasibility to create and run a range of cloud services.

Commodity hardware is a cluster of inexpensive devices enabling parallel computing. VMUnify currently has around 10 clients and has started generating revenue.

The start-up is headed by Giridhar L V and there is a team of around 20 persons working on it.

According to VMUnify’s website, its clients include CtrlS and Trimax, while it has technology partners such as Microsoft, VMWare, Dell and Amazon.

New premises

“The team (of VMUnify) has taken a new office space last week and would be moving out of the Mindtree premises soon,” the source said.

“So far, the start-up has been funded by Mindtree. Going forward, they might look to raise funding.”

VMUnify was one of the ideas shortlisted as part of Mindtree’s innovation initiative called 5/50, started in 2010.

It had invited employees to share business ideas that could generate $50 million in annual revenue over five years. After this experiment, the source said, Mindtree might look at more such spin-offs as and when possible.

“The 5/50 initiative has run for two years, and there have been some successes and some ideas that did not work out. VMunify is a first-time experiment that Mindtree is doing and it might do more,” he added.

Precedents

This is not the first time an IT services company would incubate a start-up and spun it off into an independent entity.

Among others, India’s second largest IT services company, Infosys, has in the past spun off at least — a mobile value added services firm, OnMobile, and Yantra Corp, a management solutions company, subsequently acquired by SBC Communications.

In 2013, Infosys had formed a special innovation fund of about $100 million in a move to give a fillip to its products and platform business.

The company had said the money would be used to fund the ideas of people within the organisation or outside which were in line with the company’s Infosys 3.0 strategy.

Itika Sharma Punit in Bangalore
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