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Digital India aims to emerge from Compaq's shadow

Software services firm Digital India says it plans to cut its business from its US parent Compaq Computer Corp to 50 per cent from 88 per cent to reduce dependence on its biggest customer.

"We are working towards a 50:50 (Compaq:Independent) ratio within the next two or three years," Som Mittal, managing director of Digital, told Reuters in an e-mail interview.

"While the largest chunk of revenues will come in from Compaq projects in the current year, we would have made deep inroads from what we call the external customer space," he said.

Bangalore-based Digital earned 88 per cent of its fourth- quarter revenues of Rs 625 million ended in March from Compaq which owns 51 per cent of the firm.

"Something like a quarter of our business should come from non-Compaq customers and that should happen while we exit this current financial year," said Ashish Basu, marketing head at Digital on Tuesday.

"Our own ability to make sure we can stand on our own and we can compete with similar companies in this business," has led Digital to boost business from other clients, Basu said.

Nortel Networks, NEC Corp and Riverstone Networks are a few of Digital's big clients while Sony Corp and Oracle Corp make up the smaller clients on its 30-odd list, Basu said.

"The 50:50 ratio targets greater diversification of revenue streams from current levels and this will be achieved through working relationships with an expanding independent customer base across various geographies," Mittal said.

Digital services clients through its 1,000-plus engineers who work in India and from "onsite" places which involve work done abroad at client sites.

Its net profit rose three-fold to Rs 185.4 million in the quarter ended March from 61.7 million a year-ago. On Tuesday, Digital's stock ended up two per cent at Rs 594.55. It has surged 24 per cent since it reported its results.

CAUTIOUS OPTIMISM

Despite an economic slowdown in the United States hitting the high export growth rate of India's software sector, Digital remains upbeat.

"We are watching the slowdown with cautious optimism. While the effect of the slowdown will be felt by us, we feel we are well-positioned to brave the downturn," Mittal said.

Digital's status as Compaq's subsidiary will help it absorb the growing outsourcing needs from Compaq while a global expansion will be another growth driver for business, Mittal said.

"With the recent addition of offices in Belgium and Tokyo, we will be in a strong position to tap opportunities in Europe and Asia Pacific," he said.

The United States contributed 81 per cent to fourth-quarter revenues while Europe kicked in 14 per cent and Asia-Pacific contributed five per cent.

"Our strategy to work with key channel (alliance) partners, some of whom we appointed recently, will enable more efficient and quicker market penetration in the respective geographies," Mittal said.

Digital is investing Rs 750 million this year to expand its software centres and increase staff by 500 to 1,700.

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