iGATE Global Solutions is basically a turnaround software company. The company has a new strategy and game plan to acquire new business. Pravin Palande of The Financial Express spoke to Phaneesh Murthy, CEO, iGATE Global Solutions about the software industry in general and the company's growth path in particular. Excerpts:
iGATE is basically a turnaround company. What were the factors that put the company on the growth path?
There are a number of factors that help turnaround a company. First among them is having a new strategy and game plan, and acquiring new customers based on the strategy. Second, is in creating very strong operations focus and discipline. Our iTOPS (Integrated Technology and Operations) strategy has helped us bring together our people to work for a common vision and purpose. Our operations team did an outstanding job of ensuring best in class on-site offshore ratios thereby bringing some of our financial metrics closer to our goals. We were able to acquire some key customers who have scaled well with us. That has been a great boon.What is the reason for the growth in offshore volumes?
There have been two main reasons for the dramatic growth in offshore volumes. One, on an effort basis, we had a 70% onsite and 30% offshore ratio about three years ago. We have changed that mix to 30% onsite and 70% offshore. This automatically means more work coming offshore. Second, the addition of new customers on the offshore model helped as some of these customers have scaled well with us.
Can you tell us about integrated technology and solutions (iTOPS) from the revenue perspective for the company?
iTOPS is a fascinating concept. It puts us in a partnership position with our customers rather than adversarial position. Among others, it allows us the flexibility to automate, and re-engineer processes. A large chunk of our business today is coming because of the iTOPS story. So, to us, this has become a mission critical part of our business, giving us greater revenues, enhancing differentiation and brand value. Today, its value is significantly greater than the revenue share. We believe that this will make us one of the best firms in many areas.
Your offshore resource utilisation has moved up from 60% to 72% for Q3FY06. Can you elaborate on this?
As our business is growing, we are deploying more people offshore. Also, our transformation engine from entry level to billable people has started working well now - so we can start scaling a little more.
Is this an industry trend to go for fixed price contract than to T&M basis? How does it help the company?
Fixed price projects give clients the satisfaction that we will work productively and protect their interests. Consequently, many clients prefer this arrangement. From a vendor perspective, the fixed price model helps, if the vendor has better processes, estimation models, and gets greater freedom and leverage to innovate and make more money. I think it helps a vendor company to become more sharper and more of a "thinking" company.
On a higher base, how do you see the Indian software industry grow from here? And why?
I continue to see significant runway ahead of the Indian IT industry. In my estimate, only about 7-8% of CIO budgets are spent offshore and that number will go up as Indian companies add more services to their portfolios, such as the infrastructure management, testing and ERP support. I anticipate this percentage, over the next three years, to move to 15-20%. This will mean that in the next three years, the Indian software export industry can comfortably grow to at least double its current size of $20 billion. On a higher level, the addressable market for the Indian industry (including ITES) has gone up from about $300 billion to about $2 trillion a year. This clearly indicates that there is significant headroom for the entire Indian software and services industry and specific companies within the sector, to grow.
Do you have any concentration on SOX or anti money laundering areas?
As a part of the portfolio of services that we offer, risk management is one that has met with a good degree of success. In this service offering, we cover SOX, AML, PPP and Basel II kind of consulting services followed by product selection and implementation.
Which are the areas that you feel will drive growth for the industry in India?
Newer areas in IT that will fuel growth include infrastructure management, testing, and remote ERP support. This of course, is in addition to just volume increase on traditional offerings like application maintenance, development, and re-engineering. On the non IT side, the back office processes and the knowledge processes will add significant top and bottom lines to the Indian industry.
In an age where programmers are becoming obsolete and solutions being delivered in the form of products, how will it affect the Indian software industry?
I have heard of programmers becoming obsolete since the 1980's when Case tools came into existence. As we get into more complex situations and more complex systems we will need very good integration capabilities and this will essentially become the software engineer's job. I think we are a long way from the day of the obsolete programmer - if ever it happens.
What is the product to services ratio for iGATE?
We are a pure services company and we use products or IP to generate more services revenue. We use our in-house developed products like ePartner or third party products to generate our services revenues.
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