Sanjiv Puri, Managing Director, ITC Infotech
Bengaluru-based mid-tier information technology services firm ITC Infotech, a fully-owned subsidiary of ITC Ltd, says it is tiding through the recession by focusing on value arbitrage and not just costs. Its managing director, Sanjiv Puri, shares his thoughts on the slump, and how his company is responding to the crisis in this interview:
When do you think the tech slump could ebb?
Up to the first half of this year, growth has been quite buoyant. Our top line has grown close to 50 percent; even acquisition of new customers has been good. The growth in the first half, in fact, mirrored the growth we have seen in the last year or so. In the last two years, we had doubled our turno-ver, multiplied our customer asset base by three times. This trend continued in the first half.
However, in the second half of the year, growth has certainly slowed.
Everybody seems to be affected. New initiatives are getting rescheduled.
New initiatives account for a fourth of IT spends. Work in progress are being completed or optimised. There is clearly a lot of focus on reducing costs.
There is no doubt IT spends will be squeezed. However, IT and business value are very clearly linked today. Organisations will continue to focus on IT to remain or enhance competitiveness. Once firms come to grips with the immediate problems to deal with, they will start looking at further IT investments. When that would happen is a question mark. I am reasonably clear that in the next two to three quarters things would be slow. The present crisis can lead to vendor consolidation. Customers may gravitate towards larger IT firms who could easily offer lower prices for higher volumes. Will smaller IT players get squeezed out?
Are you experiencing pricing pressure?
We have not experienced any direct impact as such. The kind of projects and services we are offering are mission critical and high value added services.
They are at the core of business usage. For instance, support on sales management systems and on loyalty programmes. As an organisation, we have never said we are in the game of cost arbitrage.
We are in the game of value arbitrage - one of the reasons we have not been hit by pricing pressure.
Some Indian companies are attempting to keep the projects flowing by absor-bing a customer's upfront investment cost. Is ITC practicing the same?
This goes down to the core of the pricing model. There are many ways pricing models that have evolved today. It has evolved from time and material, fixed price to transaction, subscription and user-based.
Software as a service, transaction-based, or models where transition costs are amortised over the period of the contract, can smoothen out the investment clients need to make. These are models we have been practicing for a while depending on need. Right now, there is a belief that the choice of models will go in favour of those where the upfront investment is less and where predictability is high.
From solutions perspective, what are you doing to reduce a customer's cost of operations?
We are going back to our clients and prospective clients with solutions that are appropriate to the environment, which is where the offshore value proposition for support becomes attractive. We are also offering solutions that can help infl-uence business outcomes - value added services around enterprise solutions. We are offering solutions that will give quick return on investment (RoI) to off shoring.
Traditionally, offshoring has yielded result after 12 months. Because the pressure is short-term, you need solutions that offer quick RoI. We have offshore acceleration kits that will enable businesses to get ret-urns much faster. So 12 months may get squeezed to six.
Companies view the slowdown as a time to shed the expense fat.
Internally, what has been your focus?
Discretionary expenses are being dropped. The focus is around productivity, value creation. We are focusing on strengthening our talent base. It's not just about numbers. It's about the productive capacity of the talent. So more investments are going towards training and getting empl-oyees to move up the value chain. We are still hiring but at a much slower pace - we are over 3,000 people now. High potential managers and good quality talent are still in demand.
Has ITC postponed the id-ea of going in for an IPO due to dipping valuations?
There was no specific plan in the first place. There is no date to it.
The ITC chairman had mentioned that at the right time, the firm would look at it. The fact that we are structured as a separate company makes an IPO possible. At the right time, it could be looked at. It's just not a question of valuations; there are other considerations. The main purpose for looking at an IPO would be to reward the talent pool that contributed to creating value.
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