How MindTree's philosophy helped it survive in Indian IT industry [Strategy] [Times of India]
(Times of India Via Acquire Media NewsEdge) Mid-sized software exporter Mindtree has a simple philosophy to survive in India's competitive $100-billion IT services industry: Get back to the 'basics of doing business'. And, that's what the Bangalore-based company did when profits started to decline and then-chairman Ashok Soota decided to walk out two years ago.
"We cleaned up our act and we did it decisively," says Subroto Bagchi, who co-founded Mindtree with 10 others, including Soota, a former vice-chairman of Wipro.
"By the time we ended FY11 -- in which Mindtree's profits had fallen over the previous year -- we had a strategy in place: To get back to basics," adds Bagchi.
Mindtree has come a long way since its debut in 1999. Founded by 10 senior IT professionals from companies such as Wipro and Cambridge Technology Partners, Mindtree soon received its first round of funding from Walden International and Global Technology Ventures.
During the initial days Bagchi focussed on ferreting out new leaders from within the organisation. In just six years, Mindtree's revenues crossed $100 million and it opted to go for a public listing in 2007.
The timing wasn't the best. A year later, as the mortgage crisis in the US shook the rest of the world, Mindtree, too, took a hit.
The company fell short of its revenue targets and profits plunged. The chairman's objective of hitting revenues of $1 billion became a pipe dream, with Mindtree's revenues between 2008 and 2010 remaining below $300 million.
It was time for some drastic decision-making. In 2009, Mindtree announced it would go beyond its mainstay of software services.
It forayed into designing mobile handsets by acquiring the India R&D centre of Kyocera Wireless. That didn't help.
The acquisition not only failed to bring in revenues, it also resulted in huge restructuring costs.
In 2010, Mindtree announced its exit from the mobile products business; and, a year later, chairman Soota announced his exit. "Setbacks build muscle tone into the organisation and, today, we are better trained than before," says Bagchi.
In 2010-11, profits continued to decline -- from a 24% fall in the first quarter to a 41% drop in the fourth quarter over a year ago. But Bagchi says this isn't relevant because Mindtree had begun growing its top line "admirably" at over 20%. The turning point for Mindtree was the acceptance that the reason for the decline in profitability was more internal than external.
By April this year, Bagchi took over as chairman. And, under him, in an effort to do something unique, Mindtree set about cutting down on verticals that weren't delivering and started providing outsourcing services mainly to the manufacturing and banking & financial services sectors.
Bagchi says this helped Mindtree focus on building specialisation in chosen verticals, deep account mining and getting prepared for larger deals. The first glimmers of a comeback appeared in the final quarter of FY12 when Mindtree posted a 115% growth in profits over a year ago.
In the September-ended quarter of the current fiscal year, Mindtree had 247 active clients and, at the end of FY12, it had four $20 million-plus customers from only one at the beginning of this period.
So, can Mindtree grow closer to the $1-billion goal "If we do the right things the right way, we will get to the billion-dollar league," says Bagchi.
(c) 2012 Bennett, Coleman & Company Limited
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