Coping With Global Recession - The MindTree Way

Most innovations happen during harsh times. Currently, the global economy is going through a transition period owing to the recession. A majority of the corporate sectors are facing the worst sides of the recession that started with the mortgage crisis in the United States in early 2007. Companies have curtailed expenses. Mass layoffs have become the order of the day. To survive, they are forced to adopt such tough measures. Strategic partnerships and innovative technologies are reshaping the markets worldwide.

The Indian IT industry, which has been marked by steady growth over the past several years, is also affected by recession. The IT boom in India, which started with the pro-globalization approach adopted by the Indian government in the mid 1990s, motivated several companies to enter the scene; but time proved that only the best can survive in a highly challenging market like India. Now, this recession is proving a testing time for them again. Since Indian IT companies are mostly serving international clients, the repercussions of a meltdown in markets like the U.S. and the U.K. are deeply felt in the Indian IT industry.

However, there are companies that are taking their growth forward without yielding to the financial pressure faced from all corners. The secret behind their success is continuous innovation and open mindedness for strategic partnerships and technological sharing. Identifying appropriate marketing strategies and implementing them on the right scale requires a lot of intelligence and a deep insight into the market scenario. Here, we bring to focus one such company - MindTree - that has set an example of success for other medium IT businesses in India through their innovative and intellectual approach.

MindTree is a global IT solutions company specializing in IT Services, Product Engineering, Infrastructure Management and Technical Support (IMTS), Independent Testing and Knowledge Services. The company was founded in 1999 by a team of IT professionals led by Ashok Soota, who was then heading Wipro Infotech, the technology wing of Wipro. The company is known widely for its focus on 'minds' as its name suggests. MindTree's focus on human capital complements its strong knowledge management function at the core level.  MindTree has been consistently rated as one among the best by several industry surveys. The following explains what MindTree is:

• MindTree was ranked No. 1 among the Most Admired Knowledge Enterprise (MAKE) India Award winners for the second consecutive year in 2008.
• MindTree is the winner of the National Award for Excellence in Corporate Governance in India in 2007-08.
• MindTree was ranked 45th among the global leaders in outsourcing by the International Association of Outsourcing Professionals (IAOP).
• MindTree was selected among the Great Places to Work in India by the Great Places to Work Institute in collaboration with The Economic Times for the fifth consecutive year.

MindTree has undergone a major restructuring, effective April 2009, as part of its growth plan and objective to become a $1 billion organization. This branching out process included entering new market segments, setting up new business units and allotting new roles for senior management. The five focus areas of MindTree now are: IT Services, Product Engineering Services, Infrastructure Management and Technical Support (IMTS), Independent Testing and the newly formed Knowledge Services.

Through this restructuring, MindTree expects rapid growth to happen in each segment. Each of these entities functions as independent companies, competing independently in the market. Each of them will have its own sales structure, so they are not confined by overall budget constraints. The more they grow, the better are further growth opportunities.

Knowledge Services

The new MindTree Knowledge Services are a combination of data services, analytics and business intelligence. These services will help companies gain deeper insight into their business, risk and opportunity areas, and customer behavior for improved sales, marketing and operational effectiveness. Scott Staples, who has been appointed president and CEO for Knowledge Services at MindTree, said, "Knowledge Services can open doors for our clients to grow, become more profitable, become more innovative, and leap-frog their competition."

While MindTree is a relatively new player in the Analytics space, they have been a long-standing dominant player in Data Services and Business Intelligence. By including Analytics, they have now completed the picture and are ready for growth.

Staples views outsourced analytics as a growth driver for the next few years. "Once clients realize the power of looking at data services, analytics and business intelligence inclusively they will start to open their eyes as to what else can be coupled with this and outsourced. That next phase will include things like market research, digital marketing and other high-end KPO offerings," he said.

Product Engineering

MindTree's Product Engineering Services (PES) deliver design engineering services to product companies in the spaces of semiconductor, platforms and products that involve electronics and/or software. The services range from licensing intellectual properties (IPs) to sub-system design to complete end-to-end system designs. These services will emerge as an extension of the R&D and Engineering organization of the customer.

Janakiraman S., president and group CEO of Product Engineering Services at MindTree, said, "We will possibly be the only product engineering services organization that covers end-to-end portfolio of products from chip to cloud. We started the business of MindTree in 1999 when there would have been more than 150 organizations in India ahead of us in this space. Today we are within the top five. This was possible due to the intensity of the technical know-how and the IPs that we built (and continue to build) over the last decade."

MindTree's accelerated growth is clearly reflected in its financials. Despite the challenging economic conditions, the company recorded 13.7 percent YoY revenue growth (US$62.1 million) for the quarter ended June 30, 2009. Eighteen new customers were added during the quarter, bringing the current active customer base to 239. MindTree now has three $10 million+, twelve $5 million+, and 60 $1 million+ customers.

The company also achieved a reduction in attrition - a plague affecting the outsourcing industry. During the last 12-month period, the attrition has been reduced to 11.4 percent from 13.7 percent in Q4 and 16.3 percent in Q1 of 2008-09.

Janakiraman now wants to see MindTree becoming one of the top five product engineering services organizations in the world in the next five years, from the current top five position in India. Commenting on the future plans of Product Engineering Services, Janakiraman said, "We will invest more in creating our own technology and products that can be licensed to our customers. This will enable them to cut down costs and time to introduce new products in the market. We will take more projects under joint risk-reward models that will enable our customers to work on more products with us and create a non-linear opportunity for both."

The opportunities for the PES business lies where there is more convergence of technologies. There is a significant revolution taking place in the electronics market with the convergence of wireless, multimedia and the Internet. A similar revolution is taking place in the software arena with virtualization, cloud computing and software as a service.

"The intersection of electronics and software in those areas will create newer products and services in the market. And MindTree is well geared up to address that, thanks to our 'chip to cloud' coverage," Janakiraman said.

Independent Testing

Here comes one of the most challenging sectors in IT services - application and software testing. According to Ananda Rao Ladi, vice president and co-head of Independent Testing at MindTree, the market is challenging just because of the responsibilities given. "The testing group is the last gate before the end user gets to use the application or product. Understanding the domain and the profile of the end users is very complex. Managing the conflict between maintaining independence and safeguarding the business interests becomes difficult. It is a challenge to ensure the desired quality in the compressed time lines."

Testing Services have become one of the major and fastest growing services lines of MindTree. The company acquired Aztecsoft last year, doubling the size of the testing unit. Aztecsoft is a leader in the outsourced product development (OPD) and testing markets, offering full-lifecycle product engineering, independent testing, sustenance engineering and professional services to application and infrastructure software vendors, as well as to new media and Internet-based companies. It has successfully completed over 1,600 product releases to date.

Ladi added, "MindTree's testing business unit is uniquely positioned to take advantage of the opportunities in product testing. We have the capability to test any product from Chip to Cloud. In the enterprise IT space, the growth areas are travel and transportation, and banking and financial services industries."

Ladi has set the goals for the company for the next five years: Be one of the top five independent testing services companies in the world (in terms of revenues), become one of the top three globally in both test maturity and offerings, build a robust and admired "MindTree Way" of testing, and nurture and build the "MindTree Testing Team" brand.

Infrastructure Management and Technical Support (IMTS)

Under this branch, MindTree offers four core services to their clients: Consulting and Implementation services in the IT Infrastructure area, Managed Security Services, Managed IMS and Technical Support Services.

Ram C. Mohan, senior vice president and head of Infrastructure Management and Technical Support at MindTree, says MindTree's IMTS is the fastest growing business. As more and more enterprises look for offshore-based production support, remote infrastructure management (RIM) will gain momentum. The midsized companies (Fortune 1,000 to 5,000) will explore the offshore support for their applications and the infrastructure. This opens up immense potential to MindTree to focus on midsized companies, specifically those clients who are planning to offshore their infrastructure management for the first time. Their focus will be end-to-end production support, encompassing IT help desk, application support and maintenance and Infrastructure Management.

There are immense challenges in the industry. The prevailing economic crisis has curtailed IT spending significantly, forcing CIOs to focus on reducing maintenance costs. To add to the woes, the IT infrastructure is becoming more complex day by day, making the management more complex and expensive. To achieve a balance between the two is the real challenge to organizations.

MindTree is helping organizations overcome such challenges by offering a common production support service that encompasses both application and infrastructure, decreasing the cost and increasing the efficiency. "Our enormous focus on execution and quality is helping our clients to be more effective and efficient as far as their IT utilization and performance are concerned. We specialize in bringing processes and tools to increase the resilience and efficiency of the IT infrastructure," Mohan added.

IT Services

MindTree's key areas of focus in the IT segment are: manufacturing, travel and transportation, insurance, banking and financial services, media and government. The service areas are Internet technologies, data warehousing, enterprise resource planning (ERP), infrastructure management and testing.

MindTree's success lies in its consulting and business-led approach. "Rather than looking at a problem as a technology implementation, we approach it from a business requirement standpoint and bring the best solution to the table. Through a close interaction with the customer, we are able to understand the specifics of the required solution better and hence implement and sustain large and complex solutions," says Anjan Lahiri, president and CEO of IT Services at MindTree. Added to these is its people-centric strategy. "Through training, appreciation and immersion in business situations, our people are well equipped to deal with the demands of our customers and realize our vision of "Successful Customers ---- Happy People ---- Innovative Solutions," Lahiri said.

According to Lahiri, the IT services business today has transformed from just enabling the business to becoming the key driver of a forward-looking business strategy. However, this can only be done one customer at a time and one person at a time. "We intend to dig deeper into untapped areas in our current customer relationships, we will create wider domain competency and create new markets and broaden our reach by creating relationships with more customers across the world."

MindTree is continuously investing in people, in training, in functional and technical frameworks. "As we go towards our stated goal of becoming a $1 billion company in the next five years, we will also look for the right acquisition opportunities, but we will not be driven by a need for acquisition as much as by the availability of good candidates within our needs," Lahiri said.

The IT landscape is undergoing a transition. The manner in which software is built and consumed is changing. The conventional software delivery model is being replaced by alternate channels such as software-as-a-service (SaaS) and virtualization. The evolution of Internet technologies has also contributed to this change. These changes have resulted in defining new business principles and service delivery models.

Growth Never Ends

As part of its ongoing growth strategies, MindTree is serious about further acquisitions. Some of the key areas where acquisition is expected in the future are package application, product engineering and remote infrastructure management. These are the services areas which have either a gap to be filled in or where there is further scope for growth. Though MindTree has a reasonably large package application business, there is still scope for further growth. This can be achieved by acquisition, officials think. Product engineering services is an area that has a gap to fill in. Apart from software and hardware, there is also a certain element of mechanical design that is required to bring the design ready for manufacture. MindTree is focusing on this line to fill this gap. Infrastructure management services, on the other hand, are becoming an attractive option to customers. To leverage this opportunity, MindTree will focus on enhancing this area of services too.

The latest in MindTree's series of acquisitions is Kyocera Wireless (India) Pvt. Ltd. The company recently signed an agreement to acquire the Indian subsidiary of Kyocera Wireless, which is engaged in wireless product development, software engineering and product testing. MindTree also announced plans to set up a subsidiary in China recently. The proposed facility is expected to become operational in a month or two. According to Janakiraman, the Chinese setup will provide a very good combination of leveraging the Chinese manufacturing ecosystem, its market and MindTree's software capability.