Spotlight

Spreading its roots

MindTree Consulting plans to focus on WiMAX, IP, Infrastructure, M&A and new geographies. By Vinita Gupta

If a tree is known by the fruits that it bears then MindTree Consulting is known for delivering business solutions through global software development. For the past three to four years the company has been generating 80 percent annual revenue growth. Recently the company got listed on both the BSE and the NSE.

The starting point

Subroto Bagchi, a co-founder and Chief Operating Officer for MindTree Consulting was working on a strategic study about the future of Indian Software during the course of which it became clear to him that the 21st century would belong to service industries and that there would be insatiable demand for software services across the world and companies that delivered knowledge enabled software would be its leaders.

Hence he teamed up with Krishnakumar Natarajan, President and CEO IT Services, MindTree Consulting and eight other co-founders to open a company that would provide end-to-end consulting solutions. MindTree was born in August 1999 in Bangalore, 13 months after the idea was conceived.

It started life as an Internet solution company and later when the dot-com bubble burst it moved into building solutions around ERP, BI and data warehousing. Once the market got back on its feet, MindTree had a whole range of solutions and this was one of the reasons for its rapid growth.

Natarajan says, “At each stage we faced a challenge. For instance, during the early stage when we launched the company we did not even know whether the company would survive. Building new services around ERP, BI and data warehousing along with the existing Internet solution business was also a major challenge for us.”

Today the company is growing with 50 percent of its revenue coming from the Internet solution business with the rest accruing from other solutions such as ERP, BI and Data Warehousing.

The company has grown from 14 people to more than 4,000 providing IT and R&D solutions to Global 2000 companies. It offers IT services in application development and maintenance, BI solutions, ERP and supply chain management, testing, mainframe and iSeries support and enhancement.

MindTree also provides R&D Services in the areas of product and board design, operating systems, protocol engineering, embedded applications, product testing and licensing of intellectual property.

Verticals and geographies

The company is strong in banking, financial services and insurance (BFSI) as well as in manufacturing (automobiles and customer product goods or CPG), hi-tech, travel and tourism sectors (airlines and online travel agencies).

Natarajan says, “We want to be domain experts in these verticals and hence we will not focus on new verticals.” He further adds, “We prefer to directly approach our customers but at times, in countries where there is a language barrier, we prefer to have a partner as they will have a better understanding of the customer’s requirement.”

Some of its customers include Hindustan Lever, ICICI Bank, ING Vysya Bank TVS Motors Volvo, Toshiba, and Cisco Systems.

MindTree operates in five geographies. Besides India, it has operations in the US, UK, Singapore and Japan. The US market accounts for the majority of MindTree’s revenues, followed by the UK. The company has a dedicated sales and marketing team in these countries.

The company considers India as a strategic market. It has four offices in India in Delhi, Mumbai, Chennai and Bangalore.

Investing in WiMAX

MindTree is investing in building a test infrastructure and pre-built test libraries to speed up the testing process for WiMAX products and reference designs.

“WiMAX product vendors have these requirements. We also anticipate the use of WiMAX in non-enterprise products such as mobile phones. We are attempting to offer services with our knowledge and experience of wireless and communication protocols using a different kind of intellectual property. WiMAX is getting deployed locally in India as well and this gives us an opportunity to provide services to the local market,” says Sharmila Saha, Technology Evangelist, R&D Services, MindTree Consulting.

With the convenience of cable free connectivity that it provides, short-range wireless communication is fast penetrating end-user products in consumer, communication and automotive markets. Hence MindTree Research is focusing on building the company’s competence in the short range wireless technology domain.

“By investing in such technologies, MindTree is able to build domain expertise and address these markets through IP and design services. These technologies also give us the edge in penetrating specific territories,” says Raghunath Govindachari, Chief Architect, MindTree Research, MindTree Consulting.

He explains that unlike in the case of other data or telecommunication wireless networks, short range wireless communication is not entirely dependent on infrastructure equipment or service providers. This provides a level playing field for quickly building, qualifying and licensing innovative solutions based on the company’s IP.

Leveraging IP strategy

MindTree’s IP is carefully selected as basket of related IP blocks that can be independently licensed or bundled into a complete solution. Such bundling significantly enhances the commercial value of the IP blocks. The reuse of building blocks enhances the gross margin for turnkey fixed price project wins. Further, a judicious mix of upfront license fee and volume based royalties bring in a steady revenue streams.

Govindachari adds, “Our IP Strategy has helped to position MindTree as a product consultant and leader in a few domains. This helps us get larger and more complex projects. We would like to expand our portfolio of offerings in diverse areas.”

The company at present have no plans for developing IP in 3G technology.

Looking ahead

Mergers and acquisitions (M&A) will remain a key focus area in the near future for MindTree. According to Natarajan, M&A will play a key role in the company’s growth but it may not be a growth driver.

He adds, “Money was never a problem but through listing we wanted to give greater visibility to the company and at the same time we also wanted to unlock our employees’ value as they have sacrificed a lot to grow the company.”

MindTree will be investing in building an infrastructure and development centre in Chennai. It will also focus on increasing its employee headcount as well as its reach in other countries.