'Deal sizes are not really shrinking'

'Deal sizes are not really shrinking'

Beginning his career in 1965 with the Shriram Group of Industries and turning the fortunes of  Shriram Refrigeration as its CEO in 1978 is not the only success story Ashok Soota has to his credit.

A veteran in the Information Technology (IT), Soota formed Mindtree in 1999 with his colleagues from Wipro, resigned from the board of the company to form Happiest Minds in August 2011. The new company has managed to get 50 plus customers in 2 years, with the first customer coming on board within a month of commencement of business.

In an interview with Shayan Ghosh of Deccan Herald, Happiest Minds Executive Chairman Ashok Soota says that at this moment the company doesn’t want to target large deals in the market. According to him, large deal will come as the company grows over time.

When you started Happiest Minds, did you fear that it would be difficult to compete with the bigger companies?

There is always a concern when you start a company as to why would a customer come to you. I had the same concern when I had started Mindtree as there are more than 100 software companies to choose from. But then, there are two things that are important in this business. First, there should be some differentiators for the company from the market and our unique selling proposition was that we were exclusively going to work in the area of disruptive technologies.

There have been few new companies in the last 10 years that have exclusively taken up social media, cloud, mobility and big data.

Then, once our value proposition was clear, customers started realising that a young company would give them more attention and may have new approaches to get work done. And, after that, it was just a question of delivering the experience in the next assignment for the client.

With $20 million in revenues in 2012-13, how did you manage to beat competition from those companies?

The challenge for larger players is much worse. In the market, a giant company has to create a new mid-sized company every year and that mid-sized company must add $50-60 million a year to meet the market’s growth expectations. Here, with the level of expertise we have, to get that sort of business, is more a function of what speed you can grow as there are enormous opportunities in the market.

Our experience is that we win much more than we lose (deals). We are realistic and not bidding for a $10 million or $20 million project and obviously they wouldn't give us those deals. As we get larger and larger, those deals will also start coming.

There is a buzz that deal sizes in IT are shrinking. How far do you find this to be accurate?
Companies are still winning $100 million deals, and I feel that there is a mix of both large and fragmented ones. There would be some (cases) where the entire deal would be given to one player and for the rest could be a possibility that it is split into two to three parts.

Of course, there will be the share for smaller deals also and that is why we are in a position to compete against others. Thus, I don’t think there is a secular trend in saying that deal sizes are shrinking.

How has the funding scenario changed in India?

In 1999, when the dotcom boom was on and everybody was bending backwards to give us (Mindtree) money; they were so keen that I got the money through a phone call. Today the world has changed and the IT industry has matured, there are many more players in the market. Money is certainly available in India as venture capital (VC) investments are going into areas like e-commerce and product companies and relatively less into service companies.

What is Happiest Minds doing in the space of engineering, R&D and IP
creation?

We have three business lines, IT Services, Infrastructure management and security and engineering R&D. In terms of market size, product engineering is probably the smallest of the three but it is more or less equal to us in terms of revenue generated.
In each of the verticals that we operate, we have created our intellectual property (IP) and it is an ongoing process. We are developing little IP blocks and not developing IP for sale at this moment. So, today we use our IP creation as a means to demonstrate expertise to bring in business to the company.

When do you plan to go public?

We are definitely committed to go public as we want to demonstrate to the world the high standards of corporate governance that we have. It is also a logical exit that we will offer to our VCs and we have one of the most generous stock option schemes created in the industry and if we get a way of monetizing the wealth, going public is a good idea.
Happiest minds would go public in 6-7 years from the date of the formation of the company (August 2011). This would, however, also depend on market conditions at that particular time.

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