Nasdaq-listed software firm Syntel is preparing for the multi-million dollar rebid opportunity and large discretionary projects with aggressive hiring and high capex investment. While Syntel’s founder and chairman Bharat Desai has made it to Forbes list of richest Indians this year, Syntel’s president and CEO Prashant Ranade tells Beryl Menezes about what the company does differently to achieve this distinction.
Last year you were able to comfortably meet Nasscom’s guidance. What is your guidance for 2013?
While in the last five years, our CAGR has been 18-19%, due to the economic downturn in CY12 Syntel registered growth of 13%. Our guidance for CY13 is 8-12%.
Given your modest guidance, what is the growth outlook for Syntel this fiscal?
The company’s three main growth focus areas are investments in people and IP, concentration on niche verticals and a customer-centric culture. So far, Syntel has 11 patent applications pending approval with the US Patents Office.
Please elaborate on Syntel’s vertical focus...
While BFSI contributes 56-57% to our overall revenues, going forward, we will be tapping new opportunities in healthcare, insurance, retail/logistics and manufacturing.
While other companies are reducing their staff numbers, Syntel seems to be increasing headcount steadily...
In the last three years, we have added 70% to our headcount – 6% in the last quarter. Our belief in hiring more people would help us best prepare for Nasscom’s huge rebid opportunity in the next 12 months, which we are confident of winning due to proven domain expertise. Keeping this in mind, we have also increased our capex to $60-65 million for CY13, which are in emerging verticals such as cloud and mobility.
What is the break-up of your revenues from North America, Europe and India?
While North America is our largest market, in the last few years we have been heavily investing in Europe, which has paid off with higher growth coming from that continent in the last two years. We also have significant investments in India, 80% of the company’s workforce based here.
Are you looking at increasing your focus on emerging markets with local hiring, like other Indian software firms?
Yes. We are planning to open a local delivery centre in the Philippines in the first half of this year. In the next 3-3.5 years, we are planning to open four more local delivery centres – three in India and one in Manila.
Outsourcing versus discretionary spends...which will grow faster?
Outsourcing will continue to contribute 70% to revenues, while discretionary will be around 30%. Discretionary spend will have three main components, namely, efficiency-based (RoI), regulatory/compliance for governance and new verticals. Syntel is aggressively pursuing all three areas.
How do you view price movements and deal flows, going forward?
Till mid last year, deal size was reducing, but after that large deals are again being signed, which helps companies like us that are better suited to working on large projects. In the last few years, deal sizes from our top five customers have gone up from $80 million to $200 million. While it continues to be a market differentiator, Syntel is not price-sensitive, as our focus is more on differentiated offerings, which has helped us maintain stable margins, despite market volatility.