MindTree, a midsized information technology company, will set itself a definitive target date for joining the billion-dollar revenue club in the next three months.
IT company will finalise strategy in three months
MUMBAI :MindTree, a midsized information technology company, will set itself a definitive target date for joining the billion-dollar revenue club in the next three months.
The company posted revenues of $185 million in FY08 and, assuming it maintains the upper end of its 24%-29% revenue growth guidance, it would take about seven years
for MindTree to become a billion dollar organisation.
An acquisition, like its recent one with Aztecsoft, will of course bring the target closer.
N Krishnakumar, CEO, MindTree, said the company has set a $1 billion goal for itself.
“We are in the process of collating from 8,000 MindTree and Aztechsoft minds on what we can achieve and other elements of purpose and vision. The India part of the process will get over in three weeks. It will then move to US and then in 8-12 weeks, we would have articulated our aspirations and then we would set a fixed timeline,” he added.
MindTree kicked off its billion dollar dreams in December 2007 with a major organisation structuring. Ashok Soota, who was chairman and managing director, assumed the role of executive chairman.
Salil Godika assumed the new role of chief strategy officer. Subroto Bagchi, earlier the chief operating officer became the ‘gardener’ to assume a mentoring role. N
Krishnakumar, earlier the president and CEO of MindTree’s IT Services business, became the chief executive officer and managing director, overseeing both IT Services and R&D services businesses.
While the timeline to the join the club is yet to be finalised, the company has identified growth areas.
“One of our key focus areas is outsourced product development (OPD). It is a $8 billion opportunity, growing at over 30% annually. With Aztechsoft, we are now in the entire product development value chain. Testing is another key area and we have over 2,000 people in the practice. Remote infrastructure management, where we entered two years back, is another fast growing segment. In 4-5 years, it could be a $150 billion opportunity. Our aim is to be within the top two or three players in each of these segments in the next four-five years,” Krishnakumar said.
MindTree has two revenue streams - R&D services and IT services in one-fourth and three-fourth ratio, respectively, and Krishnakumar doesn’t see the balance altering.
The company focuses on select verticals like manufacturing, banking, financial services and insurance, travel and tourism in IT services, storage and servers, consumer appliances, communication systems and automotive & industrial systems in R&D services.
It is incubating a few high potential industries with plans of grow them as independent verticals over the next two years. “In IT services, we are incubating media and entertainment and retail and in R&D services, we are incubating medical electronics and aeronautics. The first set of customers has been acquired,” he said.
To bring more predictability of revenues, Krishnakumar is trying to increase the share of annuity revenues to 40-45% in two-three years from 35-38% now. Hence contribution of projects revenue, which is difficult to predict, would fall.
To have an alternate growth geography, MindTree is investing in Europe, which currently accounts for a little under a fifth of its revenues. It has grown to a CAGR of 70% over the last three years.
On the near-term outlook, Krishnakumar said although there have been no cutbacks on IT spends, clients have become more cautious and are increasingly questioning each spend. In spite of sluggishness in the international market, MindTree is confident of meeting its dollar revenue growth guidance of 24-29% and net profit growth of 23-29% for FY09. After two quarters of double digit sequential growth, it expects third and fourth quarter sequential growth to be modest. Krishnakumar sees R&D services growth to be slower this year as clients cut back non-core spending. Hence a bulk of this year’s expected growth would come from IT services.
g_rabin@dnaindia.net
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