We are not mid tier, we are multi niche experts

When Ashok Soota exited MindTree - the company he founded - early last year, many felt that all was not well at the mid-tier IT firm. But since then, MindTree has re-engineered itself, sharpened its focus, and exited some verticals . And going by the $400-million company's performance in recent quarters, the new strategy appears to have paid off. In an interview with TOI, MindTree CEOKrishnakumar Natarajan says the company today finds a place at deal tables that were earlier the preserve of the big IT players. 

In the last quarter, mid-sized IT companies have outperformed top-tier ones. What are clients seeing in mid-tier companies?There is a distinct change in the client sentiment. Customers want more depth of expertise rather than scale. As long as you're of a size where the client doesn't worry about your survival, then they are far more open to deal with you. Customers are breaking up larger deals into smaller ones.

We are focusing on deals over $25 million. As long as we have the capability and the right solution, they would give us as much consideration as to a large player. The 'mid-size' terminology becomes irrelevant from a client perspective. We think of ourselves as a multi-niche expert company. There are specialists emerging in each segment who are becoming viable competition to larger players. 

You were into seven different businesses. How did you simplify the structure?We now have two market facing organizations -- IT services and product engineering services (PES). IT services focuses on business applications , while PES handles tech services. IT services are run past the CIO who runs the business, while PES addresses the CTO or VP of engineering who's responsible for building products. That's one level of simplification.

In IT services, we are focusing on manufacturing and within manufacturing we only address consumer packaged goods and automotive sectors . We said we cannot be everything to everyone. We don't address process manufacturing , industrial machinery, other sub-segments of manufacturing. The number of customers has shrunk from 286 as of April last year to 237 this year. We are also betting big on infrastructure management, independent testing and data analytics. 

Banking and insurance is big. Can you afford to ignore it?We cannot afford not to be in BFSI. We will play in BFSI, but we will address mid-sized financial institutions. Many of them can spend $10-15 million on IT. Similarly, in insurance , we address the property and casualty market.

There were project rampdowns in product engineering services in the June quarter . What were the reasons?PES is far more impacted by short term market uncertainties . R&D budgets get cut first without significant impact on the business. But there's a big opportunity. Assuming a typical product company spends 25% on engineering , and if we target a $200-million product company and help them outsource 10% of their engineering budget, then it's a $5 million customer.

There are 5,000 product companies that are $200 million plus. PES is eminently an offshorable business . Its net margins will be equal or better than in IT services . In the last 12 months, our margins have improved 100% in PES. With commoditization of IT services, we believe PES will be the key element in protecting and improving our margins. 

MindTree set a $1 billion revenue target for 2014. That does not appear achievable now.
I think we have the organizational capabilities to be a $1 billion company. We have made huge investments in rebranding the company. We have engaged Los Angeles based brand strategy company Siegel+Gale for it. The key thing is, we want to be experts in the areas we have chosen to be in. 

How is the global economic situation impacting Indian IT?Overall, there is uncertainty. But even if there is a catastrophe in the US, our clients aren't going to get significantly impacted by that. Companies that are dependent on the European market tend to be a little more cautious.