A year ago, the top management of IT services vendor MindTree Consulting, led by Ashok Soota, met at the firm’s headquarters in the primarily residential borough of Banashankari in south Bangalore to discuss the future path for the mid-tier player. Over the next 12 months, different parts of this strategy will come together as the company puts together an action plan to separate itself from the other players (not just smaller, but larger, too) in this fast-growing industry.
“This is our first major reorganisation since we started in 1999 and reflects the changing requirements of our business,” Natarajan says, adding: “We wanted to give our younger leaders much more autonomy with this new structure.” While MindTree was the fastest among IT companies to cross the $100-million mark, it has now set itself much loftier targets: it plans to become a $1-billion firm in the next few years. “As the IT market matures, we want to focus on building our expertise in specific industries such as manufacturing, financial services and travel,” says Natarajan. Simultaneously, MindTree is looking to expand into newer markets such as remote IT infrastructure management, which could be a $150-billion opportunity.
Inorganic growth will be a key component of MindTree’s evolution as it seeks to morph from just another Tier II player into something not necessarily much larger but specialised. “We don’t do everything for everyone. We have our specialisations and in each of those segments, we’re among the top few players globally,” claims Natarajan. While MindTree won’t buy or merge (at least for now) with a company purely for scale, it may opt to acquire smaller, technology specialists in future, he adds. While the company most recently bought Purple Vision, the chip design arm of French electronic design solutions firm TES Electronic Solutions, it has previously acquired Linc Software and ERP solutions vendor ASAP Solutions.
Besides this restructuring, Natarajan wants to ensure that MindTree version 2.0 also derisks its business and looks beyond its staple North American market for growth. For example, Asia-Pacific today contributes around 16 per cent of the company’s revenues and the company is also preparing to tap the burgeoning domestic market. “The rupee appreciation is a constant worry in the IT industry and we need to find innovative fiscal (currency hedging, for instance) and operational measures to tackle this problem,” says Natarajan. He also points out that MindTree has been multi-cultural “in its DNA,” given the mix in its senior management, but the firm is also looking to diversify its presence with centres overseas.
Industry watchers and competitors point out that while the initial growth for MindTree was scorching, the next couple of years will tell if the firm is really a long-term player. “Indian companies need to build scale quickly to start competing for large global contracts, but MindTree is just starting off on this,” says the Head of Marketing at a large Indian IT services company. Others point to hurdles MindTree could face—a constantly appreciating rupee and the escalating war for talent. “A company like Infosys lost nearly Rs 300 crore in a quarter from rupee appreciation; MindTree will have to be wary of this trap,” says a Mumbai-based IT analyst. In addition, with the IT industry facing a shortfall of around 500,000 trained people over the next two years and Tier I players hiring 20,000-30,000 recruits annually, mid-tier players like MindTree could face serious challenges on this front too.
