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Ashok Soota’s New Bet
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That ambitious target calls for two things. First, Happiest Minds will have to raise significant amounts of capital to fuel the rapid pace of growth it requires to hit the $100-million revenue mark. Second, it will have to disrupt the existing Indian IT services outsourcing business, currently dominated by the likes of Infosys Technologies, TCS and IBM.
Soota is no stranger to either starting companies or attracting capital. Twelve years ago he led nine other executives at the Azim Premji-controlled Wipro to start MindTree in 1999. As vice-chairman of Wipro, Soota held the impressive track record of growing the company's revenues from Rs 7 crore to Rs 1,000 crore in 15 years. When he and his team set out to create MindTree, he understood that the business model would have to be disruptive.
The company, backed by $9.5 million seed capital from US venture capitalists (VCs) Wald-en International and Global Technology Ventures, decided to become the first Indian IT services outsourcing firm to offer consulting services, till then the preserve of multinationals such as IBM and Accenture. In six years, Mind-Tree hit $100 million in revenues. It also compelled established players such as Infosys and Wipro to get on to the consulting bandwagon.
In his second innings as entrepreneur, Soota will have to replicate MindTree's early success. He attempts to do so in a market that has changed dramatically in the past few years. Customers no longer look at outsourcing to just cut costs. They also want solutions that will help in improving profitability. The incumbents in the business, including Infosys and IBM, are struggling to offer customers more for less. One of the ways to do that is to integrate new technologies into traditional service offerings. More and more enterprises globally are looking at technologies such as cloud computing and mobility to make their businesses more efficient.
It is the ideal scenario for a startup to jump in and disrupt the conventional outsourcing business. VCs recognise the potential. At least three VCs we spoke to think Happiest Minds, with its stated focus on social CRM, mobility and cloud computing as its underlying technology offering, could play an important role in defining the next wave of IT services outsourcing.
The 67-year-old Soota's unconventional choice of a YouTube video to announce his latest venture also points to his thinking along the same lines. However, in terms of service offerings, Happiest Minds still mirrors any existing broad-based IT services outsourcing company.
At present, Soota is busy in parleys with a couple of unnamed VCs to raise money. Given his six-year revenue target, he will need an investor both with deep pockets and staying power. Raising money is probably the least of Soota's concerns. What should however concern investors is that while Soota has demonstrated an impeccable track record in starting and scaling companies, he has not been very good at finishing. MindTree's fortunes have dipped steadily since its 2007 listing and it closed the last quarter with an over 40 per cent drop in net profits. Soota's surprise resignation in January brought the shutters down on a long-drawn period of dissonance between Soota and the other founders. Perhaps, now that he is on his own, Happiest Minds will have a happier ending.
(This story was published in Businessworld Issue Dated 18-04-2011)