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BW Businessworld

Thinking Out Of The Box

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Information technology spending in 2012 is estimated to grow by a mere 3.7 per cent to touch $3.78 trillion compared to the 6.9 per cent growth in the previous year, according to information technology (IT) research and advisory firm Gartner. Of this, IT services at $874 million will grow at an even slower rate of 3.1 per cent.

As customers cut back on spending, IT services are increasingly becoming a scale game. If it is all about scale and size for large IT service vendors, how can mid-sized players be successful and compete against them?

UST Global, a California-headquartered company with a large India delivery footprint says it has the answer: "Being innovative and nimble in the marketplace is the best way to take on competition, large or small," says Arun Narayanan, COO. Compared to global giants like IBM, Accenture, Capgemini, Cognizant and tier-I Indian IT services vendors such as TCS, Infosys and Wipro, UST Global, a privately held company with estimated revenues of $400 million in FY 2011, is a relatively mid-sized company. It is part of the $7 billion Comcraft Group.

But, unlike other players of similar size, three things set UST apart. While it has delivery centres across India and the world, a large chunk of its 8,000 employees are located in Thiruvananthapuram and Kochi. This is of significance considering that Kerala has traditionally not been seen as an IT manpower pool, unlike Bangalore, Delhi, Hyderabad, Chennai, Mumbai and Pune. What this does is help the company to attract and retain talent better. Even internationally, it has taken a different path by setting up a development centre in Manila. While both Indian and international vendors have always had operations in the Philippines for BPO (business process outsourcing)/ITeS (information technology enabled services), very few operate a software development facility.

The second unique feature for a company of its size is that UST has just 65 clients. "Fewer clients, more attention has been our motto. We believe in buyer intimacy and that is a conscious strategy," says Narayanan, 44. Instead of spreading itself thin over too many clients, UST has strategically chosen to  focus on Fortune 1000 companies. "Our clients know that this means close attention is being paid to them by the top management. We like to add only 10-15 clients, high quality ones, who recognise the value we bring to the table and where our values match," he adds.

Three of UST's clients contribute some 45 per cent to the company's revenues. While this may look like revenue concentration risk, Narayanan points out that UST is deeply embedded with its customers and it would be hard for competitors to match that degree of understanding of their unique requirements.

The third key differentiator has been that unlike most Indian IT companies which get the bulk of their revenues from the crucial but highly competitive banking, financial services and insurance (BFSI) vertical, 40 per cent of UST's revenue comes from the healthcare segment. HfS Research, an analyst advisory organisation, in a report in July 2011, pointed out that UST generated about 30 per cent of its revenue from the retail segment. BFSI, the mainstay for most other IT companies, contributes a modest 10 per cent to the company's income.

While UST has the usual basket of service offerings including application development and maintenance (ADM), quality assurance and testing, infrastructure services, enterprise solutions, consulting, business intelligence and data management, Narayanan claims that the way they address these markets is different. "Some companies may consider testing services low-end. But less than 25 per cent of this market is automated. So if we can deliver value to the customer by automating a large part of his requirements, we would have done things differently." Even in areas like ADM and IMS (infrastructure management services) which are seen as commoditised and thus price driven, UST says it is better placed than its competitors.

More than the geographical location of employee resources or industry segments from which it derives revenue, innovation has been the key to UST's success, claims Murali Gopalan, 44, the company's joint chief information officer and senior vice president. He is responsible for overseeing innovations. Gopalan says that UST lays stress on ‘incremental innovation.'

"A big bang moment is rare in any industry. UST follows in the service sector what Toyota has done in manufacturing. Constantly tweak and improve the small things for a large impact," says Gopalan. UST has three engines of innovation. Apple Tree Lab, an ‘innovation gym' where employees can experiment without fear of failure. "In the Indian context there is huge fear of failure. We want our employees to devote a part of their time to experiment without worrying about consequences. The only thing is that they need to keep failing in new ways, till something succeeds."

UST also has an idea management system called Eureka! and a collaboration space on the web called Open Minds. Gopalan cites solutions formulated for small internal issues which have been scaled up and sold to large enterprises.

IT SERVICES becoming a scale game as customers cut spending (Bloomberg)

When UST realised that hundreds of its employees were not switching off their computers when leaving office, it developed an in-house application called PowerUS. It is an energy-management tool that eliminates wastage of power on computers without disturbing existing IT administration processes or without impacting critical user applications and data. "Some of our employees tweaked it further so that PCs could boot up in the morning just before they arrive. Also, they provided for permanent exclusions for workstations from servers thus preventing any impact on critical stuff which need to function round the clock."  says Gopalan. The company has sold the application to several large enterprises as a feature. "While this might not look like a leapfrog innovation, it is useful, practical, money-saving and it is a green innovation," he adds.

Similarly i-Safe is a mobile application helpful to people in a panic situation. With a single button the application on the mobile gets activated and continuously provides location-tracking through SMS updates. "The Kerala police have already expressed interest in this application which can be installed on feature or smart phones and there can be many more uses for this. Again, this is a small example of how we try to think out of the box," says Gopalan.

UST hopes that innovations such as these applied to the services industry will help it retain its edge against larger players.


(This story was published in Businessworld Issue Dated 19-03-2012)