Technology- Stepping Out-Indian software company takes aim at the world
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By Pramit Mitra in New Delhi
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February 25, 1999
Rajendra Pawar is ready to buy. With a budget of $100 million and his eye on making New Delhi-based National Institute of Information Technology a global name, the vice-chairman is looking to the United States. He is shopping for a software firm with a strong sales network and a solid client base that will help NIIT build its brand name and attract projects from global companies. "Our main objective is positioning," he says.
No target companies have been named, but NIIT's purchase would be the largest in the U.S. by an Indian software company. It would also mark a turning point for the IT industry in India. Tapping the country's vast pool of cheap manpower, the industry has focused on labour-intensive year-2000, or Y2K, projects and exporting software. It has had a lucrative run: In 1998, Y2K work brought in about $2 billion and software exports jumped 68% from the year before to more than $2.2 billion, according to the National Association of Software and Service Companies, or Nasscom.
Already one of the three largest software concerns in India, NIIT is now going global. Pawar intends to build a presence in the U.S. and Europe in the systems-integration and network-maintenance fields, while focusing on IT training and educational software in Asia. Just under half of the company's revenues are now generated overseas, up from 5% in 1992. But Pawar is determined to see that figure hit 70%. That's an impressive target for a company that until recently was best known for on-line IT-training courses targeted at Indian college students. But analysts say NIIT's success since entering the software business in 1993 could be a sign of things to come.
NIIT revenues jumped to $160 million in 1998 from $30 million in 1994. That growth and the company's aggressive expansion plans have attracted attention. In December, Morgan Stanley Dean Witter named NIIT one of the top 20 stocks in Asia, estimating its earnings per share will grow 40% in five years.
On the software side, Pawar is looking to Europe for opportunities. Nasscom expects euro-conversion software projects that help companies introduce the euro currency to their accounting systems will bring an estimated $3 billion worth of work to Indian software companies during the next three years. NIIT, like many large Indian firms, has already dispatched a marketing team to the continent to bid for such projects and other software-development work. Pawar is confident the company's success with projects to prepare computer systems for 2000 for clients such as British Airways and the Brussels Stock Exchange will help it win euro-conversion contracts, too.
In Asia, NIIT has worked with the Singapore government, including the development of e-commerce software for the Singapore Sports Council's Web site. NIIT officials believe the company's ties with the government will prove lucrative as computer use expands in Singapore.
NIIT is also vying to take part in Malaysia's ambitious Smart Schools Project that will help train students for jobs in the IT industry. It has bid for an $8 million contract to develop CD-ROM-based science curriculums for 90 schools and has been granted Multimedia Super Corridor company status, which brings tax breaks and the right to bring personnel into the country for MSC projects.
The company also sees opportunity in IT training in Asia. It now has nine education centres in Malaysia and plans to expand to 20 by the end of the year. NIIT entered China in April with its first school in Shanghai and plans to have 11 schools in the country by the end of 1999. Rahul Patwardhan, head of the company's operations in the Asia-Pacific region, expects total revenues from China to top $2 million by the end of September. "We hope to mirror our India operations in China in three to five years," he says. There are now about 150,000 students studying at 750 NIIT training centres in India.
Indeed, NIIT's training centres could play an important role in the company's expansion efforts. The Indian software industry is facing an acute shortage of trained engineers and other technicians. Pawar says NIIT's network of training centres allows the company to quickly identify star performers and lure them on board early in their careers.
Taking on the world won't be easy. But with a U.S. software company in his stable, an expected surge of business in Europe and growing demand for IT training in Asia, Pawar is confident success will come. "The opportunities for growth are huge," he says. "Once the brand recognition comes, the rest will fall into place."
[Source: Feer]
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