Description
covers topics like IT industry in India, significance of outsourcing, JV with motorola, satyam acquisition
IT Services industry in India
The seeds of Indian IT industry were laid way back in 1960, when India thought of being self sufficient in handling national security concerns. The Indian government first tried to have an agreement with IBM to share the new technologies. This agreement did not proceed in the right direction and forced the Indian government to set up a new commission called Department of Electronics (DOE). It was responsible for importing of computers and initial development of IT sector.1 The first software by India was exported in the mid 1970s by Tata Consulting Services (TCS). By early 1980 the export had reached USD 12 million inspite of the regulations on import of hardware and software. The mid 1980s saw emergence of new companies like Infosys, Satyam, Mastek, etc. Most of the growth in the initial years was through “body-shopping” i.e. a transfer of programmer from India to a foreign company. The liberalization of laws in 1991 gave the right impetus to the IT industry. This allowed the companies to import hardware/software at the same time laying of optical fibre for fast communication. It shifted the focus from “bodyshopping” to working from offshore. Along with it the strict US immigration laws slowed down the “body-shopping”. The Indian IT companies came up with a new business model wherein 1-2 programmers will be at client location and the rest of the team will work from India. Significance of Outsourcing Business & Domestic Market The 1990s was dominated by the high technology jobs that required a sophisticated enough skill-set to write software and maintain computer systems. India had become the leader of “outsourcing” revolution and captured 70% of the total spending on outsourcing. According to an IDC (International Data Corporation) study, India had emerged as the fastest growing and the fourth largest IT market in Asia-Pacific. A few large firms controlled much of the exports of the Indian software industry. About 32% of total software exports were controlled by the top five firms. During the 1990s, the Indian software industry showed a CAGR of 50%. The growth reduced to 32% after 2000. Initially the Indian software industry was mainly confined to producing and exporting low-end software services. They gradually moved into high-end software services catering business in BFSI, telecom, retailing and automotive segments. Over the years, sectors like BFSI, telecom emerged as the key growth sectors.
As per the study by Motilal Oswal in July 2006, the software and IT services spending by Telecom Service Providers (TSP) was expected to grow at 5.8% CAGR and touch US $ 38 billion by 2009. Another study by Data Monitor showed that the global wireless telecom services
industry is expected to grow at 11.8% CAGR and reach US $ 969 billion by 2009. A similar study about the global fixed line telecom services showed a growth at a CAGR at 4.6% and reach US $ 696 billion by 2009.
The Mahindra Group
The Mahindra group is one of the largest industrial conglomerates of India with diverse business interests such as automotive, farm equipment, trade and logistics, hospitality, information technology, infrastructure and financial services. The US $6.7 billion group has a global presence with operations on every continent (except Antarctica) and it is ranked amongst Forbes Top 200 list of the World's Most Reputable Companies and in the Top 10 list of Most Reputable Indian companies. The origins of Mahindra Group can be traced back to 1945 when Mahindra brothers J.C. Mahindra & K.C. Mahindra had a desire to set up a franchise to produce the celebrated Willy’s Jeep (USA). They joined hands with Ghulam Mohammad and the company was incorporated as Mahindra & Mohammed on October 2nd 1945. After India’s independence in 1947, Ghulam Mohammad migrated to Pakistan, and the name of the company was changed to Mahindra & Mahindra. Over the next 60 years, the company diversified its operations, engaging in numerous joint ventures and building expertise across various sectors.
Tech Mahindra’s History
Mahindra-British Telecom (1986 – 2006) In 1986, Mahindra group entered into IT sector when it formed a joint venture with British Telecommunications plc. The company was named Mahindra-British Telecom (MBT) and started operations in 1987. Expanding Operations Since the early 1990s, MBT began to expand its geographic presence. The company incorporated its first overseas subsidiary, MBT International Inc in 1993. In 1994, the company was awarded the ISO 9001 certification by BVQI (Bureau Veritas Quality International, a France based multinational organization offering third-party certification services of quality management systems). MBT established its first UK branch office in 1995 and six years later in 2001, it incorporated MBT GmbH, Germany incorporated.
In the year 2001, Mahindra-British Telecom and the US-based Rockwell Electronic Commerce entered into a 5-year strategic alliance and set-up an offshore software development centre involving total capital cost of $4.5 million. In 2002, the company incorporated MBT Software Technologies Pte. Limited, Singapore. During the same year, MBT was assessed at Level 5 of SEI CMM by KPMG and the following year it recertified to ISO 9001:2000 by RWTUV now known as TUV Nord. In 2005, MBT continued its global expansion and acquired Axes Technologies (India) Private Limited, including its US and Singapore subsidiaries. MBT was certified to BS 7799-2:2002 (Information Security Management Framework) by RWTUV and assessed at Level 5 of SEI CMMI by KPMG.
Tech Mahindra- Post 2006
In 2006, the name of the company was changed from Mahindra-British Telecom to Tech Mahindra Limited in order to reflect the diversification and growth of the client base and the increased breadth of the service offerings. . The company continued to diversify its operations and engage into various joint ventures. In 2007, Tech Mahindra Ltd announced their participation in Microsoft's Connected Services Sandbox a new program that brings together systems integrators (SIs) independent software vendors (ISVs) developers’ network equipment providers and telecommunications service providers in a collaborative environment to develop and test new communications services. JV with Motorola Inc. Tech Mahindra formed a JV with Motorola Inc. under the name CanvasM in 2006. Tech Mahindra held 80% in the joint venture. Tech Mahindra had deep expertise across a range of telecom technologies and through the joint venture Motorola gained access to more than 11,000 professional service experts and could leverage their expertise. For Tech Mahindra, Motorola’s large sales force and presence in North America provided an important channel for expanding operations beyond Asia. Access to Motorola’s R&D activities around emerging wireless broadband technologies enabled Tech Mahindra to establish competency and ultimately develop technical credibility around areas such as WiMAX. CanvasM became a key player in the mobile VAS space, focused on developing and deploying solutions and applications for media, operators and enterprises across the globe. It was awarded the title of Best Start-Up Company at the Mobile Content Awards ’08 held in London. As recently as August 2009, CanvasM bagged a multi-million dollar deal from Bahrain's Aytaf Telecom to provide value added services. Acquiring iPolicy Networks Private Limited
On 18th January, 2007 Tech Mahindra entered into an agreement to acquire Noida based iPolicy Networks Private Limited ("iPolicy"). This acquisition was complementary to Tech Mahindra’s strong security services capabilities. iPolicy provided next-generation, carrier-grade integrated network security solutions for enterprise and service provider customers. iPolicy’ capabilities enhanced Tech Mahindra's security service offerings and enabled it to offer end to end security services to its customers. Satyam Acquisition On 13th April, 2009, Tech Mahindra acquired a 31 percent stake in the 'fraud hit' Satyam Computers after a long process of bidding. With a subsequent open offer, the company planned to raise its stake to 51%. Tech Mahindra bid for Satyam at Rs 58 per share, while Larsen & Toubro, the other player in the fray, bid at Rs 45.90 per share. “This is a landmark development for Tech Mahindra and I am delighted that we are the highest bidder for Satyam,” said Anand Mahindra, Chairman, Tech Mahindra. However, Tech Mahindra’s acquisition of Satyam is not without challenges. It remains to be seen how well Tech Mahindra executes the integration process and there lies the source of Satyam’s vulnerability and sustenance. On 21 June, 2006, Satyam Computers was renamed and the new brand, “Mahindra Satyam” was launched. Tie-up with WIN in July 2009 Tech Mahindra announced a new strategic tie-up with leading provider of interactive mobile information and entertainment services, WIN whereby Tech Mahindra would develop a next generation mobile platform for WIN. The tie-up focuses on building a new platform to provide increased functionality and faster transactions across a broad range of media services particularly targeting the Asian markets. Welcoming the alliance, Jagdish Mitra, CEO CanvasM (Tech Mahindra’s VAS subsidiary) commented: “WIN has been a leader in providing VAS services in Europe and their expertise in delivering information and entertainment to mobile phone users in Europe has great replication potential and can be integrated into broader outsourced service offerings and other efficiency tools for large enterprises.”
Opportunities & Challenges
Leaders don't look behind, they don't look to the side; they look ahead. So as far as I am concerned we are looking to be the best telecommunication service provider in the world. We have been recognized by major agencies in the world as being amongst the top and we are ranked with the best in the world. So we benchmark not just with our peers here, but we benchmark with the best in the world.
-
Anand Mahindra, Chairman, Tech Mahindra Ltd.1
Tech Mahindra always had a very clear focus on the telecommunication industry, which according to Anand Mahindra, had been done for two reasons. “There is a very clear objective and a strategic alignment that comes when you say that you are going to focus on one segment of the industry, and our goal becomes extremely clear when we say we want to become the number one telecommunication solutions provider in the world,” said Mahindra. Since mid 2000s, there had been growing concerns in terms of a slowdown in global spending. The one risk that people associated Mahindra Tech with was the large proportion of revenues, which came from British Telecom and the very large proportion, which came from telecom verticals. In an interview with CNBC-TV18 in August 2006, Vineet Nayyar, CEO, Tech Mahindra explained, “As far as proportion of business from BT is concerned, it is coming down, but we have always argued that BT really is not one company. These are four separate companies with separate objectives and separate targets. We have been working with three companies, and we now want to work with the fourth. I do believe that in absolute terms, our business with BT will grow. I do believe that the proportion will come down because businesses from other areas will grow at a faster pace.” He added: To the other point as to whether telecom kind of places a restriction or a ceiling on us, all I would say is to please look at the business numbers of the telecom industry, both in the equipment manufacturers space and also in the service provider space. The market is close to $60 billion as against which the telecom industry in India is getting only about $1.7 billion. So we have huge headroom. Second, please recognize that the concept of telecom has changed; the definition of telecom has changed. It now includes media, it includes content, and it includes a host of other things which are coming in. So I think there is enough headroom for us to play and grow still. Tech Mahindra continues to be endorsed as a thought leader in telecom industry. Frost & Sullivan awards, which recognize outstanding global industry achievements, awarded Tech Mahindra the ‘Vertical Market Penetration Leadership Award in Telecom Vertical for 2006' and the 'Market Leadership Award for Offshore Security Consulting for Next Generation Network and Applications for 2006'. During August 2009, Tech Mahindra bagged a Rs. 1500 crores IT outsourcing contract from Etisalat, a UAE based Telecom Company. This win for Tech Mahindra may shift its focus in the domestic market. Tech Mahindra is already an established player in the global OSS/BSS space. But with the global market reeling under recession, focus on domestic market appears to be the most logical strategy. Tech Mahindra is also committed to corporate social responsibility. In 2007, the company launched the Tech Mahindra Foundation to address the needs of the underprivileged in society,
especially children. The company has key focus on the areas of Education, Women empowerment & Computer donations. Endnotes
1
Anand Mahindra quoted in an interview with CNBC-TV18’s, August 2006
References:
1. Somesh K Mathur, Indian Information Technology Industry: Past, Present and Future & A Tool For National Development, 2006
2.http://mahindra.com/mediaroom/group_overview.html 3.http://en.wikipedia.org/wiki/Mahindra_Group 4.http://www.iloveindia.com/economy-of-india/top-50-companies/mahindra-group.html
doc_702349911.docx
covers topics like IT industry in India, significance of outsourcing, JV with motorola, satyam acquisition
IT Services industry in India
The seeds of Indian IT industry were laid way back in 1960, when India thought of being self sufficient in handling national security concerns. The Indian government first tried to have an agreement with IBM to share the new technologies. This agreement did not proceed in the right direction and forced the Indian government to set up a new commission called Department of Electronics (DOE). It was responsible for importing of computers and initial development of IT sector.1 The first software by India was exported in the mid 1970s by Tata Consulting Services (TCS). By early 1980 the export had reached USD 12 million inspite of the regulations on import of hardware and software. The mid 1980s saw emergence of new companies like Infosys, Satyam, Mastek, etc. Most of the growth in the initial years was through “body-shopping” i.e. a transfer of programmer from India to a foreign company. The liberalization of laws in 1991 gave the right impetus to the IT industry. This allowed the companies to import hardware/software at the same time laying of optical fibre for fast communication. It shifted the focus from “bodyshopping” to working from offshore. Along with it the strict US immigration laws slowed down the “body-shopping”. The Indian IT companies came up with a new business model wherein 1-2 programmers will be at client location and the rest of the team will work from India. Significance of Outsourcing Business & Domestic Market The 1990s was dominated by the high technology jobs that required a sophisticated enough skill-set to write software and maintain computer systems. India had become the leader of “outsourcing” revolution and captured 70% of the total spending on outsourcing. According to an IDC (International Data Corporation) study, India had emerged as the fastest growing and the fourth largest IT market in Asia-Pacific. A few large firms controlled much of the exports of the Indian software industry. About 32% of total software exports were controlled by the top five firms. During the 1990s, the Indian software industry showed a CAGR of 50%. The growth reduced to 32% after 2000. Initially the Indian software industry was mainly confined to producing and exporting low-end software services. They gradually moved into high-end software services catering business in BFSI, telecom, retailing and automotive segments. Over the years, sectors like BFSI, telecom emerged as the key growth sectors.
As per the study by Motilal Oswal in July 2006, the software and IT services spending by Telecom Service Providers (TSP) was expected to grow at 5.8% CAGR and touch US $ 38 billion by 2009. Another study by Data Monitor showed that the global wireless telecom services
industry is expected to grow at 11.8% CAGR and reach US $ 969 billion by 2009. A similar study about the global fixed line telecom services showed a growth at a CAGR at 4.6% and reach US $ 696 billion by 2009.
The Mahindra Group
The Mahindra group is one of the largest industrial conglomerates of India with diverse business interests such as automotive, farm equipment, trade and logistics, hospitality, information technology, infrastructure and financial services. The US $6.7 billion group has a global presence with operations on every continent (except Antarctica) and it is ranked amongst Forbes Top 200 list of the World's Most Reputable Companies and in the Top 10 list of Most Reputable Indian companies. The origins of Mahindra Group can be traced back to 1945 when Mahindra brothers J.C. Mahindra & K.C. Mahindra had a desire to set up a franchise to produce the celebrated Willy’s Jeep (USA). They joined hands with Ghulam Mohammad and the company was incorporated as Mahindra & Mohammed on October 2nd 1945. After India’s independence in 1947, Ghulam Mohammad migrated to Pakistan, and the name of the company was changed to Mahindra & Mahindra. Over the next 60 years, the company diversified its operations, engaging in numerous joint ventures and building expertise across various sectors.
Tech Mahindra’s History
Mahindra-British Telecom (1986 – 2006) In 1986, Mahindra group entered into IT sector when it formed a joint venture with British Telecommunications plc. The company was named Mahindra-British Telecom (MBT) and started operations in 1987. Expanding Operations Since the early 1990s, MBT began to expand its geographic presence. The company incorporated its first overseas subsidiary, MBT International Inc in 1993. In 1994, the company was awarded the ISO 9001 certification by BVQI (Bureau Veritas Quality International, a France based multinational organization offering third-party certification services of quality management systems). MBT established its first UK branch office in 1995 and six years later in 2001, it incorporated MBT GmbH, Germany incorporated.
In the year 2001, Mahindra-British Telecom and the US-based Rockwell Electronic Commerce entered into a 5-year strategic alliance and set-up an offshore software development centre involving total capital cost of $4.5 million. In 2002, the company incorporated MBT Software Technologies Pte. Limited, Singapore. During the same year, MBT was assessed at Level 5 of SEI CMM by KPMG and the following year it recertified to ISO 9001:2000 by RWTUV now known as TUV Nord. In 2005, MBT continued its global expansion and acquired Axes Technologies (India) Private Limited, including its US and Singapore subsidiaries. MBT was certified to BS 7799-2:2002 (Information Security Management Framework) by RWTUV and assessed at Level 5 of SEI CMMI by KPMG.
Tech Mahindra- Post 2006
In 2006, the name of the company was changed from Mahindra-British Telecom to Tech Mahindra Limited in order to reflect the diversification and growth of the client base and the increased breadth of the service offerings. . The company continued to diversify its operations and engage into various joint ventures. In 2007, Tech Mahindra Ltd announced their participation in Microsoft's Connected Services Sandbox a new program that brings together systems integrators (SIs) independent software vendors (ISVs) developers’ network equipment providers and telecommunications service providers in a collaborative environment to develop and test new communications services. JV with Motorola Inc. Tech Mahindra formed a JV with Motorola Inc. under the name CanvasM in 2006. Tech Mahindra held 80% in the joint venture. Tech Mahindra had deep expertise across a range of telecom technologies and through the joint venture Motorola gained access to more than 11,000 professional service experts and could leverage their expertise. For Tech Mahindra, Motorola’s large sales force and presence in North America provided an important channel for expanding operations beyond Asia. Access to Motorola’s R&D activities around emerging wireless broadband technologies enabled Tech Mahindra to establish competency and ultimately develop technical credibility around areas such as WiMAX. CanvasM became a key player in the mobile VAS space, focused on developing and deploying solutions and applications for media, operators and enterprises across the globe. It was awarded the title of Best Start-Up Company at the Mobile Content Awards ’08 held in London. As recently as August 2009, CanvasM bagged a multi-million dollar deal from Bahrain's Aytaf Telecom to provide value added services. Acquiring iPolicy Networks Private Limited
On 18th January, 2007 Tech Mahindra entered into an agreement to acquire Noida based iPolicy Networks Private Limited ("iPolicy"). This acquisition was complementary to Tech Mahindra’s strong security services capabilities. iPolicy provided next-generation, carrier-grade integrated network security solutions for enterprise and service provider customers. iPolicy’ capabilities enhanced Tech Mahindra's security service offerings and enabled it to offer end to end security services to its customers. Satyam Acquisition On 13th April, 2009, Tech Mahindra acquired a 31 percent stake in the 'fraud hit' Satyam Computers after a long process of bidding. With a subsequent open offer, the company planned to raise its stake to 51%. Tech Mahindra bid for Satyam at Rs 58 per share, while Larsen & Toubro, the other player in the fray, bid at Rs 45.90 per share. “This is a landmark development for Tech Mahindra and I am delighted that we are the highest bidder for Satyam,” said Anand Mahindra, Chairman, Tech Mahindra. However, Tech Mahindra’s acquisition of Satyam is not without challenges. It remains to be seen how well Tech Mahindra executes the integration process and there lies the source of Satyam’s vulnerability and sustenance. On 21 June, 2006, Satyam Computers was renamed and the new brand, “Mahindra Satyam” was launched. Tie-up with WIN in July 2009 Tech Mahindra announced a new strategic tie-up with leading provider of interactive mobile information and entertainment services, WIN whereby Tech Mahindra would develop a next generation mobile platform for WIN. The tie-up focuses on building a new platform to provide increased functionality and faster transactions across a broad range of media services particularly targeting the Asian markets. Welcoming the alliance, Jagdish Mitra, CEO CanvasM (Tech Mahindra’s VAS subsidiary) commented: “WIN has been a leader in providing VAS services in Europe and their expertise in delivering information and entertainment to mobile phone users in Europe has great replication potential and can be integrated into broader outsourced service offerings and other efficiency tools for large enterprises.”
Opportunities & Challenges
Leaders don't look behind, they don't look to the side; they look ahead. So as far as I am concerned we are looking to be the best telecommunication service provider in the world. We have been recognized by major agencies in the world as being amongst the top and we are ranked with the best in the world. So we benchmark not just with our peers here, but we benchmark with the best in the world.
-
Anand Mahindra, Chairman, Tech Mahindra Ltd.1
Tech Mahindra always had a very clear focus on the telecommunication industry, which according to Anand Mahindra, had been done for two reasons. “There is a very clear objective and a strategic alignment that comes when you say that you are going to focus on one segment of the industry, and our goal becomes extremely clear when we say we want to become the number one telecommunication solutions provider in the world,” said Mahindra. Since mid 2000s, there had been growing concerns in terms of a slowdown in global spending. The one risk that people associated Mahindra Tech with was the large proportion of revenues, which came from British Telecom and the very large proportion, which came from telecom verticals. In an interview with CNBC-TV18 in August 2006, Vineet Nayyar, CEO, Tech Mahindra explained, “As far as proportion of business from BT is concerned, it is coming down, but we have always argued that BT really is not one company. These are four separate companies with separate objectives and separate targets. We have been working with three companies, and we now want to work with the fourth. I do believe that in absolute terms, our business with BT will grow. I do believe that the proportion will come down because businesses from other areas will grow at a faster pace.” He added: To the other point as to whether telecom kind of places a restriction or a ceiling on us, all I would say is to please look at the business numbers of the telecom industry, both in the equipment manufacturers space and also in the service provider space. The market is close to $60 billion as against which the telecom industry in India is getting only about $1.7 billion. So we have huge headroom. Second, please recognize that the concept of telecom has changed; the definition of telecom has changed. It now includes media, it includes content, and it includes a host of other things which are coming in. So I think there is enough headroom for us to play and grow still. Tech Mahindra continues to be endorsed as a thought leader in telecom industry. Frost & Sullivan awards, which recognize outstanding global industry achievements, awarded Tech Mahindra the ‘Vertical Market Penetration Leadership Award in Telecom Vertical for 2006' and the 'Market Leadership Award for Offshore Security Consulting for Next Generation Network and Applications for 2006'. During August 2009, Tech Mahindra bagged a Rs. 1500 crores IT outsourcing contract from Etisalat, a UAE based Telecom Company. This win for Tech Mahindra may shift its focus in the domestic market. Tech Mahindra is already an established player in the global OSS/BSS space. But with the global market reeling under recession, focus on domestic market appears to be the most logical strategy. Tech Mahindra is also committed to corporate social responsibility. In 2007, the company launched the Tech Mahindra Foundation to address the needs of the underprivileged in society,
especially children. The company has key focus on the areas of Education, Women empowerment & Computer donations. Endnotes
1
Anand Mahindra quoted in an interview with CNBC-TV18’s, August 2006
References:
1. Somesh K Mathur, Indian Information Technology Industry: Past, Present and Future & A Tool For National Development, 2006
2.http://mahindra.com/mediaroom/group_overview.html 3.http://en.wikipedia.org/wiki/Mahindra_Group 4.http://www.iloveindia.com/economy-of-india/top-50-companies/mahindra-group.html
doc_702349911.docx