After achieving tremendous success in the air-conditioning and refrigeration business, the Blue Star group is now all set to replicate its success story in the information technology arena. Christened Blue Star Infotech, the group’s software arm is exploring new business avenues to foster growth in a market dominated by the likes of TCS, Infosys and Wipro.
The Blue Star group, a 58-year old company that has traditionally been in the business of air conditioning and refrigeration, formed the international software division (ISD) of the Blue Star group in 1983.
The division was formed to cater to the group’s in-house needs. In the 70s the group became distributors for Hewlett-Packard (HP), selling everything from instrumentation to other technology products. The relationship with HP saw the division progressing from rendering support to Blue Star’s in-house divisions to developing tools for HP, servicing HP’s internal systems and also working for HP’s clients. The vastness of HP’s business saw Blue Star gaining expertise in various areas. Simultaneously, the division started getting into product development for other companies in the Blue Star group. At this juncture, the Blue Star management decided to use its expertise to cater to clients other than HP as well. Incidentally, HP even today contributes to almost 35 percent of the company’s business.
Though the newly formed division was bringing in good business, there was no proper structure in place. The business was divided across three lines—global research and development (GRD), business applications and practice (BAP) and the consulting services practice (CSP). In the mid-90s when India had just begun to witness an IT boom, Blue Star’s ISD lost out due to the lack of a proper marketing set-up. A move was then initiated to form a separate company with clearly defined lines of business and a robust marketing structure. But it was only towards the end of the second millennium that this move achieved fruition. Year 2000 saw the formation of Blue Star Infotech (BSI). And since then the company has not looked back.
Elaborates Parmod Bhalla, BSI’s managing director and the man behind the company’s new avtaar, “The company was not market savvy and was dependent on the business brought in by old relationships and promoters. Lack of knowledge of the market had resulted in a weak structure. There was no quality to differentiate us from competition. Also, the company’s business was drawn on a horizontal line based on the HP system, which was hindering growth.” The first item on Bhalla’s list of priorities was to structure the newly formed company along vertical lines. This was in keeping with his belief that vertical specialisation was an urgent prerequisite for survival in today’s cut-throat competition. The first year saw the company expanding its lines of business to include banking, financial services, securities and insurance (BFSI) and a systems integration practice (SIP). The agenda was to focus on these key areas of business and gain expertise so as to provide competitive solutions.
GRD
The global research and development (GRD) services division of BSI had a strong history of dealing with technology verticals. The company realised that this line of business held huge potential, and so decided to make this one of the key focus areas. BSI had an added advantage in terms of the vast experience that it had gained over the years in working with product companies through various stages of its product life cycle. Says Bhalla, “The potential for this business was huge as the international market for R&D in IT is worth around $200 billion with the US being one of the largest markets for such services.”
To facilitate a stronger focus BSI created two segments within GRD, namely, the system integration group (SIG) and the software products team. SIG is mainly concerned with hardware product development. BSI works with system suppliers to develop embedded or application software required to run the unit and integrate with other products. Areas of competence include medical imaging, wireless messaging, telecom infrastructure, industrial automation and consumer electronics. The software products team on the other hand collaborates with independent software vendors (ISVs), who develop software products for the end-user
market.
The GRD strategy is to help a client’s R&D team in its product development efforts and end-of-life cycle support. BSI has, according to Bhalla, enabled many product companies to convert product concepts into working applications. GRD helps the customer in not only bringing out new products to market but also with the maintenance and support for existing products and installations. Towards this end, GRD has set up several competency centres that act as virtual extensions of customers’ product development teams. The idea behind this is to help customers in reducing time-to-market and the cost of developing new products. In fact BSI enabled a US-based Fortune 500 company to achieve 80 percent cost savings by migrating its DOS-based application to Windows using Autodesk’s Actrix product.
BSI has structured a collaborative development framework, which supports multiparty co-ordination between the customer, third-party vendors and BSI. While the customer is expected to contribute domain and functional knowledge, BSI brings in the technical and quasi-technical skills and processes to the team. The group has several years of experience, having built products for customers on client server, as well as n-tier architecture in both the Microsoft and Java environments.
To provide added value to customers BSI has formed a dedicated technology group. The function of the group is to keep itself abreast of all the latest technologies that have hit the market and build domain capabilities in specialised technology areas such as real-time embedded systems, telecom, networking and wireless technologies. GRD also provides the customer with product testing lab services. Here the client can, in conjunction with GRD, conduct studies and tests on enhancing product features and keeping them up-to-date with the growing needs of customers.
The slowdown in the US adversely affected the GRD line of business. BSI saw GRD revenues fall by almost 16 percent in 2001-02 to Rs 21.7 crore. The divisions—networking, embedded application and the systems integration segments are being de-merged and spun into a new system integration practice line of business. But, the division will continue delivering solutions in collaboration with BSI’s other lines of business.
BAP
The Business applications practices (BAP) division was created for networking the internal systems of HP. The company then leveraged this expertise to offer similar services to other organisations. The division is now responsible for offering support services to a customer’s legacy business applications, offering customers retention of knowledge related to their custom applications and legacy platforms, 24x7 support, and Web-enabling expertise. The benefit for the client, according to Bhalla, would be optimisation of their IT investments at a low cost.
The other segments within BAP include remote application support (RAS), business tools development (BTD) and life cycle enablement (LCE). BTD addresses the business process automation requirements of a department or function within an organisation. The segment looks at an end-to-end solution, right from analysing the client’s requirements to design, implementation and support. Most legacy business applications require a high degree of customisation. BAP develops these business tools to meet the exact business requirements of a client. Currently, the division is capable of developing applications on legacy platforms, to client/server and even on n-tier solutions.
The LCE is BSI’s proprietary methodology, which lays out a clear strategy for helping customers decide on the future of their legacy applications. This enables the customer to increase the lifecycle of their existing systems. Also, once the future of the system has been worked out the customer can then take the requisite measures to seamlessly move into a new environment.
Other than this, BSI also runs an HP 3000 competency centre in Bangalore. The centre delivers remote application support (RAS) and migration services for HP’s customers worldwide. The centre supports the accounting, distribution order and customer management applications of more than 165 HP offices spread across the globe.
According to Bhalla, BAP registered a 96 percent increase in revenues, to Rs 27.4 crore in 2001-02. The division is currently contributing to more than 47 percent of BSI’s revenues as compared to 34 percent in 2000-01. BSI sees a huge growth opportunity in this segment, especially with the discontinuation of HP’s HP-3000 series. Customers currently working on these machines would need to migrate their existing applications and data to newer platforms. BSI has equipped itself to handle this work smoothly as and when the need arises. BSI has also signed a five-year $9 million application outsourcing contract with Microwarehouse to handle the migration work.
Consulting
Consulting is another key vertical that BSI is currently focusing on. The division was an offshoot from BSI’s experience as a global consulting partner for BaaN’s ERP suite of products. Also, the company had developed domain expertise in myriad verticals like heavy engineering, process, automotive, electrical sector etc. This enabled the company to understand customer requirements and rapidly implement a solution to meet them. Explains Bhalla, “Our practices are more on the lines of a consulting company. Also, consulting is a way of opening doors to new business areas. Even the margins are much higher as customers tend to pay a premium for consulting services. Hence, we have been concentrating on consulting in a big way.”
The company is currently looking at consolidating its consulting practice. Towards this end, it has added two horizontal practices, namely, consulting practices and creative practices. While the consulting practices segment will concentrate on e-commerce, ERP implementations, etc, creative practices will look at enhancing the look and feel of the clients’ Web portal. Says Bhalla, “With the Internet emerging as a key aspect of future business, more and more organisations are looking at enhancing the look and feel of their portals. We decided to carve out a separate segment within BAP to cater to the demands of existing customers for an improved website.” BSI has also tied up with Microsoft Navision to offer customers an enlarged portfolio of services.
Currently, the consulting line of business accounts for close to 21 percent of BSI’s business, contributing more than Rs 12.9 crore in 2001-02. With demand for consulting services increasing in both India as well as in the Middle East, Blue Star expects this segment to take off in a big manner in the coming year. Also, the tie-up with Microsoft Navision is expected to enable the company to penetrate newer markets, which will serve to further accelerate growth for this division.
BFSI
The banking, financial services, securities and insurance (BFSI) vertical is the latest addition to BSI’s growing list of vertical business lines. This vertical has basically been set up to help companies in the BFSI space to leverage existing investments made in technology and derive optimum value. Helping the client achieve this is BSI’s team of techno-functional experts, with expertise in various domains like Web enablement, solution migration and integration, data conversion, data warehousing and business intelligence solutions.
To strengthen its domain expertise in this vertical, BSI entered into a joint venture with the Arab Malaysian Group, a diversified financial services group in Malaysia. The joint venture resulted in the formation of BSI Malaysia, which is a 51 percent subsidiary of BSI India. The new company enabled BSI to penetrate newer markets. The company has also entered into various partnerships for providing customised solutions in the areas of retail credit scoring and risk management.
The BFSI division has deployed customised solutions for banks and financial institutions in India, Malaysia, UK and USA. The division has also developed a Web-based system, which is designed to centralise legal recovery functions, to automate debt recovery processing for banks.
Emerging verticals
Other than the key verticals already described BSI is also looking at emerging verticals within retail and health, which haven’t been tapped as yet. For instance, within retail BSI is exploring the potential of catalogue management. According to Bhalla, there are not too many catalogue management vendors in the country. Also, with Health Insurance Portability and Accountability Act (HIPAA) initiatives in place the company is now looking at unexplored areas within healthcare. The company is currently following the strategy of developing intellectual property in this area.
Strategy
BSI launched an extensive partner programme last year. The objective was to not only extend its reach across markets but also enlarge its portfolio in terms of domain expertise. The company plans to continue with this strategy to expand its avenues.
BSI has also partnered with Iris Logic, comprising a group of senior sales and technical professionals and domain experts. The partnership has already resulted in huge benefits for the company, including 7-8 new clients, which is expected to double over the coming months.
Another strategy that the company is betting on is its partnership with various business associates, especially in areas where the company does not have a direct presence. BSI has signed up with local business associates in Austria and Germany to provide a one-stop shop for customers.
Other than this, the company is opening offices in newer geographies. Other than the subsidiary in Malaysia, the company has also forayed into the European market. Currently, the company has subsidiaries in the US and UK, and is also looking at Japan and the rest of Europe as potential markets. Elaborates Bhalla, “Almost every major European company has a presence in India. Even if we get hold of a small percentage of that base it can significantly add to the company’s coffers.” Currently, European business contributes close to 30 percent of the company’s revenues.
Future
BSI is looking at various ways and means to keep existing customers happy. Towards this end, the company has achieved a high standard of quality across its products and services. The Seepz development centres had achieved the SEI-CMM level 4 in 2001 and are looking at achieving SEI-CMMI by end-2003. The company is also focusing on developing BSI Malaysia as its development centre outside India.
This year BSI plans to focus on consolidating its presence in the technology sector as well as in emerging verticals like healthcare. As the company doesn’t have HIPAA experts it has tied-up with several HIPAA freelancers to provide that face to the customer.
The company is also in talks with various service providers to chalk out a growth strategy. Within consulting, BSI plans to develop its practice with other consulting vendors. As Bhalla says, the roadmap is to grow through organic as well as inorganic means. Organic in terms of direct sales and growth through partners, and inorganically by setting up a call centre and through acquisitions.
Comments
Post a Comment