Resurgence act

The worst seems to be over for the software solution and IT educa-tion major NIIT, but the strug-gle seems to be still on.

Ever since, the company issued profit warning in 2000–the first one of the few big Indian IT majors to do so–the com-pany has undergone a series of changes and restructuring.

First, the company spent much of 2000-01 in restructur-ing and charting out new business strategies. In the same year, NIIT had set for itself a massive Rs 10,000 crore target to be achieved in six years. The restructuring exercise, aimed at achieving this landmark, carved out four independent business units (IBUs)–software solu-tion, knowledge solution, education and training wing, and Project K12. The company had also put in place a ‘fast for-ward’ plan that envisaged that these IBUs would function as autonomous entities with the corporate center in the core to ensure synergy of business and monitor strategies and growth.

However, despite all efforts, the slowdown continued to impact the company’s fortune the next year–NIIT posted a negative growth of 30 percent with revenues going down from Rs 1138 crore in 2000-01 to Rs 799 crore in 2001-02. But the change triggered dur-ing the previous fiscal was on track, and in July 2002 the company announced that it was renam-ing its global software business as NIIT Technologies.

The objective of the move, as Rajendra S Pawar, Chairman, NIIT, had then explained, was to give a distinct identity to NIIT’s software solution IBU. It was also aimed at re-affirming the company’s commitment to deliver innovative, result-orien-ted solutions in identified domains.

However, the company ref-rained from carving out a separate company out of its software solution business. The logic behind this, as most of the NIIT top brass, including Pawar had maintained, was to enable both the companies leverage each other’s strength. “Synergy of the two operations has been our core strength and we do not want to dilute that,” had always been NIIT’s standard answer to any such question.

Agreed. So what triggered off the NIIT board’s decision to spin off the Global Solutions Business (read NIIT Technolo-gies) into a separate company now? The ‘spin off’ after appro-priate segregation of the knowledge solution business would help both the companies have a sharper focus on their specific businesses–education and software.

The press release further rea-soned that as a listed company focused only on the IT services business, NIIT Technologies would have greater flexibility as well as acquisition currency to create innovative strategic alliance.

“This step will help us realize our aspiration of scaling our business in chosen segments leading to integrated service offerings in IT services and BPO,” said its global solutions business President Arvind Tha-kur. As per the Board’s decision, Thakur is expected to lead the newly formed NIIT Techno-logies Ltd.

The new company will also have on board presidents of NIIT’s several software sub-sidiaries–NIIT SmartServe and NIIT GIS Ltd–and the business leaders based in USA, Europe, India, Asia Pacific and Japan. The new team would also have the presidents of the three recently acquired companies–Germany-based AD Solutions and the US-based DEI and Osprey Systems.

According to Pawar, “The purpose of the proposed restru-cturing is to accelerate NIIT’s growth.’’ Experts and industry obs-ervers point out that the decision is good. There are, ho-wever, many who want to know what took the com-pany figure out that this was a step that has been long over-due considering the fact that from a 80:20 ratio of education and software revenue mix, the later has been contributing more than 50 percent year on year for almost three successive years.

The official version on the ‘timing’ only says that, “With the company posting a 14 per-cent growth, 21 percent in soft-ware and seven percent in edu-cation business, it is the best time to trigger off another round of growth.” Perhaps the last one too in the series of cha-nges and restructuring that the company has continued with to tide over the nearly three year long spell of IT slowdown.

Shubhendu Parth


Cyber News Service