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| Q&A: Sanjay Viswanathan, MD & CEO, Sonata Software | | 'We plan to focus on select verticals' |
| Pradeesh Chandran / Bangalore Oct 03, 2011, 17:16 IST |
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 Mid-cap information technology services companies with a niche focus have done well as the industry emerged from the 2008 slowdown. Sanjay Viswanathan, the recently appointed MD & CEO of Bangalore-based Sonata Software, is focusing to position the company in chosen areas. In a chat with Pradeesh Chandran, he talks about these plans to differentiate itself in the crowded market. Edited excerpts:
What changes are you seeing in the outsourcing space, given the volatility in the market place?
Outsourcing has undergone significant changes in the past three to five years. Earlier, companies would go with generalist firms. Now, they prefer to work with specialist partners, focused on niche verticals.
Today, clients are comfortable with outsourcing deals in the range of $10-20 million, rather than a $100 million deal. There are headwinds in the market. The euro zone is in a freeze and North America is in debt trouble. The combination of the two essentially means clients are holding back on outsourcing decisions.
You have a significant exposure in Europe, through your joint venture with TuI. Won’t it affect your prospects there?
Decision making cycles are becoming longer, compared to earlier. A lot of our focus will be on the existing key customers. Relatively speaking, that is the fastest way you can grow in these conditions. In an uncertain world, reliability is what customers want.
Do you see this new scenario as an opportunity?
The best part of the financial meltdown is that in the past three years, most companies have strengthened their balance sheets. We did an analysis of the cash on the balancesheets of FTSE 100 and Fortune 500 companies and found it is the highest ever in history. They want to release the cash, either to do inorganic activity or organically develop new products and services. Service providers which can build a platform-based strategy to enable clients getting into newer product and services will be the ones benefiting. I think that fits in our sweet spot.
For Sonata, travel & transport is over 30 per cent. What other verticals are you focusing on?
We are strengthening our portfolios to make us a specialised player. We have taken a big bet on the travel, transportation and logistics vertical. The IT spending (market size) by this vertical alone is around $36 billion and only about 12 per cent of that is being offshored. If you take a sub-vertical like airlines, the market opportunity is around $9 bn, of which only 10-11 per cent is being outsourced. We want to be among the top three in this space.
High-tech is another big play. Working with firms like Microsoft gives us an opportunity to develop products and services faster, better and cheaper. Now, technology is being embedded in other sectors like healthcare, oil and gas, semiconductors. We want to add one more vertical as part of our specialisation plans.As part of our specialisation in horizontals, we plan to focus on select verticals like testing, infrastructure management, enterprise solutions, etc.
Post the 2008 recession, mid-sized companies like Sonata seem to face difficulty in bagging deals, as larger players are also getting aggressive in this space.
The deal size has become small. Today, clients are happy working with two-three vendors, rather than putting all eggs in one basket. Our position is clear. We don't want to be a number one provider, but want to be on the top four in the list. The market is right for a firm like us, as we are specialists, doing higher value works like outsourced product development, remote infrastructure management and testing, where clients are willing to pay a higher price.
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