Subex winds up low-margin placement services business

To focus on core IT product operations

Mid-sized telecom software provider Subex has shut its services division to focus on the high-margin product business. The company had no revenue from the segment in the June quarter of the current financial year.

The Bangalore-based company has been slowly reducing its exposure in the services segment for the past few years. The share of the services business in total revenues had come down to five per cent in FY13 from 17 per cent in FY08 . In FY13, the business generated $2.5-3 million in revenue, when the company reported a revenue of around $60 million.

“We had some placement services or body shopping kind of operations that made for the services revenue. That business used to function as a separate entity. When the new team took charge, it was decided to focus on core operations and do away with the services business,” said Vinod Kumar, chief operating officer (COO).

Subex is focused on providing business support systems for communications service providers. The company has remained committed to grow its core operation as a telecom software provider and would continue to do so, Kumar said.

According to the company, one reason why it decided to wind up the services business was that it was dragging down overall margins. In an interview with Business Standard in 2008, Subhash Menon, the then chief executive officer and managing director, had said the services business was essentially around body shopping and onsite activity.

The company was booking an earnings before interest, taxes, depreciation and amortisation margin of six-seven per cent in that business in 2008, against 15-16 per cent in the products business.

In 2008, Subex had 250 employees in the services business. However, COO Kumar said the company had only two or three permanent workers left in its services business lately, who were absorbed into other operations. The remaining staff was on placement contracts, which gradually expired.

 

He also said that winding up of the services business will not have much impact on the company’s earnings going forward. “This will not matter at all to our earnings going forward; it was very small business,” he added.