Cyient to build software for telcos rolling out 5G

The IT company is set to compete with the likes of Tech Mahindra, Altiostar, Rakuten

Bengaluru-based IT company Cyient is finalising its plan to build Open Radio Access Network (O-RAN) software as well as offer system integration services to telcos readying to roll out their 5G networks across the globe.

With this move, Cyient, which has lately been a darling of the stock market, will lock horns with Indian companies like Tech Mahindra, Us-based startup Altiostar (controlled by Japanese 5G telco, Rakuten) and Radisys, acquired by Reliance Jio in the US.

Jio, too, has stated that it plans to offer end-to-end 5G network solutions in both software and hardware, thereby posing a challenge to the might of traditional telecom gear makers like Ericsson, Nokia and Huawei, among others.

Elaborating on Cyient’s strategy, Karthik Natarajan, president and COO, said: “5G O-RAN will create a new set of opportunities and we want to participate in it both in software as well as system integrators. We have a significant strength on the network engineering part, and work with almost 40 telecom operators worldwide. We are working across wireline, wireless, and also expanding into the 5G network rollout.”

Natarajan added that the company was still conceptualising its plan of action in this space as it would also require collaboration with hardware players. Cyient would be able to roll out the system in 12 months, he said.

Telecom companies are already in talks with global and Indian IT companies for their tryst with 5G. For instance, Bharti Airtel has tied up with Altiostar to build its 5G O-RAN software. Tech Mahindra has shown interest in bidding for the BSNL 4G network as a system integrator. The company says that it is working with telcos across the world and is open to collaborating with Reliance Jio, which has developed its own 5G technology. Rakuten is also in talks with other telcos to sell their 5G ORAN architecture.

Cyient’s strategy is largely based on its learnings during Covid times. The company saw its revenues drop to $131.6 million in Q1 21, picking up slightly in Q2, and growing by over four per cent in Q3 to hit $141.4 million, with an EBIT margin of 11.2 per cent. Needless to say, the markets took notice and the company’s share price zoomed up by 20 per cent in the last one month to hit ~655 on Thursday.

The pandemic hit Cyient hard. After all, 35 per cent of its revenues came from aerospace and defence, sectors that faced serious challenges with flights getting cancelled all over the world and airlines cancelling orders for new planes.

“Pre-covid, we had 35 per cent of our revenues coming from aerospace and defence. That is because the aircraft manufacturing business was booming with growing demand. Then Covid happened and impacted orders. The lesson that we have learnt is to have a balanced portfolio, with each vertical not having more than 20 per cent share of revenues. We have started this process and should be there in three years,” says Natarajan.

He also feels that the pandemic has accelerated digital products and services by at least two years. The location factor has vanished as a constraint in projects, whereas earlier, foreign clients wanted engineers to work close by. “I think this is really going to change some medium to long term mindsets of customers, especially in engineering and R&D. Currently, there is about $100 billion worth of outsourcing that happens globally, with India having a 33 per cent share of it. This will double in the next 10 years, and I think India will have half of this market.” says Natarajan. That is why Cyient is driving more digital and more software-centric expansion in its business, he adds.

The IT company is also leveraging its expertise in aerospace to offer its services to electric vehicle and autonomous car makers. Natarajan says that aircraft turbines are very similar to what is needed for an electric car powertrain. Moreover, the software for high-definition mapping in an aircraft can be leveraged for navigation in an autonomous car.