‘Merger to create most formidable enterprise digital company’
Earlier this week, Birlasoft, the CK Birla Group’s IT services company, and Pune-based KPIT decided to create two companies, one focusing on digital business and the other on automotive engineering and mobility solutions. ANJAN LAHIRI, chief executive off
What really triggered this merger?
As the world is becoming much more competitive, customers are also demanding specialisation. In earlier days, operations were important for customers; today capabilities and specialisation are important for each company. If you look at KPIT, it has a very large IT services business and a smaller focused automobile engineering and mobility one. Their founders are actually much more autofocused. We have put together a management team at Birlasoft, which is focused on IT services. So, combining the IT services strength of both to make a $500-million business and a focused IT engineering business makes sense.
What are the complementary strengths each firm brings?
KPIT is very strong on the ERP (Enterprise Resource Planning) side. Birlasoft is very strong with digital and application development. Combining, we can go to the same segment and sell more things to the same customers. And, at Birlasoft, we have a very strong consulting and solutioning capability, apart from expertise in verticals others than automobiles.
No overlapping of customers?
None, which is interesting. Very few of their customers do business in engineering as well as in IT. From my experience, I can tell you that very few customers give business to both engineering and IT. The customer segments are different and operations of companies (in these) are different. So, it makes sense to separate them.
What digital capabilities does Birlasoft have?
If you define the different constituents of digital technologies, which include analytics, cloud, Big Data and all, we derive 3035 of our revenue from these segments put together. But, if you only talk about machine
learning, robotics, etc, almost every company derives a small percentage of revenue from those. On top of that, we have strong consulting capabilities. I myself come from a consulting background and Dharmender Kapoor, our operations head, was the head of consulting at HCL Technologies. Because, technologies keep changing and customers need to know how to pull those to serve their business needs, there is greater demand for consulting today. And, almost the entire Birlasoft growth has been led by consulting-led wins.
Once KPIT’s IT services business is merged, will you be able to maintain the digital revenue share at over 30 per cent?
They (KPIT) also do a lot of digital work. Particularly because they are very strong on the auto side, they have strong capabilities in IoT (Internet of Things) and machine analytics. So, it will only strengthen our digital story and also allow us to access a segment of customers that were not there before.
In digital, finally, the data is sitting in core ERP. So combining the two, we believe we will be a formidable enterprise digital firm. I say enterprise digital because there is no other company for which such a large share of revenue comes from the enterprise software. For most firms, 50-60 per cent comes from application development and maintenance, 1015 per cent from ERP and the balance from infrastructure. Almost 60 per cent of our revenue will come from ERP.
Given the focus on consulting and digital, how is your revenue productivity?
It’s our intent to grow above the industry standard but it will take a bit of time to settle down. We absolutely believe we can produce above-industry growth.