Local IT future is in products, not consulting : Leapset CEO
Sri Lanka's future is not in consulting or IT services, since there aren’t millions of IT grads locally as in India. Rather, the way forward is product development, according to Mani Kulasooriya, the Chief Executive Officer of Leapset.
Speaking to the Business Times, Mr. Kulasooriya elaborated that, to achieve this end, Sri Lanka must create a "development and engineering culture that is less focused on coding or implementation of somebody else's specs and more focused on truly understanding the problem that we are solving". A culture shift that he is currently undertaking in his own company.
He also added; "To be able to do this, you need to become a domain expert".
He continued that being a domain expert is not only about marketing or product expertise, but this knowledge had to apply to the entire organisation, especially when it was geographically removed from the customer which is especially complex. "It is also complex when you have an IT industry that has grown up around services and consulting where there is a very specific mindset," said Mr. Kulasooriya.
Commenting on the progress of his own company, Mr. Kulasooriya noted that, while his company was aged just over two-and-a-half years, it was spun off from a larger company that was initially more focused on consulting. He further commented that, with the two other units of the company shutting down, the US-based restaurant industry eventually became the sole focus of Leapset. Added Mr. Kulasooriya; "Between 2006 to 2010 we [experienced] a very rapid growth rate, but from half way through 2010 to today, our growth rate was 10x that. In a product company, when you start gaining traction, [the company] scales rapidly". He also elaborated that, following an initial investment in 2012 from US-based food services company Sysco, the largest food distributor in the world at US$ 42 billion in revenues, 9,000 sales people and 400,000 restaurant partners, Leapset had also more recently accepted additional funding from this food services giant, facilitating a strategic partnership with it. Now, Leapset has exclusive access to all its partners, with the ultimate aspiration of becoming a total restaurant operating system, incorporating both the frontend, and the back, of each partner outlet.
Said Mr. Kulasooriya; "In June 2012, we took an US$ 5 million investment from Sysco at US$ 24 million valuation. We [then] launched in California, in all seven of Sysco's markets there".
At the same time, he revealed that Sysco's stake in Leapset was akin to a private equity type structure, with Leapset having already received another US$ 25 million funding tranche, which took its market valuation above US$ 100 million. "More than the valuation and the capital, more important is that we are essentially the technology platform for anybody that wants to sell anything through Sysco", opined Mr. Kulasooriya.
In terms of the company's plans for the next 12 months, and beyond, he signalled; "We kind of proved ourselves in California. So we went to a less tech-savvy state, Florida, and after Florida we are not really going to go state-by-state. So, by the end of next year we want to be available nationally in the US".
He also revealed that, since Leapset wanted to become a total restaurant operating system, and because there are many functions in restaurants, his company planned to build or acquire technologies to address these. Stated Mr. Kulasooriya; "We are currently in the latter stages of our first acquisition, to be announced soon, and planning another. So, next year, we would have done a couple of acquisitions and a couple of major partnerships". He also identified Leapset's second acquisition as a social networking space similar to Yelp, Web Builder, etc.
It also emerged, according to Mr. Kulasooriya, that "over the next four years, we plan to [serve] five per cent to 10 per cent of Sysco's customer base. Five per cent will get us to 20,000 locations, 10 per cent will get us to 40,000. At this stage, we can go to the [capital] market and say we have already acquired 5 per cent of our captive audience, and not only from the marketplace but from our captive audience. So the message to the 'street' will be much more powerful". He added that investors do not necessarily base a company's worth solely on currently going-ons, also considered was that company's future prospects. He also noted that, beyond signing up 20,000-40,000 outlets, Leapset also plans on offering multiple products to each restaurant, while additionally having entered another international market, at a very early stage.
Meanwhile, the potential benefit for Sysco? Formerly commodity focused, the food distributor would eventually reposition its relationships with customer restaurants, offering ways to grow revenues, cut costs, interact with diners, etc. "For Sysco, this will take time though, if it can be perceived as a technology services provider rather than quantity seller, this could mean a massive shift in value. But these are big picture items", contended Mr. Kulasooriya.