Back `Significant deal for both of us'
Krishnan Thiagarajan
Bharat Kumar
| SlashSupport, fresh from the tie-up with NTT, makes clear its focus. |
Clinching the talks: Shiva Ramani of Slash Support - Bijoy Ghosh
You could tell that Shiva Ramani was excited about this deal. Why else would he make himself available at some unearthly hour of 4:30 a.m. when in the US to talk to us here in a video conference?
Ramani, co founder and CEO, SlashSupport, a tech support company, had recently struck a deal with NTT Communications to offer remote infrastructure management (IM) services to clients in Japan.
Snapshots from the conversation Ramani had with eWorld soon after the deal:
Why IM?
The genesis for this was our Group's vision of becoming a billion-dollar company. We felt that rounding off our offerings would help take us faster to our vision. IM was a logical extension to our niche tech support business.
We have broken the IM business into four pieces of stack-Server infrastructure, Applications infrastructure, Desktop Infrastructure and Network Infrastructure. While it is still early days, the initial customer traction has been positive.
Our entry into the IM business takes away the language dependency. Previously in our business (tech support), it was voice-based communication and also reactive solution to problems. With this, I believe we are moving further up the value chain by providing proactive solution to problems that may arise in the future. The tech support part of our business will continue to grow.
SlashSupport's early wins?
A player in the education ASP space is a customer here, where we manage over 1,700 servers remotely from India. This helped us showcase our capability in the IM space.
NTT relationship
NTT's relationship with SlashSupport in the IM space is exclusive at this point of time, i.e. they are not working with any other partners currently in the IM space. For NTT, we are doing two legs of the stack-Server and Desktop. However, for their customers, we are likely to be on all four pieces of the stack.
How will NTT as a partnership work?
This is a significant deal for both of us. For NTT itself, we are managing the server and desktop infrastructure. However, NTT will be taking all the pieces of the stack to their customers.
For example, the entire data centre of an NTT customer could be with NTT. In such cases, NTT would go to its customer and propose that it will manage the latter's servers, network connections, desktops, offshore through us in India.
Offshorability of IM deals
The reality is that IM would mean information access. Customers who are scared about information may not offshore. I do believe that, into the future, CIOs are going to demand a cut in application management cost. By and large, offshoring in the IM space is here to stay.
Ours is a value play, having done seven years of pure-play tech support and hence I think we are well-positioned to leverage this opportunity.
Margins in the IM space
This is almost a start-up industry and hence it may be too early to talk about steady state margins in this business. Having said that, there are two ways to look at this business.
If you are looking at it as a services business, you will not invest in technology and you may invest in manpower alone. In this case, margins are likely to be a shade lower than IT services business.
If you are a young, aggressive player who wants to look at this space as a technology play, there will be a lot more investment in technology, including building your own IP. In such cases, the margins in this space could be closer to IT products margins than IT services margins.
Can you elaborate Technology Development?
When we engage with a customer, we start by writing probes, specific to an application the customer has (We write probes for different platforms). We identify 30-40 transactions in his applications, which would be a bottleneck for performance or system availability. When the customer is building his next product, we give them insights into what is wrong in the architecture that is creating the bottleneck in the existing product (this is leveraging a little bit of our RTG capability). The probes are the first-level defence in our support mechanism. (Probes are transaction-oriented and not technology-oriented at this point of time).
Pricing in the IM business
We think that IM business is the easiest to move into Output-based Pricing. Customers have begun to like it. The NTT deal that we announced recently is on the transaction-pricing model. We are going after a tech-based implementation rather than a people-based implementation.
Growth of IM business for SlashSupport
At SlashSupport, we expect to see 80 per cent year on year growth. The IM business itself, because of its smaller base, may grow well over a 100 per cent in the next couple of years. We expect the IM business to contribute 25-30 per cent of the overall SlashSupport revenues in the next 36 months from the current 6-7per cent.
Your aim to become a Top 3 player in the IM space
We have clearly defined the four legs in the IM business. The territory has been well mapped out. More importantly, the customers understand it and this model has gained initial acceptance at the customer end. Now, we have to move into the top gear on the sales front. I would say that we should be right among the top players in the IM space in 36 months.
Deal sizes in the IM space
We haven't even scratched the pie yet. There is a big market out there. Large deals will start coming into the play in the next 24-36 months, by which time I expect SlashSupport to show a $50m offshorable business in the IM space.
We have a head start in terms of technology competency and a tail start as far as acquisition goes. The recipe has been defined, we just need to go out there and complete the menu.
Competition from Tier 1 players in this space
Global customers are now seeing IM as a specialized competency. If this trend continues (and I am confident it will), smaller players like SlashSupport, if we innovate amazingly well, will benefit. Chances are that CIOs will see this as structured offering, just like how they have seen pure play tech support as a specialized offering.
I believe that the IM business is a line item with specialized capability rather than a general contracting capability and hence the reason for my bullishness in this space.
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