Momentum Forum moves development discussion forward

Momentum Forum moves development discussion forward

http://www.ft.lk/?s=nisthar+cassim

By Nisthar Cassim

Q: What would you term as the turning point for Virtusa during its 18 years of existence?
A: We started the company back in 1996 and we have steadily worked with our clients to help them create much better IT applications and IT environments and help them accelerate their time to market, innovate, etc.
Starting in about the early 2000s, we focused a lot of our energy on large industries, industries where they invested a lot in IT technology, building new products and services. The first noticeable change we had was when we started to focus our energy on three primary industries – banking and financial services, which also includes insurance (called BFSI); communications and technology; and media and information.
Even today about 60% of Virtusa’s revenue comes from BFSI; about 30% or so comes from communications and technology and about 10% comes from media and information. We have continued to see steady growth across all of those industries.
We took the company public in 2007 and we were about third the size we are today. This year we will do close to 480 million dollars in revenue and we have about under 10,000 people worldwide. There has been very strong growth. The 10-year CAGR (Compound Annual Growth Rate) has been close to 30%.
 
Q: When you started what were the staff numbers like?
A: When we started we had a team of about 10 people, both in the US and Sri Lanka and from day one we were a global team; we had people both in the US and here. We have preserved that as a part of our culture and our ethos. In the first year we probably had four clients and we were really experimenting with this idea and obviously it was very successful.
 
Q: In these 18 years, what would you highlight as your milestones? When you started, did you have a plan to grow to a particular size in terms of head count and revenue?
A: It’s hard to imagine that it has already been 18 years. It seems like just the other day. When we started we really wanted to help our clients innovate. Innovate as in bring products and services to market faster. We decided to do this purely as a consulting and an outsourcing firm. The first inflection point was realising that we were onto something that was very much in demand. Then it was around taking this capability of innovation that we had built and applying it in these three industries that I talked about. As we have done that, we have been very focused in terms of working with clients who service large consumer populations. Across all the industries that I described, what’s common is that these industries are service-oriented industries that service large numbers of consumers and our focus in that area has given Virtusa tremendous strength in terms of understanding how companies and their enterprises need to work with their end consumers, because that’s what we’ve done.
What’s amazing to us is that there’s so much new technology that’s coming into the market, innovation that’s taking place, and at the same time there is a new demographic of younger consumers that have essentially grown up with one of these handheld devices in their palm, while for the prior generation, for most of us, this is a convenience. Being able to do all of our banking and our insurance needs, everything we buy and the stores that we go to on this is very much a convenience to our generation. For the next generation it’s a way of life. I, for one, remember very well going to a branch office and doing my banking at a branch, taking my cheque book out and writing a cheque, but my kids probably will never go into a bank office or a bank branch, they will probably never own a cheque book, and if they can’t get these services on their handheld devices, they’re going to go to someone else that provides that.
What is most interesting for us, and I think one of the inflection points for the company, is that, one, we focused on these industries that service large consumer bases; two, we were working on innovation, as in leveraging new technology to help them being their products and service to market faster; and now, combining that with a demographic shift where consumers are demanding that everything they do has to be on these handheld devices has created a perfect storm for Virtusa. That leverages our experience, our strengths and our aspirations and that’s really what’s been at the epicentre of driving the growth that we have seen across our 10,000 or so people worldwide.
 
Q: The last announcement was 8,000 but that number has changed?
A: The last announcement was exactly 9,436 people worldwide. In our most recent quarter, which was our second quarter, we did $117 million in revenue, and for the full year we forecast $ 480 million.
 
Q: What’s the breakdown of the 10,000 staff?
A: We don’t break it down by individual countries. About 25% of our team members are in what we call customer facing geographies, that is all of the countries we have clients in – that includes the UK, Europe, the Nordics, Germany; about 75% of our team members are in South East Asia, across four centres primarily, in India – Hyderabad, Chennai and Bangalore – and in Sri Lanka – Colombo.
 
Q: Virtusa has benefited from the mobile revolution globally. In terms of innovation, any particular case that you can highlight that really made a difference in the markets that you serve?
A: There are several. The technology changes that have really been precipitating or providing a way for enterprises to provide new innovative services include mobile, social, analytics, and cloud. Those are the four technologies that have matured over the last three years. Start-ups, as in new companies, and innovative enterprises can leverage these technologies to create disruption in the market.
So about four years ago, for one of our largest clients, we created the capability for them to take a cheque and instead of taking that cheque and depositing it at a bank branch or to a teller, where the consumer could take a photograph of that cheque and basically deposit it right from their phone. So this application became the number one downloaded banking application in the United States. We released this product for our client in less than 90 days. This was back in 2010. Since then we have continued to work on bringing in a lot of these technologies so that the end experience the consumer has is so much more secure. I still believe though that this is the start of the revolution that is taking place; most of our established clients today are bridging – taking what they built online through a web browser and creating a mobile extension so that they can do it may be a bit better on a mobile device. But very few of them are thinking of disrupting themselves and really harnessing the power of these four technologies, where you bring them together and you understand the consumer behaviour requirements, where you can really create disruptions. There are quite a few examples in all the industries where we are operating now, where there are a few disruptors but most enterprises are still bridging. We believe that the amount of disrupting is only going to increase over the next one, two, three years.
 
Q: The highlight of Virtusa has been that even during recession periods, it has managed to grow. What would be the key reason – is it innovation, luck, is it in your culture where even during turbulent times you still grow, or is it the markets in which you are operating?
A: I think it’s actually a little bit of all of the above. I think we have picked our markets very deliberately. As I mentioned, we only work across these three markets but the common thread across these three markets is that they all service large consumer bases. We believe that we have a very compelling value proposition that goes well beyond the cost arbitrage of doing work in South East Asia for Western countries. Much of that is based on the fact that the work we do enables our clients to become more efficient. We have a simple philosophy at Virtusa that it’s all about the fact that less is actually more. It’s not about doing the same for less and what that really means is we’ve focused on helping our clients rationalise, consolidate and modernise and opposed to simply doing the same work in a different geography. We think that we have benefitted by our team members and our people who have worked diligently during good times and bad times to create a very strong service level for our clients and that has helped us clearly not only to grow faster than our industry during good times but to continue to grow even during bad times. I’d be remiss if I don’t underscore the fact that there’s been certain good fortune and good luck. I think our teams have worked very hard to put themselves in a position to reap the benefits of being in the right place at the right time and good fortune, but all of the above have helped us grow.
 
Q: Do you recall a set of customers with whom you worked from day one who are still with you or doesn’t that happen in the industry that you serve?
A: When we first started we were experimenting with the idea of innovation in a subset of the industries in which we are operating today. The reason was, as a start-up company, working on a theory and a vision around innovation, global innovation for our clients, we could actually experiment only in a certain part of the industry. Then we very deliberately moved from that segment of the industry to the three industry segments that I talked about and since then we have established very, very strong relationships with our clients. Over 90% of Virtusa’s revenue at the growth rates that we’ve talked about comes from our existing clients who have worked with us before the start of a new fiscal year. Several of our clients contribute very significant pockets of work and do a lot of their work with Virtusa. Today we have 111 clients; we have a very significant opportunity to expand the size of each of our clients. The clients who have worked with us for seven, eight, nine, 10 years or more, you can already see how they’ve grown with us and expanded to become very significant contributors to Virtusa’s revenue profile.
 
Q: Are all these clients in the US, Europe and the Nordic region?
A: The majority of our clients are in the US and Europe. Approximately 5% of Virtusa’s revenue comes from outside of the US, Europe and UK. That would include India, Sri Lanka, Singapore – essentially Asia.
 
Q: Going back, when you started, where did you think you would end up? Did you envision this 20 years ago that you would be here one day or did you have very modest goals, were you just trying it out to see whether you would strike lucky?
A: When we started, we really felt that there was an opportunity. First and foremost, based on personal experiences, we were very clear that we wanted to work in a very large industry, not a small industry – that was very deliberate. I think it had to do with the fact that in a prior life I had worked with helping start a company in a very small industry; we were very successful in that small industry but we were still a very small business. I think that was a very enlightening experience for me personally, where I felt that whatever I spent my time on next, I wasn’t afraid of competition, I wasn’t afraid of working in a very large setting, but I really wanted to make sure that the industry or the market we were working in was a very large market and ideally a market that continued to grow, had a good foundation and good growth prospects. That selection was very, very deliberate, even before we started Virtusa. So we picked the IT services market and we picked the global services segment of that market. The good news is that, other than for a few years, the overall IT services market has always expanded at the tune of between 3 and 5% a year. A segment of that market, which is the offshore outsourcing market, has expanded between 12 and 18% a year. This industry overall, this is the overall IT outsourcing industry, will be over a trillion dollars in 2018. It’s about 960 billion dollars today. So we picked that very wisely. We then were very fortunate in that our strategy and vision right from the start was about innovation. It wasn’t about doing maintenance and remediation and just taking advantage of a lower cost model. It was about leveraging a global talent pool to help our clients innovate and accelerate time to market. I think that has really defined who we are, it has defined out ethos, and it has enabled us to enter new industries and excel. It’s enabled us to enter new markets, as in new geographies, and excel, because our fundamentals are very strong. We have an excellent ability to attract talent, because we are looking for people who enjoy innovating, applying themselves and being creative. We apply this in a very large industry that is growing and in that industry across clients who are servicing end consumers. To our clients, their goals are to expand and preserve the consumers they have. Our focus is to help them expand their market by applying innovation, to help them create new services and technologies, and help them improve the efficiencies of their IT environment, through rationalisation and consolidation.
 
Q: Do you feel that you will stick to these three core market groups (banking and financial services; communications and technology; and media and information) going forward or are you looking at opportunities outside?
A: These three markets are much bigger than our presence in these markets today. We have a terrific opportunity just to expand in these three markets in a big way. Having said that, we will continue to explore related or adjacent industries, because as we continue to grow Virtusa and skill Virtusa, we will need to operate in more industries and more markets than those in which we’re operating today.
 
Q: Where would you like Virtusa to be in the next five to 10 years? Or is it the case that companies in your industry don’t envision that far because you work in an industry where technology has a shorter lifecycle?
A: Just by way of context, the modernisation that is required in the industries that we work in will necessitate the largest investment in IT. So we are still pretty much at the start in terms of growth. The reason for this is the demographic shift that is taking place where consumers will only deal with providers if they can deal with this, combined with the fact that these large enterprises have to modernise to be able to service that demographic need, is going to require very significant investments in IT.
We are uniquely positioned to help our clients in those industries with the services that will help them intercept these new consumers and expand their market. These enterprises are starting only now but the investments are going to increase over the next five to 10 years. We feel that we are very uniquely positioned to help them create these new services, modernise their IT infrastructure, to service this change. We obviously feel that we have positioned Virtusa very well to in that period of time be the leading provider of business consulting and IT outsourcing services to help our clients establish, modernise and provide services to this demographic change that is taking place.
 
Q: What’s the kind of goal you are looking at – doubling your revenues going forward or are you much more cautious in terms of forecasting where you will end up?
A: Our long-term objective – obviously we are given guidance here – and that guidance calls for growth that’s pretty significant year over year. We’ve gone from approximately 397 million dollars of revenue last year to 480 million dollars this year; around 21% year-on-year growth. In our industry that is very strong. The industry is growing about 12% a year so we are growing almost twice that even at our scale. Our goal is very simple. Our long-term goal is to continue to grow Virtusa faster than the industry growth rate in the industry we are operating in. We believe that we can do that on a consistent basis and that we will continue to increase our market share.
 
Q: Is your market share available within the industry and how do you position yourself?
A: Well, if you take a look at the overall IT outsourcing market, that’s almost a trillion dollars and we are not even 1% of that, so we have a very significant opportunity of expanding our market share. I think the fact that we had such strong capabilities, we are very well-positioned in terms of what we do and how we do it, that’s what has enabled us to continue to grow faster than our industry, thereby expanding our market.
 
Q: Do you think you will grow faster than how you’re grown in the last five years? Has that been the momentum within Virtusa?
A: Our goal has always been to grow faster than the industry growth rate and we’ve got a very good shot at that. In the last five years we may have grown well ahead of the industry growth rate and our goal moving forward continues to be to grow faster than the industry growth.