A New Kind Of Software Company For India
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A New Kind of Software Company for India

BANGALORE, India — At a time when the term start-up evokes images of crashing stock prices and collapsing business plans — here as much as in the United States — Ashok Soota might not seem to be a man to watch.

But Mr. Soota's 19-month-old venture, Mind Tree Consulting, has been celebrated by technology analysts and journalists, even though it is privately held and has all of $15 million in sales.

Part of the buzz stems from its pedigree: Mr. Soota, 58, had been the vice chairman of Wipro, one of India's largest software concerns. He helped lead India's drive in the early 90's into the back-office end of the computer business, writing software code for big American companies.

But most of the excitement stems from Mind Tree's ambition: Mr. Soota wants his new company to leap several links up the technology food chain. Rather than supply programmers for the humdrum work of writing routine software code, he wants to design and build sophisticated computer networks for customers.

"In the early days, there was no need for Indian software companies to differentiate themselves," said Mr. Soota, an intense man given to philosophical musing. "Now, companies are starting to set themselves apart."

In Bangalore, a southern Indian city that has been called the Silicon Plateau, Mind Tree is viewed as something of a leading indicator. Its success or failure could say a lot about India's ability to graduate into the more advanced, lucrative realms of the technology industry.

Other Indian companies — Infosys Technologies, Satyam Computer and Wipro itself — are trying to make the same jump. But nobody has set out to do it from scratch, nor with quite the audacity of Mr. Soota.

"By inserting themselves at a higher level in the value chain, they are creating a mind-set in the company," said N. R. Narayana Murthy, the chairman of Infosys, arguably India's flagship software company.

"The question is whether they'll have credibility," he added. "Where do they get the experience to do higher-level work for clients?"

Despite India's reputation for superlative code writing, which has won it a blue-chip roster of customers like General Electric and Nortel Networks, some analysts question how successfully the country can compete in the more-rarefied digital fields of strategic consulting or systems integration.

Infosys is eager to offer high-end services, too. But Mr. Murthy is not about to discharge his army of software writers, who work at a sprawling, verdant campus outside Bangalore. His strategy is to continue writing code while gradually building expertise and to appeal for more complex assignments. "It is a longer-term process," he said, "but it has a higher likelihood of success."

India's technology industry will have $6.2 billion in exports this fiscal year, and total sales of about $8 billion. That is extraordinary growth, given that the services industry did not exist a decade ago. But it still accounts for just 2 percent of India's total economic output.

India also faces rising competition in the low end of the business from other Asian countries like China, Vietnam and the Philippines. With salaries in software companies here rising at more than 15 percent a year, India must expand into new areas that promise a higher return.

"What gives us an edge is that our education system has a bias toward mathematics and engineering," said Vivek Paul, the current vice chairman of Wipro. "But China will be a real threat in a few years."

Enter Mr. Soota, who had already steered Wipro through a transition from making PC's and minicomputers in the 1980's to providing software services. Determined to have a "third inning" in his career, Mr. Soota left Wipro in 1999 and began hunting for seed capital to start his own business.

Unknown to him, another Wipro refugee, Subroto Bagchi, had also been promoting the idea of a high-end software consultancy. A partner at a venture capital firm in the United States, Walden International, put the two men together in March 1999 and suggested they merge their plans.

With $9.5 million from Walden and an Indian venture firm, Sivan Securities, Mind Tree Consulting hung out its shingle six months later. From the start, it behaved differently from a typical Indian company.

First, the founders pledged to donate 3 percent of Mind Tree's after-tax profits to primary education. The company's initial donation went to a center in Bangalore for children with cerebral palsy.

The company logo, a stylized tree, was designed by the children, and their artwork adorns the walls throughout the headquarters, which are two glass boxes in a clamorous residential neighborhood.

Mr. Soota said he chose not to build a suburban campus, like that of Infosys, because he did not want his employees to spend three hours a day commuting on Bangalore's horrendous roads. Likewise, he noted, Mind Tree's philanthropy was part of a broader business strategy.

"It will attract a certain kind of employee, which in turn will attract a certain kind of customer," he said.

So far, Mind Tree has won assignments from Lucent Technologies, Avis and BP Amoco. Though the company is cagey about the project's details, it is designing a Web-based reservations system for Avis, a unit of Cendant. It is also advising Harvard University on ways to promote sports events on the Internet.

In addition to e-commerce projects, Mind Tree advises equipment makers like Cisco Systems, Alcatel and Fujitsu on network management issues. To be close to its mostly American clientele, it has built a development center in Somerville, N.J., and a branch office in Santa Clara, Calif.

"We're not building a small company," said Mr. Bagchi, 44, who plans to move to New Jersey to run those operations. "We've built large successful companies for other people. We're comfortable with growth."

So far, Mind Tree has hired 437 employees. It plans to add 1,000 more in the next year. The company has a five-year revenue target of $231 million. Yet Mr. Soota said he would not pursue a stock offering for three years. He also wants to have 100 clients before going public.

In part, he is only being realistic. The appetite for information technology start-ups is as sour here as in Silicon Valley. But, his philosophical side showing, Mr. Soota sees a lesson in starting his company in such an unforgiving climate.

"It's a good reminder for India's I.T. industry not to take what we have for granted, or become too greedy," he said.

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