About two years ago, Sears wanted to exhibit a mobility application at an Apple show. But the US retailer was queasy to outsource the contract to the large services-led technology firms, including those in India, as it wanted to get the project up and running in less than six weeks.
This proved to be the entry point for a Bangalore-based startup set up just two months earlier in November 2011 with an aim of making it big in the social, mobility, analytics and cloud, (SMAC), space. The startup, Happiest Minds, did not even have a client then.
The firm’s pitch to the retailer was simple: it’ll put together an A-class team to ensure the project is completed in a short period.
Happiest Minds went on to win what was then a small contract: the order was $100,000 (Rs 60 lakh).
“We were able to deliver an award-winning application in record time and this led to an ongoing relationship with the retailer even though there were multiple incumbents,” said Ashok Soota, executive chairman of Happiest Minds.
But more than the ticket size, the order helped Happiest Minds get recognition and bring the focus on other niche players, including IPsoft, and LiquidHub. These players had not just started winning contracts by competing against big technology service firms, including HCL and Accenture, but also forced many of them to forge partnerships.
“There is a change in the C-suite’s way of thinking. Not everything is about cost-reduction now, there is more thought on speed-to-market and innovation. And not everything requires the scale of a global player,” Sushma Rajagopalan, partner and MD of digital technology company US and India-based LiquidHub, told ET.
Firms operating in automation, mobility and analytics solutions as well as cloudbased deployment are competing in areas that are seeing the fastest growth for Indian IT players. Digital technologies contribute 5-10% of the industry’s revenue, according to the National Association for Software and Services Companies.
The total digital opportunity is pegged at $164.1 billion (Rs 10.2 lakh crore) in 2013, according to industry body Nasscom and is estimated to grow 75% to $287.3 billion (Rs 17.8 lakh crore) by 2016. The smaller players not only have innovative products but also deep existing experience in the IT industry. “They (startups) know that they are competing with the big vendors so they go the extra-mile and they are fast,” said Deepak Sharma, executive vice-president and head of digital initiatives at Kotak Mahindra BankBSE -0.13 %. “Sometimes you can’t wait months to do things; you need to turn offerings around quickly and startups are nimble.”
Happiest Minds, which claims to have 80 customers, believes that almost 90% of its wins came when it was bidding against some of India’s largest IT companies.
Not for nothing then are investors backing sector-focussed firms: LiquidHub, which has about $125 million (Rs 753 crore) in revenue, raised $54 million (Rs 325 crore) in funding from private equity firm ChrysCapital, Credit Suisse and PPM America Capital in March.
The growing startup ecosystem in India also presents a challenge to Indian IT firms. Earlier this month, the Indian Software Product Industry Round Table held an event to connect startups to the chief information officers of large corporates like the Aditya Birla Group, US insurer Accretive Health, payment processor Vantiv and others. To be sure, homegrown technology players are taking steps to mitigate the danger from smaller more nimble players — from incubating emerging technologies themselves to partnering with the most disruptive companies in the sector.
Uday Chinta, managing director at robotic automation provider IPsoft, said as the company bade for projects, about seven of 10 times, it competed with leading players. “Now, of course, most of the global IT firms have partnerships with us. We collaborate and work with them to deliver best solutions for the clients,” said Chinta whose company claims to have more than 500 clients, across financial services, telecoms, and retail verticals.
Pravin Rao, president and board member at Infosy, said: “There is enough opportunity for everyone in the ecosystem as long as you are able to build the capabilities and thinking in that direction.”