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Geometric Software: Research Report - Views on News from Equitymaster
 
 
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  • Feb 25, 2004

    Geometric Software: Research Report

    Geometric specializes in providing product lifecycle management (PLM) technologies and solutions to the global mechanical design, manufacturing and industrial markets. The company started as a spin-off from the R&D division of Godrej & Boyce in July 1994. Beginning with around 60 people, Geometric currently employs around 700 software professionals. The company has a unique business model where it collaborates with OEMs (companies making the PLM software/suite of product) in order to capture business in the niche PLM segment.

    PLM is not a strong focus area for other Indian IT companies for 2 reasons. Firstly, the market is relatively small, and revenue potential is not huge, unless you want to target end-users. Secondly, if you want to operate in the space where Geometric is, you would have to invest in a specialized team and in building relationships with the OEMs.

    Reasons to buy

    High barriers to entry:  Geometric is present in a domain (geometry) which has high entry barriers on account of high-levels of technical skill-set requirements. This makes the company stand out from the other software service organisations that are generally technology neutral and, therefore, more susceptible to competitive pressures. Also, even when there is some competition in the PLM space (from players like Infosys, Satyam, Wipro and TCS) it is concentrated in the implementation segment. In the development segment, Geometric, with its high domain expertise, is the leading Indian player.

    Strong relationships with partners:  Geometric follows a unique and synergistic business model of working through partnerships. Over the past few years, the company has been able to establish and maintain strong relationships with three of the big names in the product lifecycle management (PLM) space – Dassault Systemes, MatrixOne and EDS PLM. These relationships not only help Geometric enhance its technical and operational capabilities and gain a toehold in a highly technical and niche industry, but they also act as an extension of Geometric’s sales and marketing initiatives, thus helping the company cross-sell its range of offerings to industrial customers.

    Reasons not to buy

    High levels of attrition:  The attrition levels at Geometric, at around 20%, are above the industry average of 16%-17%. This does not augur well for the company’s growth prospects, as a highly skilled manpower base is the biggest competitive advantage that the company has over its peers. Over that, the company spends a substantial amount in training people in their respective domains. Thus, such high levels of attrition cast a significant pressure on the company’s profitability as well.

    Read our detailed report on Geometric

     

     

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