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IT & T E-transition is the mantra - Views on News from Equitymaster
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  • Oct 12, 2000

    IT & T E-transition is the mantra

    A company with a unique business model, IT & T uses Internet as an enabler of business in four distinct domains. It has presence in managing IT enabling services, developing IT enabled services and supporting IT enabled services. The company plans to tap the markets with an equity offering amounting to Rs 317 m.

    Till now, the company has been servicing back-end system integration and networking solutions for various clients, which include DSP Merrill Lynch, Coca-Cola, Ranbaxy Laboratories, Castrol, HDFC Bank, and Canara Bank. However, the main change that is happening in the company is that it is migrating into the Internet world based on the conventional brick and mortar model. IT & T has a website called smartsourceit.com, which allows its clients to order their hardware requirements, which in turn contacts IBM, Compaq and 3Com with whom the company has contractual agreements. The company has 70 help desks servicing various clients in different parts of the country, to service client requirements.

    IT&Ts e-transition group of consultants and developers focuses on enabling customers to exploit the potential of Internet by offering web enabling software development services that include e-business application development. It has designed two software development services for telecom account management and travel requisition and expense package. The company has licensed one of its product to a Singapore company, for which its receives license fees.

    This model provides technical support via Internet for its clients. This is considered to be the top-end of the pyramid in the call-center business as envisaged by McKinsey-NASSCOM study (the subsequent levels are e-CRM and conventional call centers).

    This is how the model operates. IT&Ts client would submit their queries directed via a toll-free number, through satellite, to the call center. IT&Ts trained employees would answer these queries from India for which the company is paid in dollars (on Indian costs). However, the bargaining power of employees (the company indirectly) is based on ranking. If clients are satisfied with the answer to their queries, engineers are ranked like four stars or five stars, which are the highest level. The bid would range between US $ 20 to US $ 50 based on rankings. IT & T on an average earns around US $ 30 for every 22 minutes.

    But the problems here are skill set of employees and infrastructure (broadband). Every engineer has to go through a specific course and training programme (the company reimburses the cost) before they are eligible to answer queries.

    The notable aspect of this model is that the company recovers the loaded cost (inclusive of interest on investments etc) within two days. But, the company currently has just 82 employees (with highest ranking) addressing queries out of 173 engineers. As a result, more than 5,000 queries are left unanswered. Since there are only eight companies operating in this business model globally (one of them being Telesma of Bangalore), there are enough opportunity to exploit. The company is setting up new infrastructure facilities with a broadband access network, which would enable it to deploy more resources.

    Here, IT&T proposes to provide technical, managerial and financial support to business as well as start-ups. The major apprehension is that this is a high risk-high return venture. If any single venture fails, the company will have a big hit.

    One of the worrying factors about the company is the net receivable position. For the first quarter ended June 2000, the net receivable amounts to Rs 85 m on sales of Rs 90 m. with working capital cycle of 65 to 70 days.

    However, given the credibility of the management, their experience, scalability of its services and impressive client list who have been associated with IT&T for over six years, the company should emerge as one of the leader in the emerging e-transition era.



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