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| NIIT Tech to take the non-linear route
NIIT Technologies, a provider of IT consultancy services, is taking a non-linear approach to detach its revenues from its people strength. The strategy involves stress on deployment of intellectual property (IP)led solutions and offering of more software-as-a-service (SaaS) applications.
"We are trying to adopt a non-linear business model to free revenue generation from the pangs of people dependency", Arvind Thakur, managing director, NIIT Technologies, said on the sidelines of an investors' meet. "About 25% of our revenue in 2007-08 came from the non-linear approach", he said. The company expects about 40% growth in the non-linear business in the next three years.
"NIIT's new approach makes it less people-dependent, thereby reducing operational expenses in addition to lessening the impact of people churn", said an analyst.
By an estimate, for a given revenue target, the requirement of people under the non-linear business model is a fifth of that for the linear version.
NIIT is banking on some of its recent acquisitions to foster its non-linear approach. Softec, the German company it acquired in February, provides IT solutions and services in the airline revenue accounting and operations space. NIIT is leveraging its association with Singapore Airport Terminal Services (SATS) to develop IP on cargo operations system (COSYS) application.
In February, it launched its SaaS offering whereby its clients pay as per usage and not as per headcount.
However, soaring oil prices are likely to take a toll on the company's business. Rising oil prices are making many of its airline customers think about cutting down on new projects. Dollar-rupee fluctuations, people churn and wage inflation are other issues faced by the firm.
The company earned 44% of its revenue from BFSI, 24% from travel, transports and logistics and 12% from retail and manufacturing segments.
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"So far, we have not heard of any order cancellations by our airline and other transportation customers. But any further hike in oil prices might make them reconsider funding new projects", Thakur told DNA Money.
To guard against rupee fluctuations, NIIT has hedged $236 million over a period of 30 months at a rate of over Rs 40.
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