The IT services player is investing significantly in its SAP practice. By Mehak Chawla
MindTree has been providing SAP services for the past eight years and, with business flowing in steadily from its SAP practice, the mid-sized IT services player plans to significantly expand its SAP line.
To this end, it will double its SAP headcount during the next 12 months. It also aims to boost its SAP services line by 70% in the same timespan. Today, it has about 700 people working in this area. The appointment of Arun Rangaraju as Senior Vice President & ERP Practice Head also formed a part of this strategic announcement.
MindTree’s SAP ambitions seem in sync with its recent shift of focus to try and grab some large deals and move away from the conventional mid market mindset. With the ambition of touching the billion dollar mark by 2016, the company has to bag several $50 million per year clients if it is to achieve the same.
Mobility and intelligence
Mobility and HANA have been earmarked as growth areas by the company. Arun Rangaraju, Senior Vice President and ERP Practice Head, MindTree, commented, “For over a year now, we have been investing in emerging areas including mobility and HANA.”
“Together with analytics, mobility is poised to be a big growth area for applications,” he added.
Having said that, he admitted that India was yet to take to mobility in a big way. “Areas like mobility are indeed sparking a lot of interest in the Indian enterprise but we expect a lag between interest and actual adoption.”
Analytics is apparently ahead of mobility although, even there, hype precedes actual investment.
Then there are the integration issues that SIs are struggling with on account of the Sybase acquisition by SAP being a work in progress. Rangaraju agreed that these integration challenges with deploying the Sybase Unwired Platform (SUP) did exist. However, he felt that they would not have any marked impact on the software’s long-term traction. “SAP is investing a lot of time and effort in integrating SUP with the SAP suite. They are in the process of releasing a lot of mobility apps that work seamlessly on the SUP platform. We do anticipate some integration issues in the short run but nothing significant that could impact SAP’s marketability.”
Exploiting ERP
Although MindTree is betting big on mobility and HANA, it is also looking to some action in the ERP domain. All said, SAP’s bread, butter and cheese continues to come from its core offerings. With licensed revenues of ERP stabilizing, thanks to core ERP implementations being well rooted in most enterprises, there have been worries about a stagnant ERP market.
Rangaraju dismissed these fears. “Demand for ERP in general, and SAP ERP in particular, continues to grow. There was a scare a couple of years back that the market was flagging but that fear has subsided. SAP recently announced its best ever second quarter and ERP made a substantial contribution to that. For many enterprises, ERP is the core IT system accounting for no less than 50% of IT spending.”
With most organizations, the core foundation of the ERP has been laid. The next step is to extract the maximum value from this core investment. This is going to come either through advanced analytics or through making this information accessible on mobile devices.
“We expect growth to be across the spectrum because, if you look at global markets and large corporations, many large businesses continue to spend on ERP. This spending is mostly sparked by M&A activity or ventures into new business, service lines or new markets,” said Rangaraju.
Market dynamics
MindTree’s industry strategy remains the same and is fairly clear. It targets manufacturing, CPG & retail, travel, media & services, telecom and BFSI. With the government becoming a major focus area for SAP, especially with its launching ERP in Hindi, MindTree could also evaluate projects in the government sector. “We are also associated with the government as we are doing a lot of work for the Aadhaar project.”
“We are engaged in a couple of large design and template roll outs for customers in the CPG & retail space. We expect such projects to provide an impetus to these growth plans. We are also looking at doing some cutting edge work for clients in the Middle East,” said Rangaraju.
Is growth in the SAP practice likely to impact other big application practices including Oracle and Microsoft? Rangaraju said, “Growth in SAP is not going to cut down on growth in any other area. It will complement our offerings and, since SAP is a big part of IT spending, we are looking at increasing our share of the pie,” he said.
MindTree already has a large practice for Microsoft platforms. It also works with Oracle but, in the next six months to a year, most of its energies will be channelized into the SAP practice.
According to Rangaraju, MindTree has close to 300 people with Oracle skill sets.
Sunil Padmanabh, Research Director, Gartner, commented, “Oracle has not been in the limelight of late because of too many acquisitions. A lack of clarity around their Fusion suite, which was hailed as a panacea for all the application ills, is also creating some sense of disillusionment amongst the user community.”
Despite that, MindTree’s investments in Oracle could rationalize especially with the latter enhancing its focus on India.
Across the board
Investing and expanding the SAP practice is a trend that is not relegated to MindTree alone. According to Padmanabh, this is a trend across the board, not only in India but also globally, with both tier 1 and tier 2 SIs investing in their SAP lines.
“SAP is on a roll because of its strategic acquisitions and high end-user flexibility. It is rapidly adopting technology trends such as the Cloud and mobility and the resulting business dynamics are driving partners to fill the demand supply gap by ramping up their SAP lines,” he remarked.
The recent past, according to Padmanabh, had seen several mid market players including MindTree, NIIT Technologies and ITC Infotech investing in their SAP businesses. Even biggies like HCLT and Capgemini had made a lot of space for SAP during the past year.
While SAP’s offerings and traction in the mid market is propelling these investments by SIs, Padmanabh was of the view that SAP’s nimbleness in adopting new technologies and trends like BYOD also played a big role in its cementing its current popularity with SIs. “SAP is known for flexibility in pricing and has laid great emphasis on third-party endorsed solutions. All of this has driven partners to expand their SAP investments,” he concluded.
