For most of the large Indian offshore IT outsourcers, the millennium bug was the catalyst that catapulted them onto the world stage. Western businesses had billions of lines of code to be checked and changed, and only India had the human resources to do it.
To a certain degree, that set the tenor for software outsourcing engagements to the subcontinent. The nature of the work lent itself to the time-and-materials billing structure that most contracts have followed ever since.
Indian IT firms that have sprung up since the millennium bug furore have been able – or obliged, perhaps – to offer alternative terms of engagement. One example is HCL Technologies, which, founded in 1998, more or less missed the Y2K boat and therefore pioneered the use of ‘outcome-based’ pricing (although it does time-and-materials work too).
Another example is Aditi Technologies. The company was founded in 1994 by Pradeep Singh, a former Microsoft product manager who had worked on the first version of Excel. Aditi spent its first 12 years providing outsourced product development services to Microsoft alone, matching its working culture to the software giant’s product cycle.
Since 2006, it has offered development and testing services to enterprise clients, based purely on Microsoft’s various software platforms. Since then, it has tripled in size to around $90 million in 2010, and attracted customers including Thomson Reuters, Ladbrokes and the Co-operative Group.
According to CEO Pradeep Rathinam, also a Redmond alumnus, the product-focused approach it learnt from Microsoft informs Aditi’s engagements with enterprise clients, and is what differentiates it from the competition.
“In 16 years of working with Microsoft, we’ve learned a lot of things about cutting the time to market, about programme management, about user interface design,” he says. Ironically, Microsoft now wants Aditi to train up its newly established developer workforce in Hyderabad in that very development culture, Rathinam claims.
Another leaf that Aditi has taken out of Microsoft’s book is making the most of its intellectual property. “Our approach is not to think about how many people we can put into a team, but how we can leverage the work we’ve done before.”
Bangalore-headquartered Aditi makes no pretence at being an American company, but Rathinam nevertheless argues that the Western influence makes it what it is. “We learned all of our product development and engineering practices from the West,” he says. “We are probably the most Westernised Indian IT company.”
Financially speaking, however, Aditi is very much an Indian outsourcer, as Ovum analyst Rob Hailstone explains. “With around 1,200 employees and $90 million in revenue, Aditi earns about $6,500 per employee, which is very low,” he says. “They can still be profitable with that, because with most of their employees in India they have a low cost base.”
Hailstone says this puts Aditi in a position to compete with Accenture, whose software outsourcing business is also based on Microsoft’s platforms, at least on cost.
However, he adds that Aditi’s plans to maintain revenue growth of around 40% per annum will require it to grow the number of employees it has in expensive locations such as the US, the UK and Europe. “Being able to grow rapidly and still be profitable at the same revenue-per-employee will be quite difficult, I think,” Hailstone says.