Eka Software, the software solutions provider to the commodity trade and risk management segment, is among the fastest growing product technology companies in the country
In 2004, Bengaluru-based Eka Software Solutions (Eka), commenced operations with two employees. Today, they employ over 200 people and continue to provide software solutions for the commodity trade and risk management sector. Eka is ranked 4th by Boston-based AllWorld Network, whose mission is to identify and advance growth companies from the emerging world and reward the fastest growing ones. Eka got there on the basis of its 451 per cent revenue growth between 2007 and 2009.
According to Manav Garg, founder-chief-executive officer, “This has been possible due to growth in the market and our product superiority.” He explains that most products available in the market were originally developed in the 90s, based on older technologies with only upgrades available. The software product, Eka, uses proprietary technology – developed using Java, n-tier, SOA, Web 2.0, thin client and web-based modules. The product includes functionality that helps companies that trade in agriculture products, metals and crude oil. Today, the company has expanded its client base to trading companies in the U.S., Europe and Australia.
What’s unique about Eka is that it integrates the physical and financial side, rare even in enterprise resource planning systems, whereas competing products in the market focus either on the energy sector or on the financial side of commodities. For instance, Eka has introduced several innovations in managing agriculture and metals commodities such as functionalities to handle changing weights (e.g., agriculture commodities have changes in weight due moisture losses), handling small lots in inventory, product allocations, mark-to-market accounting needs, hedge associations with futures, options, swaps and other derivative instruments. “It helped us authenticate our belief and philosophy that the physical commodity trading segment experiences continuous tremors and can only be controlled and mitigated with the right software,” says Garg.
The market opportunity in this segment is estimated at around U.S. $ 1 billion per annum. Larger market volatility, increased business complexity and greater regulatory compliance needs are driving this market. There is an increased risk for companies dealing with commodities and greater demand for software that can help manage risk, profit and loss (P & L) and operations.
As a result, Eka is expecting over 50 per cent growth annually. “This growth will be driven by newer markets and also by new products that we are planning to launch. Our goal is to become a U.S. $ 100 million product software company in the next three to four years through organic and inorganic growth,” explains Garg. Currently, the company is evaluating some acquisition opportunities. This expansion is still at a planning stage and the company plans to fund it through internal accruals.
Finding a niche
It is rare for an Indian software company to be product driven, that too in the trading space. For Eka, services are offered to the extent it is required for their software to work efficiently within client organisations. But, the company’s growth comes from new product sales, larger market share and acceptability of its products. “Today, global players in the agriculture and metals commodity markets have deployed the Eka CTRM [Commodity Trade and Risk Management] solution for managing their physical trading, position, P&L, risk, logistics and finance operations,” he explains.
Eka Software has introduced several innovations (in their product features) in managing agriculture and metals commodities such as functionalities to handle changing weights (e.g., agriculture commodities have changes in weight due moisture losses), handling small lots in inventory, product allocations, mark-to-market accounting needs, hedge associations with futures, options, swaps and other derivative instruments.
The milestones in Eka’s history can be pretty much defined by the segments it entered, starting with agriculture in 2004; metals in 2007; and energy in 2010. “We take inputs from clients, market experts and our own internal research and development (R&D) arm; keeping in tune with what the market needs is very important for any product organisation to manage its evolution and be successful,” adds Garg.
A U.S. $ 10 million company in 2010, Eka clocked U.S. $8 million in 2009 and is targeting growth of 30 percent to 50 percent in the coming year. It has come a long way since 2004, when it received a seed investment of U.S. $5 million from GP Group, a Thailand-based conglomerate with diverse business interests. The second series of funding was in 2009, with U.S. $10 million from Nexus Ventures. While the seed investment was utilised in developing the product, setting up infrastructure and getting the business in motion, the second round of funding was used for international expansion and increased R&D spends.
“We had a lot of initial hurdles such as raising capital and getting our first customer; roping in a multi-billion dollar company as a client and convincing them that they can trust us was a big step forward,” reminisces Garg. He adds that one significant challenge was that of managing a software product that handles the complexities of commodity trading from India. Eka overcame these challenges by focusing on customer pain points, creating winning relationships and persevering during hard times. “My marketing and trading background helped me in business development,” Garg says.
“The single biggest challenge was creating a global product company out of India,” he states. The Indian software industry is primarily a service driven industry and at the time Eka started, it was very difficult to recruit people with a product mindset. “Sales and marketing traditionally have been a weak area for Indian product companies. Creating a world class sales team was key to our success,” he adds. What helped was Eka’s single-minded focus on product management, right from the start.
For future growth, the company will focus on new product offerings in hedge accounting and crude oil. Opening an office in Australia and increasing presence in the U.S. and Europe, in addition to acquiring companies overseas are part of its growth plan.
Behind the risk
Manav Garg joined GP group in Singapore in 1998, after passing out from IIFT, to join a new division the company had started for trading in green coffee. Extensive travelling across the globe and meeting with clients made Garg realise that managing risks in this highly volatile business was the key to success and there was a great demand for a system to manage this risk. There was no market solution that did this effectively.
One fine day, in 2001, Garg quit his high-paying job without even consulting his parents and friends. He spent the next two years travelling, meeting his old clients to understand their requirements and conceptualising the product. India being a software haven, he set up the first Eka office in Bengaluru in 2004 with seed capital from the chairman of the GP group and a technical expert to aid the development process.
Throughout the development process, Garg focused on market development as well as meeting clients and showing them the progress. Real-time feedback helped in shaping the product as per customer needs and even before it was ready; he had a customer in Europe. To assure customers of his commitment to the market, he starting the scaling up process and established offices in New York, London and Sydney for marketing and customer support.