For Ranga Reddy, playing safe were never enticing. So, when the founder-chief executive officer of software testing specialists, Maveric Systems Pvt. Ltd. (Maveric), had the chance to be his own boss, he grabbed it with both hands. An engineer with an MBA from XLRI School of Business and Human Resources, Jamshedpur, Reddy spent over a decade being a management consultant before stepping out to establish Maveric with his business partners. Today, the company has established a clientele in the banking vertical that consists primarily of Tier-III and Tier-IV banks, and aims to capture the larger banks and grow to revenues of US $ 100 million over the next five years, at an annual growth rate of about 30 per cent.
While the global recession did not affect us much, the extensive hiring hit us in the 2010-2011 fiscal and we were able to recover only by July 2011.
From consulting to company
Through the 90s, Reddy first worked in the growing healthcare industry before moving on to the FMCG (fast moving consumer goods) and IT (information technology) industries. This brought him in touch with several nascent organisations looking for a sense of direction. “In the last four years I spent as a consultant, I had the chance to create growth strategies for owner-driven IT startups and perhaps, this helped me keep my own entrepreneurial dream alive,” he shares. In June 2000, Maveric was founded with a five-member team and seed funding of Rs. 4 crore. The initial idea was to engage in consulting within IT, but Reddy quickly saw that this would mean sacrificing scale for it would be tough to sustain the efficiency of a large consulting operation. By 2002, software maintenance posed a big question to IT entrepreneurs and Reddy saw the opportunity for Maveric to transition to software testing, an area of business that not only suited the company’s existing areas of strength but also allowed for volume creation.
By June 2002, Maveric emerged with a streamlined focus on software testing for the retail banking vertical and went to market by April 2003. While its initial round of clients included international banks with operations in India, over the next four years, the company developed its product competencies and expanded operations to include the Middle East and engaged in a delivery partnership with a U.K.-based testing company. By 2008, Maveric had already progressed into the vertical of corporate banking and was ready to take on investment banking and insurance. Even as the economic downturn affected its business plans, Maveric was not dramatically impacted as it had minimum exposure to the U.S. markets. As the tide changed in 2010, it developed a sales force which was previously absent, especially for the Indian and Middle Eastern markets. The company also went into the Asia-Pacific markets and has already generated revenues of US $ 1.5 million and sees further potential of touching US $ 4 million in the next two years.
“In 2010, we went wrong in predicting the volumes of business and we scaled up more than required,” shares Reddy. Maveric erred in its assessment of the market and hired close to 150 people ahead of time. “While the global recession did not affect us much, this hiring hit us in the 2010-2011 fiscal and we were able to recover only by July 2011,” he adds. Reddy also states that at present, the company is back on track to achieve its revenue goals that it set out prior to the recession phase.
When Reddy speaks of Maveric’s future, he stresses on leveraging the company’s current size and global presence to take on projects that it was previously incapable of handling. “A shift towards Tier-I and Tier-II banks will mean that the deal size will move from US $ 1.5 million to about U.S. $ 5 million and that will certainly have a big impact on us,” he says. Traditionally, the company has planned its growth around anchor clients and it currently gets close to 60 per cent of its revenues from six clients. An effort will be made to grow this base of clients for the future and Maveric has already taken strides in this direction. Over the last 18 months, it has clinched two deals in the U.K. market with financial services clients that it will enable it to grow in the region. “Typically, undertaking a project for a large bank means multiple project openings that give us the chance to earn US $ 3 million in a span of 18 months, per client,” adds Reddy. Currently, Maveric will aid these U.K-based banks with operations in India, Asia-Pacific and possibly, the U.S. In October 2011, Maveric also signed a multi-year contract with SBI General Insurance and it views this as a means to expand its clientele in the insurance space in the Indian markets. In order to grow its people bandwidth to meet these project expectations, Maveric is looking at increasing its headcount by 28 per cent in the next calendar year.
Founders: Ranga Reddy, P.Venkatesh, V.N.Mahesh and N.N.Subramanian
Strength: Software testing specialists who have the bandwidth to cater to the requirements of leading names in the banking vertical
In order to get to its financial goal of being a US $ 100 million company, Maveric is eyeing a growth strategy where close to 40 per cent of its future revenues could come from acquisitions. “We are looking at external funding options around early 2013 and will target acquisitions in the bracket of US $ 10 million to US $ 12 million range,” says Reddy. He also mentions that the company would be considering a debt and equity mix at a ratio of 60: 40.
Reddy is optimistic about the market potential for testing services in the years to come. He is also excited about possible opportunities in the space of requirement management. “Currently, requirement management is at the same stage that testing was at, five years ago. Nobody regarded the space with much seriousness but in time, they have seen the return on investment it has accorded them. I am keen on requirement management as an area to look at since it will afford us higher revenue potential at higher margins,” he shares on a concluding note.
ADDRESSING THE PEOPLE PROBLEM
“Very few people built a career based on testing orientation and most viewed this field as a stop-gap arrangement,” says Reddy. And this meant Maveric could create the right competencies, he adds. Right in 2002, Reddy conceived a two-year post graduate programme in a tie-up with LIBA (Loyola Institute of Business Administration), Chennai that hones testing competencies alongside managerial competencies. When an employee graduates from the programme and joins the company, he enters a three-year bond, a practice Reddy follows till date. “We have done a decent job of recruiting fresh engineers and culturing their outlook to get them to believe they are no less than MBAs who graduate from the top management institutes,” says Reddy, while adding that close to 50 per cent of his employees are now ready to take on the initiative to create a larger, more corporate environment rather than expect it.
In an industry plagued by attrition, unlike others who take a diplomatic stance, Reddy prefers a blunt speak approach. “Right from day one, I have always said to my employees that Maveric will grow, with or without you,” he states. This approach worked because the team was younger and relatively inexperienced when compared to those in charge. Also, the company functioned on creating trust rather than demanding loyalty from its employees. And the approach saw good results as prior to the 2010 hiring debacle; the company’s average attrition rate was only 8 per cent as opposed to the industry’s average of 20 per cent. However, Reddy admits that as with everything else, his outlook towards people is also something that must evolve.
“Today, we are facing a challenge in hiring the next layer of people who come with experience as we cannot use a similar approach with them,” he says.