Onward Technologies Ltd. provides system integration services mainly in the area of banking, CAD/CAM services and customized software development for both domestic and international markets. The company was initially focussed on domestic and low-end market like hardware and system integration. However after an extensive restructuring last year, the company has increased its focus towards exports and set up a wholly owned subsidiary in USA. The restructuring has had its impact and the company is back in black. Harish Mehta, Chairman and Managing Director spoke to Sujoy Ghosh and R. S. Chari of India Infoline about the future plans of Onward.
Onward Technologies Ltd.
Can you brief us about your company?s operations?
Onward?s operations can be broadly divided into four SBUs namely Banking Software Solutions Division (BSSD), Mechanical Software Solutions Division (MSSD), Process Software Solutions Division (PSSD) & Software Development Service Division (SDSD).
Within the banking solutions we offer solutions suited to the modular banking environment. We have our own suite of products, which we install at the customer site with the necessary customization. In this division, the approach is to provide a total solution to the client including the hardware and networking.
Within engineering solutions, we have two main divisions namely Mechanical Software Solutions Division (MSSD), which is into 3-D modeling and art to part designing and Process Software Solution Division (PSSD) which offers services in the area of plant design, modeling, simulation and training for the process industry.
Recently, we have also started generic software services in the areas of client-services, migration, networking, etc., which are offered both on an off-shore and on-site basis.
You had recently undertaken a company-wide restructuring exercise. How successful has it been?
As you know, we downsized / closed down our non-performing divisions at a cost of Rs43.4mn. The exercise included shutting down the hardware / systems integration division along with reduction in manpower by around 100. Overall, we have been fairly successful at our efforts, which can be gauged by our operating results in recent times. However, offshore software development division has not been able to achieve the desired results yet and orders for this division at this point of time have been slow. The sector has been bogged by several factors including Y2K and the sluggish demand for generic services like client server, ERP etc. Also, we believe that restructuring is an ongoing process, especially in the field of Information Technology where things change with lighting speed. Our restructuring will continue in the form of making our products / services web-centric.
Coming back to details related to each of the businesses, can you tell us how much banking contributes to your total revenues? Who are your major competitors in this line?
During FY99, the Banking software solutions division contributed approximately 60% of the total revenues. Within banking we have whole gamut of products starting from account-ledger management software to the recently launched total bank mechanization product - Arthapranali. We also install the requisite hardware to go in with our products. We have made around 7000 installations of a variety of our products for around 29 banks ranging over 2200 branches. For our existing partial bank mechanization products, we are the leading vendors for most of the nationalized banks with hardly any competition in this segment. We are one of the largest players as far as branch automation is concerned, with over 30 offices across the country. In that sense we are the only company to have a national presence and account for a market share of over 30% in the Partial Bank Mechanization segment.
Who are your major clients in this segment?
Some of major clients in the banking division include Bank of Baroda, UCO Bank, Oriental Bank of Commerce, Punjab National Bank, Dena Bank etc. These banks put together constitute roughly 30-35% of the company's total revenues for the previous year.
Could you tell us about your Engineering Solutions business?
Our MSSD has built up very good domain experience, which we have leveraged to develop end-to-end solutions for clients. We work with the client right up to the prototype development stage. We have worked with clients like M & M and Menon and Menon in India and with automobile giants like Ford abroad. . There are no prominent players with this type of business model. The others offer professional services whereas we offer knowledge based consultancy.
Our PSSD has a tie-up with Aspen Tech of USA, who are the world leaders in this area. We have had a long partnership with Aspen Tech in selling, supporting and providing solutions to its clients in the domestic market. Our clients include most of the major PSUs like IOC, BPCL, MRL etc., apart from large private companies like L&T, etc. Our main competitors in this market are multinationals such as Simsci or Hyprotech.
How has been the performance of your company in the current year
So far all the divisions have been growing at a good pace. Our new banking product Arthapranali, which is a multilingual, total branch automation software has been well received by the market and we have already bagged some orders. Our old clients in the banking sector continue to give us good business both in terms of new installations as well as maintenance services.
Also, our Engineering Solutions Division has grown at rates faster than what we had expected, in spite of the somewhat sluggish economic scenario in the country. This is also being driven to some extent by increased demand for our consultants for on-site projects with vendors of Ford and other automobile companies in the US. Growth in the software services division is upto our expectation now, but should pick up once this calendar year is behind us.
What are your capex plans in the current year?
For the next 1-2 years we are planning a capital expenditure of around Rs50mn. The amount will be utilized for mainly investments in our US and UK operations, and workstations, furniture and fixtures in our Mumbai facility.
What is your order book position?
Currently, we have an order book position of Rs30mn for the offshore development division and around Rs60mn for the domestic market. We recently tied up with Aspentech, US, for providing Process Engineering services. The company will provide a minimum business of $1mn for the next 2-3 years
Are you looking at any new growth areas?
We plan to concentrate on the divisions we have already mentioned. Further, we are planning to add additional features to our existing products besides adding new in-house developed softwares to our line of products in BSSD. In the Engineering segment we are also exploring the possibility of additional business with higher level of participation by our existing business associates who are world majors in these areas.
Do you see the Indian software industry moving towards a product based or will it remain a service provider?
There is likely to be a significant shift from the current services model to a product based model and services will come as a part of the product.
Is the Y2K slowdown real or has it been blown out of proportions?
There has been a definite slowdown due to the Year 2000 problem. Many companies have postponed their orders till the Y2K passes over. We are definitely feeling some pinch in our off-shore / on-site software services. However, the problem is most likely to get over by Jan/Feb 2000.