Introduction
In the post-pandemic environment, businesses across industries are increasingly looking
at technology as a key strategic differentiator. According to International Data
Corporation (IDC) research, investments in various technologies that support Future of
Work initiatives will surpass $1 trillion worldwide by 2024. Another report by Gartner
estimates that worldwide IT spending will touch $4.5 trillion in 2022, an increase of 3%
from 2021.
We have witnessed price hikes and delivery uncertainty during the year, further
aggravated by the Ukraine crisis. These economic developments have made business and
technology leaders shift gears and move from ownership to service. According to Gartner,
cloud spending that grew by 18.4% in 2021 is expected to increase by 22.1% in overall
cloud business expenditure. Investments in data centre systems are likely to shoot up by
11.1% in 2022. Cloud consulting, implementation, and managed services are expected to grow
by 17.2% in 2022, from $217 billion in 2021 to $255 billion in 2022.
In the US, digital adoption has increased with a cascading effect. This year,
businesses across industries have replaced traditional systems and applications and
embraced future-proof technologies and platforms to stay ahead of the curve. According to
the economic forecast by the European Commission Winter 2022, the EU economy, following a
strong recovery by 5.3% in 2021, is now forecast to grow by 4.0% in 2022, as in the euro
area, and by 2.8% in 2023 (2.7% in the euro area).
Developments/Investments:
With support from the Government, considerable investment and development has incurred
in different sectors such as agriculture, healthcare, space research, and nuclear power
through scientific research. For instance, India is gradually becoming self-reliant in
nuclear technology.
In India, businesses have increased IT spending through 2021 to drive digital
transformations, achieve agility and resiliency, and craft hyper-relevant customer
experiences. According to IDC, adopting new technologies, such as cloud platforms,
artificial intelligence (AI)-based services, and cyber security, helped IT services grow
last year. As we enter a new phase of business development, it is estimated that the
domestic IT services industry will reach $21.67 billion in valuation by 2026 at an
estimated compound annual growth rate (CAGR) of 8.9%.
The Road Ahead
In the past year, we were focused on positioning our company on a stronger growth
trajectory. Our thought leaders collaborated across various organizational layers to weigh
every aspect of our business and deliberated on potential measures that could unlock new
streams of growth. We determined the need to shift to a more integrated, synchronized
business model and create liquid ways to serve our customers globally. India is
aggressively working towards establishing itself as a leader in industrialization and
technological development. Significant developments in the nuclear energy sector are
likely as India looks to expand its nuclear capacity. Moreover, nanotechnology is expected
to transform Indias pharmaceutical industry.
The agriculture sector is also likely to undergo a major revamp with the government
investing heavily for a technology-driven Green Revolution. Government of India, through
the Science, Technology and Innovation (STI) Policy-2013, among other things, aspires to
position India among the worlds top five scientific powers.
AJEL BUSINESS OVERVIEW
Ajel is a leading provider of next-generation Cloud Computing, Infrastructure
management, networking, enterprise IT solutions, Application Development & management
and Professional Consulting Services.
The Company delivers its services primarily to customers in the USA and India, it
continues to focus on delivering its development and support projects on an offshore
basis. As the bulk of its services are currently delivered in other countries, the Company
remains subject to the effect of changes in the relative values of the respective country
currencies.
Our vision is to build a globally respected organization delivering the best-of-breed
business solutions, leveraging technology, delivered by the best-in-class people. We are
guided by our value system which motivates our attitudes and actions. Our core values are
Client Value, Leadership by Example, Integrity and Transparency, Fairness, and Excellence
Our strategic objective is to build a sustainable organization that remains relevant to
the agenda of our clients, while creating growth opportunities for our employees,
generating profitable growth for our investors and contributing to the communities that we
operate in. There are numerous risks and challenges affecting our business.
Companys success stems from its strong technology and business partnerships with
industry leaders like
CISCO, Citrix, CA, Informatica, Kalido, IBM, Oracle and MICROSOFT. Company works
strategically with its partners to deliver mission critical solutions for leading
businesses and government establishments across the globe.
The Company has also invested its capital in Datacenter in Edison, NJ USA. The Company
realizes income from infrastructure management services.
Operations of the Company are completely integrated with its subsidiaries. The Company
performs delivery management including offshore development and support, finance and
administrative functions for the consolidated group. Ajel Technologies, Inc. (USA) is the
wholly owned US subsidiary of the Company and Ajel Limited US branch office formed in July
2011. This Subsidiary and Branch office focuses on customer facing and business
development activities including pre-sales, marketing, sales and onsite project/program
management activities and also focus is to sell both on-site and offshore Information
Technology services in the practice areas mentioned above.
The Companys consolidated customer base can be classified into two groups: a. Commercial
Sector
This group includes all commercial organizations in the US and elsewhere. The Company
targets the SME (small and medium sized businesses up to $1B) market sector as well as
Enterprise (Global) corporations. We believe this market holds significant potential for
Company growth, largely driving offshore business for the company. This marketplace
represents approximately 60% of the companys business.
b. Public Sector and Utility Companies
This includes national, state and local governments, non-profit entities and utility
companies, primarily in the US. The Company has several large public sector and utility
customers that comprise approximately 40% of the Companys business. Although these
services typically are not delivered in an offshore format, there is a significant market
due to our experience and depth of expertise in areas useful to public sector and utility
clients. Current market focus is to additionally deliver services in this segment in the
domestic market as well as the Middle East.
BRAND BUILDING
The Company undertook marketing initiatives to promote the Ajel brand, and the brand
promise of ‘The Difference is Depth to its clients. The Company participated in
leading industry and business events around the world, reaffirming its commitment to
delivering a complete brand and organizational experience. Apart from regular channels,
Ajel continues to invest in building the brand in the digital space using premium business
and technology solutions.
Ajel continued to articulate the brand promise internally, using various channels and
internal marketing assets and leveraged them to activate the brand amongst employees as
well as other important stake holders.
The company has been exploring new areas which have the potential growth to Companys
business and recently has come up with an application catering to various Local
Governments.
Technology and Innovation
Ajel continues to invest in futuristic areas related to Cloud Computing, Networking,
and Enterprise IT Solutions to make a difference to its customers and society. The Company
continuously strives to improve quality and efficiency of current offerings to customers
and enable them prepare for future challenges.
Intellectual Property (IP)
Company continues to build an effective portfolio of Intellectual Property for future
monetization, collaboration and risk mitigation. In fiscal 2019-20 company continued to
focus on building and managing of IPs. Company emphasizes to its employees for
collaborative mining of Intellectual Property. IPs gives multiple advantages like cost and
time saving, technical edge, risk mitigation etc.
The Company continuously engages in customer focused innovation and launches new
offerings that use technology to address its clients business problems.
Products of the Company
DEM: Dynamic Enterprise Management (DEM) is a Professional Services business management
solution that provides growing and midsize organizations with complete and scalable
financial and operational functionality, such as advanced Consultant Resource Management,
robust business intelligence, rich reporting, Payroll, Human Resource Management System,
Financials and Sales Force Automation. DEM is accessed irrespective of any geographical or
language limitations. DEM gives total control of consulting process from sourcing of the
consultant to payroll generation to HRMS.
DEM is a bespoke ERP designed as a complete end to end recruitment system. DEM offers
the stability you require, so you know your solution will support your business-critical
needs, today and in the future. This rationalized, comprehensive solution automates key
processes and connects Information across your business, empowering you and your employees
to focus on core business initiatives, respond swiftly and make better strategic
decisions.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
Software and computing technology is transforming businesses in every industry around
the world in a profound and fundamental way. The continued reduction in the unit cost of
hardware, the explosion of network bandwidth, advanced software technologies and
technology-enabled services are fueling the rapid digitization of business processes and
information. The digital revolution is cascading across industries, redefining customer
expectations, automating core processes and enabling software-based disruptive market
offerings and business models. This disruption is characterized by personalized user
experiences, innovative products and services, increased business agility, extreme cost
performance and a disintermediation of the supply chain.
Leveraging technologies and models of the digital era to both extend the value of
existing investments and, in parallel, transform and future-proof businesses, is
increasingly becoming a top strategic imperative for business leaders. From an IT
perspective, the renewal translates to re-imagining human-machine interfaces, extracting
value out of digitized data, building next-generation software applications and platforms,
harnessing the efficiency of distributed cloud computing, modernizing legacy technology
landscapes and strengthening information security and data privacy controls.
The fast pace of technology change and the need for technology professionals who are
highly skilled in both traditional and digital technology areas are driving businesses to
rely on third parties to realize their business transformation. Several new technology
solution and service providers have emerged over the years, offering different models for
clients to consume their solution and service offerings such as data analytics companies,
software-as-a-service businesses, digital design boutiques, and specialty business process
management firms.
While these developments present strong market opportunities for the IT industry, there
is also an imperative need for IT services and solutions companies to transition from
fast-commoditizing traditional service offerings, to attract and retain quality talent
globally, to reimagine cost structures and leverage automation for increased productivity.
OPPORTUNITIES AND THREATS Opportunities:
Information Technology support services remains an increasingly competitive business
environment. With the change in emerging technology areas, companies have become dependent
on technology not only for day-to-day operations, but also for the use of technology as a
strategic tool to enable them to re-engineer business processes, restructure operations,
ensure regulatory compliances, etc. As systems continually become more complex, companies
increasingly turn to external IT services provider to develop & implement new
technologies & integrate them with existing applications in which companies have made
considerable prior investments. Additionally, many companies continue to explore methods
to reduce their cost of IT operations. This provides an opportunity for providers to
support and integrate company IT systems on an ongoing basis. The Indian IT Industry
becomes a powerful tool used by companies to reduce their costs.
Ajel has Alliance partnerships with several leading technology companies in its
practice areas including CISCO, Citrix, CA, Informatica, Kalido, IBM, Oracle and
MICROSOFT. The company is well poised to take advantage of the new advanced technologies
provided by these alliance partners. These technology alliance partners expect to see
major technology opportunities for their customers in the United States.
Ajel continues to focus as a priority on obtaining and providing offshore sourced
services for its customers. Any increase in offshore related services should have the
effect of increased company margins and profitability and increased longevity of business
contracts. The company intends to continue to grow its share in existing clients. This has
the supplemental effect of reducing the cost of overhead and delivery cost.
Threats:
The economic uncertainty of the current worldwide markets makes the future less
predictable than in the past due to the current on-going environment. Worldwide IT
spending growth has significantly reduced with budget cutbacks on IT spending by
customers, buyers in "wait and watch" mode, government units significantly
cutting budgets to match expected revenue shortfalls and delayed decision making.
Reduction in new client additions, absence of large deals, vendor consolidation,
downsizing for greater efficiencies and cost savings as well as pricing pressures in both
onsite and offshore realization put greater pressures on revenues and margins in the last
fiscal year and are expected to track lower for some time.
The US market is under increasing pressure from general economic conditions as growth
diminishes. US spending on offshoring services have slowed in the face of these market
conditions as well as the adoption of protectionist measures by policy makers. Ajel is
also subject to the threats of competing against much larger International IT service
providers, the large global Indian IT service providers and more entrenched US and Global
System integrators, many of which also provide services to established markets on an
offshore basis. The good news is that, global sourcing is expected to increase as focus on
cost and value increases with buyers "stretching the dollar" to include
greater value delivery.
As with other Indian IT Services companies, other general threats to the business
continue to include competition among Information and Technology units in India for
talented people, which has resulted in rising employee compensation packages and shrinking
margins available to IT Companies. We are also seeing a potential backlash in the US from
the increasing loss of employment due to outsourced services overseas, resulting in an
impact on the countrys immigration enforcement procedures.
OUTLOOK AND RISKS
The Company is expected that its strengthened relationships and alliances with partners
such as CISCO, Citrix, CA, Informatica, Kalido, IBM, Oracle and MICROSOFT will continue to
lead to business and revenue growth and increasing profitability with a continued focus on
offshore revenue as and when the global market improves. The Company continues its focus
aligning its sales and delivery structure to an Indian Model.
The Company has not kept up with industry growth trends, primarily due to decreased
spending in the US public sector and a corresponding decrease in activity at several of
our large clients. Additionally, the absorption of new customers in the targeted
small/medium client base has not grown as expected. US market conditions continue to
soften making it harder to locate new development opportunities. The Company intends to
continue to grow its offshore business while exploring new opportunities domestically and
in adjacent markets, including new ventures in the Middle East and India domestically. New
opportunities will focus on leveraging our US public sector expertise and delivering our
market solutions and products to these markets. Companies continue to look for specialized
expertise and cost saving methods, both of which are provided by the Company.
The Companys US subsidiary generated a loss after tax for the period. The Company has
been impacted by the worldwide slowdown in discretionary IT spending which has impacted
several of our targeted sectors. Due to this slowdown, our clients and many other
companies are deferring the implementations of new systems and other discretionary
spending. The new paradigm has become one of "reducing the total cost of ownership
including the ongoing maintenance and support of IT systems". The Company has focused
its efforts on driving cost effective support offerings resulting in improved offshore
revenue while realizing a detriment to onsite business. This coupled with reduced spending
in the public sector and increased pressure by the government to reduce the number of
foreign IT workers has negatively impacted growth in the United States. These actions do
not forecast a quick turnaround in the US market. The company continues to take all
reasonable steps to reduce and optimize costs to improve profitability. Focus remains on
expanding the benefits from our alliance partners and creating offshore opportunities
where relationships are of a long-term nature and recurring services can be provided at a
lower cost.
Some of the key strategic risks the company faces, their impact and corresponding risk
mitigation actions undertaken by the company are discussed in the table:
| Key Risks |
Impact on Ajel |
Mitigation |
Lack of diversification |
The Companys potential for growth is driven by one market segment,
namely IT services, with a focus on several technology areas. |
Company management has purposely remained focused in the near term as
opposed to spreading its manpower too thin to achieve its goals. The company is also
taking measures to change the perspective from the pure services providers company to
market "Product" and "IP" |
Excessive dependence on one geographic segment |
A large percentage of companys revenue comes from USA heavy
dependence on this one geographic segment could lead to volatility because of the economic
and political situation there. |
The Company has successfully penetrated into the local Indian market
apart from the setting operations in Middle East. |
| Legal and Statutory Risks |
The companys international |
As of the date of this report, the |
|
operations are subject to local legal and statutory risks including
compliance with local laws and regulations, one of which is compliance with immigration
laws and regulations, which may change from time-to-time. Other risks include contractual
risks when delivering complex technology solutions. |
company is not aware of any noncompliance with local laws or
regulations that would have a material impact on the financial statements. |
Risk of attracting and retaining of IT Professionals in a highly
competitive environment |
In the IT services industry, people are the most valuable assets.
Attrition of the key technical talent is one of the major risks. |
The company reviews its compensation policies regularly to determine
that compensation is competitive with the market conditions. The company also determines
that there is a defined career path for all employees and the work environment provided to
all employees is of very high standard. |
Currency Risk |
The changes in currency rate between Indian Rupees and US dollars have
been a major cause of concern. The fluctuation of rates coupled with the shocks emerging
from various parts of the world relating to the economic meltdown has increased the
currency risk. |
The company has tried to protect itself through various measures using
available financial instruments from time to time. |
1. ENERGIZING THE CORE
Every enterprise that is in transformation, including ours, needs to address the
challenge of extracting higher return on existing assets while investing into newer
business transformation initiatives. We are leveraging and automation techniques to
energize our clients and our own core technology and process landscapes.
2. INTERNAL CONTROL SYSTEM & THEIR ADEQUACY
The company strictly adheres to the internal control systems proven to be effective
over the years. The internal audit team carries out extensive audit on all operations at
regular intervals. The company implements the policies and procedures so as to safeguard
the assets and interests of the company.
The internal control systems are implemented with a view to achieve good ethical
culture within the organization. The internal control systems would ensure that any
vulnerability in the achievement of companys objectives caused by risk factors whether
internal or external, existing or emerging, is detected and reported in a timely manner
and is meted out with appropriate corrective action. Strong internal controls minimize the
risk of frauds by introducing effective checks and balances into the financial system.
3. FINANCIAL CONDITION
Your company had consolidated revenues of Rs.4.25 crores and Rs.0.46 crores net loss in
the current year. We expect to achieve significant growth in revenue and net income in the
coming year.
The financial health of your company indicates adequate and sustainable financial
resources to meet with the needs of its business. The Company and/or its wholly owned
subsidiary have:
Generated cash from its business
Gained more productivity from its assets and properties
Maintained its current dividend level
The Company believes it has adequate and dependable resources to meet its liquidity
needs, including the ability to raise short term debt, and manage the ongoing mismatched
cash flows inherent in a consulting business.
HUMAN RESOURCES
We focus on the workplace of tomorrow that promotes a collaborative, transparent and
participative organization culture, innovation, and rewards individual contribution. The
focus of human resources management is to ensure that we enable each and every employee to
navigate the next, not just for clients, but also for themselves. The three key strategic
pillars of our Employee Value Proposition are:
? Inspiring them to build whats next
? Making sure their career never stands still
? Navigating further, together
Ajel Management and Leadership Program
The Company holds regular programs to develop team spirit and to motivate its employees
to perform better. The company has launched a Ajel Management Leadership (AML) Program.
The objective of the AML program is to select, recruit and groom young leaders and next
generation managers of Ajel. The program will:
? Provide AML managers opportunities for professional growth within Ajel.
? Groom, develop and build AML alumni as key managers and leaders of the Company.
? Tap their energy and vast potential to support growth of Ajel as an organization.
? Take Leadership roles in Ajels core IT business units, Financial, Real Estate and
human Capital management
Need for Multidisciplinary Education and Experience
Ajel believes in a multi-disciplinary education as a robust base for general management
and leadership. All real-life problems and opportunities require multi-disciplinary
education and management skills. Our management experience over the years has proved that
leaders need to be experienced in at least two or three distinct disciplines (examples
such as Management and Accounting; Law and Finance; Engineering and Management; Finance
and HR).
CAUTIONARY STATEMENT
Statements in this Management Discussion & Analysis Report describing the Companys
objectives, projections, estimates, expectations or projections may be ‘forward
looking statements. Actual results could differ materially from those expressed or
implied. Important factors that could make a difference to the Companys operations
include economic developments, particularly in the USA, & improvements in the state of
Information Technology Services markets, changes in the Government regulations in India
& USA, tax laws & other incidental factors.
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