and were impressed with the company’s robust pace of growth and IMSfocused
business model. Company seems well-poised to exploit the
Remote IMS wave with proved expertise, established customer base and
low competition. On organic basis, Glodyne expects to clock 44-52%
revenue growth in current year with significant expansion in margins due
to ongoing shift towards Remote IMS. In addition, company also has
aggressive inorganic growth plans, which would supplement organic
growth. However, the funding of any large acquisition may require some
equity dilution. Based on management’s expectations about growth and
margins, we derive a likely EPS band of Rs64-68 for FY09. At 7.5-8x FY09
P/E (just below median mid-cap valuations), Glodyne is an attractive long
term growth story.
Company Background
Glodyne Technoserve (Glodyne) was incorporated in the year 1997 with a modest
beginning by a group of first generation entrepreneurs. The company set out with
an objective of extending high quality IT services across various industry
segments. Gradually, the company has evolved into an end-to-end IT services
provider with core competencies in Technology IMS and Application software
services. Glodyne has strategic alliances with various global technology giants like
Sun, IBM, CISCO, SAP, Oracle, Microsoft and Acer among others.
Company’s service offerings straddle across industry segments such as BFSI, egovernance,
education, retail, manufacturing, ISVs & ISPs. Its clients include some
blue-chip companies and mid and large size organizations. The service
engagements vary from few months to years of partnership.
Glodyne is a Level-1 Turnkey Solution Provider empanelled by Department of
Information Technology and Government of Maharashtra. Apart from Glodyne,
there are a select few IT companies like IBM, TCS, Wipro, CMC and Tata Infotech
in this league.
Glodyne has presence in the US through its 100% subsidiaries in California,
Virginia & New York.
Business Segments
Glodyne operates in two strategic business segments (SBUs) of Technology
Technology IMS Application Software Services
Facilities & Helpdesk Management Application Development & Maintenance
Network Management Business Process Management
Remote Management Enterprise Application Integration
Disaster Recovery Management Testing & QA
Database & Datacenter Management IT Consulting
Server & Desktop Management Customer Relationship Management
Security & Storage Management HR Information Management Solution
Key clients
Industry Rev share % Key Client Names
BFSI 24.0 IDBI, JM Fin, Amex, HDFC, Stan C, Corp Bank, Deutsche Bank
E-Governance 21.0 Air India, MSSIDC, Mhada, BHEL, GoI, Indian Rail, Dept of Mah
IT/ITES 21.0 KPIT, Geometric, Acer, IBM, Symantec, Plateau, msoft, bmcsoft
Mfg & Retail 18.0 BPCL, Saint Gobain, Hindalco, Tata Motors, Globus, Pantaloon
Education & Research 11.0 IIMB, IMRB, SNDT, TAPMI, Bangalore Univ, IIA, AIMB
Telecom & Media 5.0 BSNL, CellBrite, Nortel, UTV, Hathway, O&M, Equant, ECI Tel
Glodyne has about 240 active clients with the Top 20 clients contributing 30-35% of revenues.
Domestic revenue share at 75%
With majority of the clients from India, about 75% of the Glodyne’s revenues are from the domestic market. The
balance 25% of revenues is from the US where the company has presence through subsidiaries. As the profitability is
higher in the US business compared to India, Glodyne is keen on increasing US revenue share by increasing its
presence. Company also believes that the current recessionary environment in the US would not impact its IMS business
as it targets the clients’ operational expenditure and not the capex, which is discretionary. Company has been
witnessing increasing ticket size of the deals in India.
Remote IMS Industry Size
As per McKinsey, the global IMS industry size is estimated at US$524bn in 2008. Out of this, the addressable market for
Remote IMS services is estimated at US$104bn. Remote IMS services out of India has been growing at a fast pace
increasing from ~US$1bn in 2005 to ~US$3.6bn in 2008. The projected Remote IMS industry size is US$28bn by 2013
of which India is expected to contribute US$15bn. Within the Tech-IMS, the wave towards Remote IMS has been driven
by:
ä Increasing realization by clients and vendors that majority (93-95%) of the technology infrastructure problems can
be solved remotely from the network operations centre (NOC).
ä Significant reduction (1/4th-1/5th compared to onsite) in problem resolution time from NOC assuring higher uptime
and better quality.
ä Cost savings for clients especially those outsourcing IMS for first time.
ä The vendors have been pushing for remote management due to higher profitability as compared to onsite
management. Remote resources are cheaper and could be deployed for multiple clients and attend (13-15 calls/daycompared to 4-5 calls/day onsite) higher number of calls/problems
Remote IMS is ~15% of Tech-IMS revenues for Glodyne
Currently, Remote IMS is ~15% of Tech-IMS revenues for Glodyne and has increased from a negligible contribution 2-3
years ago. This has been the single most important factor behind expansion in company’s operating margin from 11.6%
in FY06 to 18.2% in FY08.
Typically, IMS contracts are annual and pricing is based on assets managed
IMS services are provided under annual contracts, which are governed by strict SLAs (service level agreements) and
contains the uptime requirement (typically 97-99%). These contacts come up for renewal in the period of March-April-
May. In terms of pricing of the contracts, there has been a marked shift towards IT asset billing (US$xx/asset on
monthly or annual basis) from traditional manpower billing by global IMS vendors. An asset could be a desktop, server,
database, etc. The key reason behind this trend is the scalability and non-linearity of the former pricing model. As the
client’s IT assets increase, revenues for the vendor increases irrespective of whether additional manpower is deployed or
not. The client is mainly concerned about the uptime of his IT infrastructure. Further, clients’ sensitivity to pricing (in
context of switching between vendors) is lower compared to software services.
Penetrating an existing IMS account in three ways
Typically, an IMS vendor can penetrate a client or increase his wallet share in IMS budget in three ways:
ä By increasing the locations under service – For instance, starting with the main office of a BFSI customer and then
covering offices across state or country.
ä By increasing the number of asset under service – For instance, starting with managing 100 desktops and then
increasing the coverage number.
ä By increasing the type of assets under service - For instance, starting with desktop management and then managing
servers, database, security, etc.
Important alliances in place
Partner Nature of Partnership
SAP End-to-end enterprise applications services partner
Microsoft .NET Application Suite, development environment, desktop & server O/S
Oracle
Strategic relationship with Oracle for customized package development based on Oracle RDBMS. Glodyne is an Oracle
Technology Partner (OTN), the highest level in Oracle Technology.
Cisco Systems
Premier Partner of Cisco Systems for the entire range of its Networking products, specializing in providing enterprisenetworking
solution to its customers.
Sun Microsystems Platinum and iForce Partner as a privileged Sun ONE family member. Java J2EE Development Framework.
IBM Premium Business Partner for their Intel Servers, Laptops, Desktops and services
Glodyne has important alliances with leading global technology companies like Sun, IBM, Cisco, Oracle, Microsoft and
SAP. These alliances keep the company abreast about the latest technological developments and skill-sets apart from
providing direct business opportunities ie partnering with them for services in projects and indirect business
opportunities through reference/lead generation.
Pursuing inorganic growth opportunities actively
Links Group International Inc Front Office Technologies Inc
Acquired in March 2007 Acquired in October 2007
A Virginia based software services company A New York based IMS services company
Clients: Symantec, France Telecom/Orange Business, Openet,
Plateau, Equant Inc, etc.
Clients: Amex Bank, Stan C Bank, O & M worldwide, Bartle Bogle
Hegarty, Sotheby’s, Alchemy, etc.
Rationale: Client acquisition and cross-selling Remote IMS services
Rationale: Client acquisition and leveraging the onsite:remote delivery
model
Integration completed and the company is now
Glodyne Technoserve Inc
Integration is in process and the company is now Glodyne
Technoserve Inc
Clients added: 41 Clients added: 45
Over the last couple of years, Glodyne acquired two entities based in the US, Links Group International Inc (LGI) and
Front Office Technologies Inc (FOT). The former being a software services company, the key rationale behind its
acquisition was to cross-sell Remote IMS services to its esteemed clientele. Glodyne has already started providing
Remote IMS services to couple of LGI’s clients. The rationale behind FOT acquisition was to transition to Remote IMS as
FOT was a 100% onsite IMS services provider. Presently, Glodyne has already started providing Remote IMS services to
O&M Worldwide, one of the large clients of FOT. Company plans to pursue larger strategic acquisitions like these going
ahead.
Buoyant about growth potential of its HR solution
Glodyne has developed a complete HR information management solution called HrWorQ. It is a web-based solution
covering the entire employee lifecycle right from pre-recruitment to exit. With this solution, company intends to exploit
the domestic market for HR solutions, which is under-penetrated and does not have a choice of any complete solution
but individual modules like payroll processing solution, etc. Company intends to target the huge SME market in India by
offering HrWorQ on a SaaS (software as a service) model unlike the traditional license model. Under the SaaS model,
Glodyne would be hosting the web-based application governed by SLAs and charging the client on a per-person-permonth
basis. Presently, company is providing this solution on a SaaS basis to a financial services company in Mumbai
where it is charging Rs100-150 per-person-per-month.
Apart from above, company has also developed a core banking solution called FinWorQ. With this solution, company is
targeting the mid-sized and small-sized private banks and co-operative banks. As this solution cannot be provided on a
SaaS model due to regulatory restrictions, company would be selling it on the license model. All the costs associated
with development of the above two solutions have already been expensed.
NOC in Mhape; planning for an SEZ facility
Glodyne has a NOC in Mhape, New Mumbai, where 140-150 people work on 3-shift basis (24*7). It is fully occupied and
company is scouting for lease facilities nearby for meeting near-term growth requirements. For the long-term, company
is planning for an SEZ facility in Pune or Nagpur. The arrangement of the lease facility is critical for growth in the next
two years.
Manpower dynamics are different in Remote IMS
Presently, Glodyne employs ~650 people of which ~150 are in the US (including the recent acquisitions) and the rest
~500 are in India. In terms of segmental distribution, ~450 employees are in the Tech-IMS space with the balance
involved in ASS segment and support functions. According to the company, Remote IMS being a nascent service
offering, the salary levels and attrition levels are lower compared to traditional IT services. Glodyne offers Rs1.5-2lakh
pa to freshers (BE, BSC, MCS, etc) with relevant certifications. This is significantly lower than Rs3-3.25lakh pa salary
offered to freshers by large and mid-sized software companies. Further, the attrition for Glodyne is lower than industry
at 12%.
Company expects 45-50% organic growth in FY09
Based on the current revenue visibility, company expects organic revenues between Rs4.42-4.68bn in FY09 implying 44-
52% growth over FY08. Company, presently, has committed revenues to the tune of Rs2.4bn (50-55% of guidance)
from the recently renewed IMS contracts. With further shift towards Remote IMS, company expects operating expansion
by ~250-300 bps to 21-22% in FY09. For Q1 FY09, revenues are expected at Rs1-1.04bn representing 2-7% qoq
growth.
Targets Rs10bn revenue by 2010
Glodyne targets Rs10bn revenues by 2010 through both organic and inorganic growth. In 2010, it expects Tech-IMS to
form a far higher proportion (compared to 65% currently) of revenues due to its faster growth potential and
management’s focus. ASS segment would continue grow at industry rate. However, company cannot afford to ignore the
ASS segment as software capabilities are critical for winning large turnkey projects, which would include both IT
infrastructure and software management. Within Tech-IMS, Remote IMS is expected to contribute 50% as compared to
~15% at present. Operating profitability is estimated to expand to 24-25% with increase in Remote IMS share. In terms
of geography, company is looking at a revenue composition of US-40%, India-30% and Europe & Others–30%.
About the management
Mr. Annand Sarnaaik – Chairman & MD
Annand is the founder promoter of Glodyne. He holds a bachelor’s degree in Engineering and Master’s in Business
Administration from Jamnalal Bajaj Institute of Management Studies. Annand plays a key role in defining the company
strategy and in using technology and innovation continuously to achieve the company’s vision. He leads the company
efforts in growth strategy, alliances and corporate structuring, a recent instance being the acquisition of Links Group
International, Virginia & Front Office Technologies Inc by Glodyne.
Annand began his career in 1990 with HCL-HP Limited where he experienced the changing face of IT and recognized the
opportunities in the sector. With a desire to create a world class IT organization, he started Glodyne in the year 1997. In
2007, Annand was conferred with the prestigious “Udyog Rattan Award” by The Institute of Economic Studies, New
Delhi.
Mrs. Divvyani Sarnaaik – COO & ED
Divvyani is the co-founder of Glodyne. She overseas all the operating business units and is responsible for account
delivery management including people and operations management. Divvyani focuses on increasing competitiveness,
improving customer experience, improving employee engagement and increasing the depth of services. She has an
overall experience of about 16 years in IT and Finance.
Over the last 2-3 years, company has expanded its management bandwidth by attracting experienced people from Sun,
Lucent, etc, to join as head of sales, finance, software services and HR.
source :-visit note of india infoline
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