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| Mody
says although the ‘Made in India’ tag was a barrier to
the company’s progress, things are looking up now |
The
Indian software success story so far has been linked largely
to services. Analysts lament that Indian firms have not been
able to move up the value chain and offer productised solutions.
But there are exceptions. Bangalore-based Sasken Communication
Technologies is one of the few Indian companies that have
created substantial intellectual property and offers hi-tech
solutions in the complex domains of wireless and telecom.
Pankaj Mishra analyses Sasken’s evolution and road
map
Like
many of the success stories from Silicon Valley, Sasken Communication
Technologies too has garage-start-up roots literally. “Sasken
was born in a small garage in Fremont, California,” recalls
Rajiv Mody, the company’s founder and CEO. Mody, along
with four of his friends, invested $2,00,000 as initial capital
to set up Silicon Automation Systems back in July 1991. The
company was later renamed as Sasken. Mody recruited four professionals
who formed the core group at Sasken. He still remembers the
first order: “Nortel (then part of Bell Labs) approached
us for helping them out in developing a translator for converting
their models into VHDL.” That order was worth $40,000.
In 1999, Sasken received funding from Intel, one of its clients.
“We were working with Intel in the area of multimedia
and DSL. Our relationship was very strategic and Intel decided
to invest in us,” says Mody. Intel still happens to be
one of Sasken’s largest customers. “We now have
clients like NTT and Sony, Japan.” Mody declines to comment
on the equity stake that Intel purchased, but he admits that
75 percent of equity is still owned by the promoters of Sasken.
“At present we are amongst the top three players in the
telecom space, and we want to displace TTP Com of UK and gain
the number one spot.” Ericsson, Lucent, Nokia, Nortel,
Alcatel and Siemens are some of the target customers for the
company. All these vendors are focusing on wireless and Sasken
perceives a continued demand for its R&D services.
The challenges
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| Sherlekar
believes IPRs is the way to go—the company has already
made headway in ADSL and 3G |
Like
most start-ups during the early nineties, Sasken had to face
a lot of roadblocks while marketing its offerings in the US
and Japan. “There were times when we had to hide the
‘India’ identity,” admits Mody. Sasken decided
to focus on its core competency, which was technology, and
started making inroads into markets in Europe and Japan. “One
of our promoters has Japanese contacts. This helped us in
gaining an entry, but in the end it was our ability to deliver
hi-tech solutions which made us a global player.” Sasken
had to build its brand equity in Japan and Europe slowly and
painstakingly.
Swaminathan,
the head of the central marketing organisation at Sasken,
divides the company’s history into three phases. Phase
One was when the company had just been founded and the emphasis
was on building technical competence. This was followed by
a second phase, in which there was a sustained thrust on marketing.
“During phase one of its existence, Sasken’s product
culture was in the early stages. We were a company driven
by strong domain expertise,” Swaminathan says. However,
during the mid-nineties, Sasken decided to set up a basic
marketing infrastructure by recruiting eight marketing professionals
and also beefing up its website.
“During
phase two, we had offering-based business units like the broadband
access division, telecom services, mobile services and the
Internet access division. This was a precursor to the Strategic
Business Units which we have formed now,” says Swaminathan.
Sasken recently restructured its business units and carved
out the semiconductor division, terminal equipment division
and networking services division. “What we have now are
market-centric SBUs. We are also looking at establishing a
new SBU for the service provider market to focus on wireless
LAN technology.” To gain expertise in this space, Sasken
is planning to acquire a small company with relevant skill
sets.
Semiconductor markets
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| revankar
says the company will look at equity investments post-2002,
since the ongoing slump does not allow such deals |
The
company competes with Wipro and Infosys in the networking
services business. On the terminal equipment side, TTP Com
and Condat (a German firm) are Sasken’s close competitors.
However, the major chunk of the company’s business will
still come from its semiconductor division where it is targeting
the top ten semiconductor companies of the world. “We
have already roped in seven of the top ten semiconductor firms,
our thrust now is to increase market share,” admits Swami.
Hughes Telecom is the only Indian competitor for Sasken in
this space. Repeat business accounted for 75 percent of revenues
in 2001.
Sasken’s Semiconductor Business Unit provides solutions
and services to the semiconductor segment in the communications
market. The relationship can extend from a pure services model
to providing solutions around licensable Sasken intellectual
property (IP) or the customer’s IP, to being a turnkey
solution provider.
The unit possesses world-class infrastructure in terms of
simulation and development tools, a well-equipped hardware
development and test lab, system testing facilities and IC
design tools. A large team of engineers work in the IC design
space and they have expertise in DSP, software and hardware
partitioning and implementation, IC design, product testing
and verification, on a variety of platforms.
All the SBUs have dedicated marketing teams supported by product
managers and a customer support cell. At present there are
around 10-12 marketing professionals in each SBU. The central
marketing organisation headed by Swaminathan takes care of
branding, event management and media relations.
Creation of Intellectual Property
For a company that has more than 40 IPRs to its credit, innovation
has to be a never-ending process. “Services is a lucrative
business, but we never wanted to depend upon it. Therefore
we decided to enhance focus on creating IPRs in niche areas,”
says Sasken’s CTO Sunil D Sherlekar. Sherlekar has established
a team that comprises of professionals from various divisions
of the company. The team is responsible for evaluating IPR
opportunities. Sasken has recently created a prototype in
the area of mobile 3G and is planning to license it to either
a semiconductor company or a company making mobile handsets.
Sherlekar says that the company has also created a few essential
IPs in the area of ADSL and 3G.
Sasken also established a corporate R&D group in 2001,
for which it invested a sum of Rs
5.8 crore. The company has developed protocol stacks in the
areas of 3G, GPRS, EGPRS and GSM. These stacks are targeted
at semiconductor vendors, terminal equipment manufacturers
and test equipment manufacturers. This business accounted
for thirty percent of the company’s revenues in 2001.
Sasken invests eight percent of its revenues in research and
development. The company owns IPRs in the areas of broadband,
DSL, multimedia and 3G and it has already applied for acquiring
patent rights.
“2002
is going to be tough and we don’t expect things to turn
favourable very soon. Once the situation improves, we will
definitely look for more equity investments,” says Neeta
Revankar, CFO, Sasken. Revankar says that with valuations
being down, offloading equity might not be a wise decision
now. The company is also scouting for acquisitions for adding
competency. “We will not do a cash deal. Once the target
is identified, we will make an all-stock deal,” says
Revankar.
Future roadmap
Sasken today is poised to take the inorganic route for growing
aggressively and is eyeing acquisitions. The company has also
identified several new areas for intellectual property creation,
which hold the key to its growth, moving forward. “The
next logical step is to design a chipset and offer it through
a licensing model,” Sherlekar says. The company is also
working in the areas of Multimode and Wireless LAN and is
also looking at the area of software-defined radio. Globally,
Sasken is ranked by analysts as one of the leading players
in the telecom space. “Product innovation, customer intimacy
and operational excellence are key to our growth,” says
Swaminathan.
Sasken’s recent thrust in 3G communication by developing
protocol stacks in the areas of GPRS, UMTS and Multimode has
positioned it as a leading player in the telecom space. In
2001, the mobile software division accounted for 30 percent
of the company’s revenues. Moving forward, this percentage
is expected to increase as Sasken intensifies its ongoing
relationships with the vendors in this space. The company
is also believed to be in acquisition talks with several small
firms in the service provider space for gaining access to
this segment.
Mody also wants to take the IPO route once economic conditions
become better. His aim of making Sasken a Rs 1,000 crore company
by 2006 depends on how well he is able to steer the company
through the ongoing downturn.
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