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From
e-engineering solutions to fulfilling the Net-centric needs
of enterprises, Aztec Software one of the first companies
in India to focus on next-generation technology has carved
a niche for itself in the market. Though revenues are down
from last year, the company managed to ramp up sales in the
fourth quarter. Akhtar Pasha profiles Aztec
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| Muralikrishnan
A G
says Aztec’s financial prudence has resulted in cash reserves
of Rs 80 crore |
Aztec
Software and Technology Services started focusing on Internet
middleware when the Internet market was still evolving. The
company has deep expertise in Internet middleware, databases,
application integration, and technologies like XML. Aztec
has an offshore-centric business model the company does most
of its work from its development centre based out of Bangalore,
and has overseas offices in Santa Clara, Los Angeles, New
York and Seattle. It closed fiscal 2002 with consolidated
revenues of Rs 70 crore, down from Rs 80 crore in 2001. Its
net profit accounted for Rs 16.95 crore in 2001-02.
Aztec has successfully transformed itself from being a product-based
company to a software services company. Its clients include
Cadence, Novell, Microsoft, Asera, Viador, enCommerce, Capstan,
Jamcracker and Embarcadero. The company also offers a portfolio
of reusable components and frameworks to its clients for speeding
up the solution development cycle.
People and beginnings
The
name ‘Aztec’ was borrowed from a Mexican warrior
tribe. The Aztecs are considered to be tough warriors. The
company’s 35-member core team in 1996 has grown to a
248-member team today. Of this, 44 people are located in the
US and 204 in India. 206 employees constitute the technical
pool while 42 people man support and management functions.
The company has nine people for sales and marketing.
Aztec was formed by S Parthasarathy, who is the founder and
chairman. It was his dream to start an IT company in 1996.
Few people know that this Rs 70 crore company was started
from a government factory.
Partha met V R Govindarajan, who would become Aztec’s
CTO, in the US and they decided to start their own company.
Govi came up with Aztec’s vision the company would develop
products for the application server market. Initially, the
company provided solutions to ASPs, B2B companies and Internet
start-ups like Jamcracker. 15 to 20 techies working for IBM
and Microsoft in the US joined Aztec and started working on
its first product as part of an initial team of 35 people.
It took two years for Aztec to develop its first application
server product called ‘jp@ct’ (Java Powered Access
Technology), built entirely on Java. Aztec was one of the
pioneers in the application server market. jp@ct was developed
at the Bangalore development centre at a cost of Rs 1.5 crore.
In 1997 Aztec set up a wholly owned US subsidiary called Aztec
Software Inc to market jp@ct in the US market. Later, Aztec
extended the product by developing ‘jp@ct List Server’,
an Internet-based end-to-end e-commerce
platform for companies like Zapdata. Aztec’s revenues
for the year 1998-99 stood at Rs 1.5 crore.
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| S
Parthasarathy
says Aztec will continue to be a company operating at
the higher end of the technology value chain |
Says
Muralikrishnan A G, CFO: “Aztec did not have the muscle
power to push the product more aggressively into the market
and compete with giants such as IBM and BEA nor did we have
proper financial backing to continue product development.”
With the slowdown in the technology space, Aztec started looking
at the Net-centric needs of enterprises by providing application
integration services, including integrating the networks and
applications of an enterprise with those of its suppliers.
In 1998 the company changed its business model from developing
products to providing technology solutions. K B Chandrasekhar,
co-founder and chairman of Exodus Communications, and a friend
of Govi’s, suggested the move to productised services
where the technology boom was going to take place. Chandrasekhar
took a 51 percent stake in Aztec and invested $1.5 million
in December 1998. That was the turning point for Aztec, which
saw its revenue growing from Rs 1.5 crore in 1998-99 to Rs
14.5 crore in 1999-00.
In early 2000 Aztec wanted additional funds for its expansion
plans and decided to go public. April 2000 saw the company
raise Rs 52 crore through an IPO for its capital expenditure,
expansion plans and mergers and acquisitions.
Govi says, “In the past 18 months, the company has shifted
focus from product development to e-engineering solutions
and technology services for ASPs and Internet companies. The
company is involved in developing, architecting, designing
and e-integrating solutions for ASPs and Internet companies.
ASPs are also looking for wireless solutions and we are geared
to develop middleware for wireless applications.” This
effort paid off well as Aztec notched Rs 80 crore in revenues
for the period 2000-01.
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| Govindarajan
V R says
Aztec is also geared to develop middleware for wireless
applications |
Murali
says, “We have been very cautious in our spending from
the start. We have not given vehicles to our senior team,
unlike what other companies do with their IPO and VC money.
This has left us with enough cash reserves to sustain Aztec
in the downturn. We have over Rs 80 crore in cash reserves
as on date, including the IPO funds.” He hints that this
cash reserve will help the company take the mergers and acquisitions
route for growth in the future.
Revenue streams
Murali
says, “Our US subsidiary is not a profit centre and works
on the cost-plus model.” Therefore the company has been
focusing on an offshore-centric business model wherein it
does most of the work from its development centre in India.
The offshore-onsite revenue ratio stood at 63:37 for the period
2001-02. Going forward Aztec wants to increase the contribution
of its offshore business to 70 percent of the total.
The company’s main market has been the US, which contributes
95 percent of Aztec’s revenues. Partha says, “We
have in the recent past begun focusing on the European market,
especially the UK and German markets, since we see some good
opportunities here. We have also begun working closely with
a large software product company in the far Eastern market.”
Currently Aztec earns 5 percent of its revenues from the European
market.
Future growth areas
Partha says, “We continue to be a company operating at
the higher end of the technology value chain, offering our
services to both New Economy and enterprise customers. Going
forward, we plan to increase our revenues through customer
acquisitions, and expanding the breadth of our relationship
with our clients.”
In the past Aztec has developed solutions for companies like
Microsoft. Going forward, the company’s thrust areas
for growth will be the users of technologies companies such
as GM or Ford and, in terms of technology, Web services. The
company has recently developed a J2CS application, a Java
to C# conversion tool using Microsoft’s .NET platform.
Organisations that have invested a lot in Java and now want
to move to .NET need to overcome the challenge of porting
Java code to C#, the preferred language in .NET.
“We
have signed up new clients who are users of technology like
Cadence. We are developing solutions that will help Cadence’s
customers access information with a single sign on. Novell
is another customer for whom we are developing a single sign
on for their directory services and security products. Polycom
is another new customer,” says Murali.
Q4 2002 saw Aztec’s revenues growing to Rs 13.2 crore
as compared to Rs 12.7 crore in Q3. Aztec is seeing the first
signs of a rebound in the US economy. It expects spending
on technology by enterprises to pick up as the revival in
the US economy gathers pace. Such a pick up in technology
spending should enable Aztec to add more customers in the
enterprise space.
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