Kale looks at taking off with Cognosys deal

Kale Consultants has crossed umpteen milestones since its inception in 1986. After establishing itself in the airline vertical the company recently acquired Cognosys, a company specialising in the travel domain. Chitra Padmanabhan looks at the impact of the deal and the prospects for Kale Consultants

In recent times travel and tourism has been emerging as a promising area for companies in the field of e-commerce and BPO. Traditional players in this space—the likes of Thomas Cook and Cox & Kings—are increasingly banking on their online booking systems and call centres that enable customers to carry out their dealings without having to personally pay a visit to brick and mortar shops.

The Cognosys acquisition enables Kale to leverage the huge opportunities in the airline and travel space for its products and outsourced business services, says VIPUL JAIN

Looking to cash in on this trend, Kale Consultants recently acquired Cognosys——a travel technology company. Cognosys is a privately held company, funded by Pravin Gandhi’s Infinity Technology Investments. Though both companies refuse to reveal the exact size of the deal, all they have to say is that it is valued at a little excess of a million dollars. Kale has acquired a 100 percent stake in Cognosys, which marks its foray into the travel and tourism segment. The acquisition is significant considering that Kale is positioning itself as a specialist player in the travel and airlines domain.

Steps taken by Kale

In a recent development, Kale has sold its banking technology division to Onward Technologies with an agreement to transfer the Intellectual Property Rights (IPR), support and marketing rights for its branch automation products. The transfer has been facilitated by Kale’s business strategy of focusing on the airline and travel industry. “This move will enable us to leverage the huge opportunities in the airline and travel space for our products and outsourced business services,” says Vipul Jain, the managing director at Kale Consultants. Also, the move to let go the banking division seems to have materialised when at the other end Onward Technologies has been making plans to spruce up its banking, financial services and insurance (BFSI) focus.

Though Kale’s earlier plans included a balanced focus on the banking as well as the airline vertical, the results declared by the company speaks volumes about its tilt towards the latter. For the quarter ended September 2003, Kale recorded 19 percent growth in revenue to reach Rs 9.41 crore and 45 percent growth in segment margin to reach Rs 2.92 crore in its core airlines division. Kale’s Q2 results show that the airline vertical has contributed 80 percent to revenues against 65 percent in the corresponding quarter in the previous year. In the quarter ended June 2003, Kale reported a net profit of Rs 20 lakh, showing an increase of 108 percent against a profit of Rs 10 lakh reported during the corresponding quarter in the previous year. On the basis of vertical growth the airline division contributed 73 percent to revenues against 65 percent in the previous year. The banking segment contributed 21 percent and other segments 6 percent to the overall revenue pie. This clearly reflects that over the years the company has been bagging major business orders from the airline vertical, which justifies the increased thrust.

Why Cognosys?

In order to spruce up its travel and tourism focus, Kale had two options, either to make investments on product development in the area of travel and tourism or to acquire a company that has done significant work in this area. The acquisition of Cognosys falls perfectly in line with Kale’s strategy to replicate its success in travel and tourism.

Cognosys is a company specifically catering to the travel vertical with products like eBookEngine, eFlightInfo, eBizTravel, eWebFares, eFareEngine, eSeatBuster, etc. From the user-end, these products help Web-enable businesses in the travel and tourism domain. For instance, eFlightInfo claims to eliminate the concept of waiting at airports for delayed flights. The product extracts flight arrival and departure information from airline systems and displays them to the user and eWebFares connects to the airline website and retrieves availability and fare position. Cognosys’s roster of customers include TQ3, Lastminute.com, Cox & Kings, Tcube, Travelonline, Secure-res and others. “Cognosys’s merger with Kale has provided its customers greater stability and the possibility of local customer support,” says Rajnish Kapur, chief executive officer at Cognosys.

Kale has carved a niche for itself by developing solutions from the airline perspective and Cognosys develops solutions from the perspective of the travel agent. The common thread between both the companies is the similar domain knowledge required for both verticals. Kale has a three-tier business model wherein the company offers its services either through the licensed model, hosted model, ASP or outsourced model, which can now be passed on to Cognosys’s customers as well. Additionally, Kale will cater to the requirements of Cognosys’s existing customers in Europe and the US, thus increasing its customer base.

Kale-Cognosys BPO focus

Kale has branded its BPO outfit as a managed process services (MPS) centre. Though the airline vertical has grown to Rs 8 crore from Rs 7.3 crore last year, the key contributor for the same has been the MPS business, showing a growth of 54 percent to Rs 3.4 crore. “Looking at the global nature of the airline business, clients are willing to outsource some of their processes to BPO outfits, and this has prompted us to leverage our domain knowledge in this space,” says Jain.

In the past six months, the company has been constantly expanding its service offering from revenue accounting to audit services for the airlines. It plans to further expand its airline service portfolio to include ticket proration, cargo sales audit and interline billing, among others. Kale’s MPS currently serves six airlines. This infrastructure and BPO capability is now available to Cognosys customers.

With travel companies increasingly viewing India as an outsourcing destination for their mid- and back-office needs, the acquisition gives Kale the ability to provide travel customers services similar to what Kale offers its airline customers. Between Cognosys and Kale, they can offer expertise not only for etravel but also for front office, mid-office and back-office processes.

The merger is aimed at harnessing individual competencies to create a bigger platform for both Kale’s and Cognosys’ clients. The existing customers of the two entities will see an enrichment of travel domain knowledge, a scaled-up delivery capability and a larger infrastructure for offshore project execution. Also, while Kale’s customers will get the benefit of Cognosys position in travel domain-specific customised software development, Cognosys customers will get the advantage of Kale’s BPO capabilities.

chitra@expresscomputeronline.com