Successful Quest in high-end engineering

QuEST LLC provides engineering services to Fortune 200 firms. Akhtar Pasha analyses the firm’s plans to keep its growth momentum going by focusing on high growth areas such as aerospace, oil & gas and energy

Aravind Melligeri says that the decision to open a Chinese subsidiary was driven by customer demand as clients wanted QuEST to support them in manufacturing

Quality Engineering & Software Technologies, LLC (QuEST) is a $20 million company offering high-end engineering solutions for advanced technology products. The company has four strategic business units focused on the aerospace, automotive, power generation, oil & gas, and industrial product domains. The company has acquired Fortune 200 clients such as GE Power Systems, United Technologies (UTC), Ford Motor and General Motors. It employs 450 people in India and another 110 abroad to support its global clients in high-end engineering design and analysis.

QuEST expects to grow at a CAGR of 50 percent to reach $65 million by 2006, at which point aerospace, energy & power and oil & gas will be the major sources of revenue for the company.

Slow beginning

Looking at its present success it is tempting to conclude that QuEST had it easy but that is far from the truth. Aravind Melligeri and Ajit Prabhu founded the company. Melligeri was under contract with Ford Motor, doing Finite Element Analysis (FEA) and crash testing. Prabhu was with GE Corporate Research. QuEST was formed in February 1997. (QuEST Inc is the holding company located in Cayman Islands and owns 100 percent of QuEST LLC). Prabhu convinced GE Corporate Research and bagged QuEST’s first order worth $20,000. The duo bought a Silicon Graphics workstation and software for $70,000 on a lease agreement and survived on their credit cards with help from family and friends.

Fighting hard to win contracts

During February 1998, two GE Corporate Research gas turbines failed in Singapore. QuEST shouldered the responsibility of pinpointing the root cause of the failure and helped fix the problem. This was QuEST’s first major project, valued at $750,000; it was successfully completed in six months. In May 1998, the company set up their first offshore delivery centre in Bangalore. Even back then QuEST had plans to move onsite projects back home.

In March 1999, the company acquired Lexel Engineering and announced its entry into the automotive industry. Aravind Melligeri, president, QuEST LLC says, “We wanted a skeleton to grow on and did not want to keep all our eggs in one basket.” Towards the end of 1999, when the GE Power Systems office moved to New York, QuEST formed a Global Engineering Development Centre (GEDC) in Bangalore to support all GE entities, including electrical engineering and hydro-turbines. 2001 proved to be a major inflection point for QuEST as it won a $1.5 million contract from GE Power Systems for designing compressors to be used in gas turbines. QuEST won this against the likes of Belcan Corporation, the largest engineering and technology company in energy & power. The company signed up United Technologies Corporation in 2002. Today, about 70 percent of its total revenues ($20 million) come from Fortune 200 companies.

Local talent at global locations

Ajit Prabhu, CEO, QuEST LLC says, “One mantra worked for us—think global and speak the customer’s language. We always believed in working very closely with our customers such as GE, UTC, Ford and GM. We set up wholly-owned subsidiary offices in strategic business locations such as the US, Italy, UK, Japan and China.” The company strongly believes that it needs to hire local talent at all strategic business locations. There are 50 locals working in the US and 14 in Europe (Italy and UK put together).

Six Sigma and toll gate

According to Ajit Prabhu, the way forward would be to focus on reducing the product lifecycle of customer products, and helping them bring products faster into the market at a lower cost

QuEST is using Six Sigma tools to bring cost savings to its customers. Every project has to go through QuEST’s rigorous ‘Toll Gate’ process. This is a four-stage process—the first two stages involve understanding customer expectations and the first batch of deliverables and review of whether it meets customer expectations. This is done at the preliminary design stage. The third stage is the final review where customer recommendations are accommodated. The fourth and final stage is closure; this includes documentation, customer survey and internal assessment of the project. Lessons learnt are incorporated into knowledge management system for reuse at this stage. Prabhu says, “Six Sigma helps our customers reduce their product development costs by 10 to 30 percent year-over-year.”

Services and tools

QuEST’s services include full system and component design, analysis support, field failure investigations (root cause analysis) and solutions, and custom design tool development. The company is using tools such as FEA from Ansys and Abacus, Computational Fluid Dynamics (CFD) from CFX, CAD tools such as Unigraphics, SolidWorks, Catia and Pro/E and crash analysis and simulation tools such as LS Dyna and GT Power.

Addressing high growth verticals

QuEST has created Strategic Business Units (SBU) to focus on aerospace, oil & gas and energy & power. Each unit is capable of delivering separately, will identify new business opportunities and formulate customer acquisition plans.

“These high growth verticals requires a high-level of customisation, therefore the value-adds we do are significant,” adds Prabhu. QuEST estimates that if margins in low-end design services are $5 to $6 per hour, high-end engineering design solutions as done by them command a margin ranging from $34 to $36 per hour.

“Our focus will be to reduce the product lifecycle of our customers’ products from ‘cradle to the grave’, helping them bring products faster into the market at lower costs. That will be the way forward for QuEST,” says Prabhu. The industrial and automotive segments are currently going through a lean patch and QuEST finds that customisation requirements are less here as compared to oil & gas, energy & power and aerospace.

Future

Conceptual design or product design from the US, Italy, UK and Japan will be sent offshore to Bangalore where the detailed design engineering will be done. China will be the manufacturing base through third-party manufacturers and suppliers. QuEST recently set up a wholly-owned subsidiary in Shanghai, China. Melligeri says, “The decision to open a Chinese subsidiary was driven by customer demand. Our clients want us to support them in manufacturing.” The company plans to hire local talent for the Chinese unit, which will start operating with 50 engineers. It has also formed partnerships with two third-party manufacturers and suppliers such as Namag and Hudong Shipyard. Namag in China manufactures aerospace and industrial parts for Sequa Corporation.

QuEST expects its oil & gas and aerospace businesses to grow 100 percent in 2004, helping it earn $10 million each from these businesses in the next two years. Prabhu says, “Forming the strategic business units (SBUs) will help us grow our revenues to $65 million in the next two to three years.” Additionally, the company is in the process of closing three deals with large OEMs. Of this, one pilot project is expected to close by January 2004 in the aerospace segment. The other two projects are in energy and oil & gas. The average deal size is $4 million.

To meet future customer demand, QuEST plans to ramp up its strength and will hire 400 engineers during the first quarter of CY 2004.

The company has received $6 million funding from the Carlyle Group, 20 percent ($1.2 million) of which has been set aside for its acquisition plans. Another 20 percent is kept as a cash reserve for the company. The rest will be for its expansion plans—expanding headcount, creating additional facilities and to meet customer commitments.

akhtar@expresscomputeronline.com