NelsonHall recently attended NIIT Technologies’ analyst and adviser event in London, and we were keen to get an update on developments at the company since the arrival of Sudhir Singh as CEO. We were aware that the last two quarters have seen a significant increase in the number of large deal signings (five, compared with two in H1 FY18), also that there have been a significant number of new appointments - but generally NIIT Technologies has been rather quiet. It is now apparent that the company has been embarking on a major transformation.

From Geographic to Industry Focus

This transformation is most evident in a radical organizational restructure from the former geography-based P&L to one that is vertical-led. In sales pursuits, there has been a sharper vertical-specific narration and a stronger emphasis on capabilities in digital, data, cloud and automation – and this is likely to have helped in at least some of the recent large deal signings.

NIIT Technologies is now structured primarily around three key industries, in each of which there is a focus on a specific sub-segment where the company would like to have a dominant position:

• Travel & Transportation (26% of total revenue), specifically airlines & airports
• Insurance (we estimate ~24% of total revenue), specifically commercial and reinsurance (primarily London market)
• Banking & Financial Services, (~19%), specifically wealth & asset management.

The importance of this is not to be underestimated: in both IT and business process services, deep industry domain expertise, and ideally IP, is a key factor in vendor selection. Having recognized the need to operate at the intersection of selected verticals and emerging technologies, NIIT Technologies has made a wholesale rejigging that goes from go-to-market right through to delivery.

The former ADM organization (which generated two thirds of the company’s total revenue) has now been folded into these three verticals; each now has a Global Head (who may also have a regional responsibility) and a head of delivery.  The former head of ADM is now wearing a different hat: as NIIT Technologies’ first ever CTO, his responsibilities include accelerating the use by the company of blockchain, IoT and AI.

The other much smaller service lines of Infrastructure Management Services and BPS stay as standalone units, and there are also separate units for Data/Automation and Cloud.

Singh has also introduced:

• A large deals pursuits team, in parallel tweaking salesforce incentivization plans to increase the focus on large deal ($20m+) wins
• A new partnerships and alliances organization.

External Leadership Hires, Center of Gravity Moved from India to the Markets

Since Singh’s arrival, the company has been on a hiring spree: all the three vertical global heads are new recruits, as are the global heads for Data & Automation (a new service line), RPA, and Cloud.

Several things are evident in these recent leadership appointments:

• They are all external hires, and from much larger firms
• They are all based onshore, close to clients: three of the eight are based in Princeton, NJ (where the CEO is also based) and two in London (near the London market client base)
• There is a clear focus to accelerate the use of intelligent automation (IA) in service delivery, also to expand capabilities in data & analytics.

This influx of new senior execs is not part of a turnaround program: NIIT Technologies’ topline growth in recent years has been steady, if not stellar, and EBIT margin has not been under any unusual pressure. What is happening should be seen rather as an evolution, one that builds on assets and capabilities that the company has acquired or been developing over the last few years, including:

• Proprietary IP such as Mona Lisa for the airlines sector and the suite of products (Navigator, Exact and Acumen) for the commercial insurance sector. As we indicated in our blog last year (see here), the recent focus in product development has been adding microservices (10 were launched last week) and cloud-based tools to improve the UX: next month will see the launch of a smart assistant, Aniita, and an analytics tool, Score 
• Capabilities in Pega and Appian, through its acquisitions of Hyderabad-based Incessant Technologies in 2015 and Ruletek in 2017, which expanded Incessant’s delivery presence and client base in the U.S. BPM is a building block in digital process transformation
• Its ‘TRON’ intelligent automation platform. Our perception is that while NIIT Technologies is slightly in catch up mode in the use of IA in its delivery of both application and infrastructure services (e.g., it currently has 4 PoCs in progress using arago’s HIRO), there is a strong push to change this.

“Engage with the Emerging: Innovate, Incubate, Industrialize”

This phrase neatly captures the journey on which NIIT Technologies has embarked: to build on its existing industry knowledge by expanding its capabilities in emerging technologies and by industrializing service delivery through IA. The ambition is clear: for clients in its target sub-verticals to see NIIT Technologies as a partner of choice for large scale digital initiatives, not just as an offshore ADM provider with experience of operating in their vertical.

So, what will we see at NIIT Technologies over the next year? In brief:

• More industry-specific use-case in the use of cognitive, IoT and blockchain (which has obvious relevance in all its target sectors), with concomitant marketing
• Much greater use of IA across service delivery, particularly in infrastructure services,
• Expansion of the existing partnership ecosystem, e.g. around cognitive tools, analytics, fintech
• Expansion of cloud-based offerings and of API capabilities in each of the three key sectors
• NITL (the insurance software unit) growing its client base outside the U.K., with a particular focus on the U.S.
• Double digit CC growth (EBIT margin expansion coming after: the current priority is topline growth)

And what might we see?

• Stronger interaction between Incessant Technologies and the vertical units in building out vertical-specific digital transformation narratives
• Niche acquisition activity, e.g. around data and analytics
• More onshore hiring, e.g. of solution architects, data scientists, vertical domain SMEs, etc.
• The creation (though unlikely in 2018) of a fourth vertical unit, perhaps manufacturing, or possibly media (though the acquisition of key account Morris by Gatehouse is causing a major dent in this business).

Summary

Sudhir Singh was appointed last May as CEO designate, taking over this January from Arvind Thakur, NIIT Technologies’ first-ever CEO, and now Board Vice Chair. In that seven-month period he was able to put in place some of the building blocks for the next phase of the company’s development, one where it can position on possessing capabilities across vertical domain, emerging technologies, and IA: three absolutely critical attributes for staying relevant to clients.