FINLATICS: BUSINESS ANALYST EXPERIENCE PROGRAM
PROJECT-1
Name: Shlok Agarwal
PROBLEM STATEMENT: An Indian IT Service and product company has an employee base of
5000+ resources all over the globe. Around 73% of the resources are based out of India (Mumbai,
Pune, Hyderabad and Ahmedabad). Total employee strength includes 690 contractors out of which
60% are in India, 5% in Australia and 7% in Asia Pacific centres. These contractors are on an average
1.4 times costlier than permanent employees.
Its customers are across 35 countries mainly in the US (32%), Middle-east (27%) and Europe (20%).
Its main business is providing IT solutions and Annual Maintenance Services. Though they provide IT
solutions in all the domains, 46% of their revenue comes from BFSI sector, 21% is from the
Healthcare sector and the rest from other sectors like Retail, Public sector, Manufacturing, Travel,
Entertainment etc.
Its product-based business is providing pre-made software and applications for companies. The three
products they offer are DevOps bundle, cybersecurity and digital marketing. 90% of revenue comes
from the digital marketing product.
It enjoys a good margin from BFSI (42%) and Retail (39%) sectors and also from business in the US
(48%) and Europe (44%) region. The margin is very low in business in India (9%) and other Asia
Pacific countries (14%).
It is finding it difficult to be at par with its competitors on a year-on-year margin improvement rate
which is 11% v/s 26% by other comparable IT companies in India. To address this, it is thinking of
acquiring smaller organisations which specialise in niche technologies and having a larger customer
base which will help them in increasing its employee base and expand the business with cross-sell
opportunities.
Will the acquisition help in the improvement of margins? If yes, then why? If not, then what alternate
strategy should the company follow?
The company is looking forward to investing in India, US and Europe. See the potential growth for
different sectors in these geographical locations.
PROBLEM OVERVIEW:
Employee Base:
5000+ resources all over the globe
73% India-based employees out of all resources
690 contractors:
1) 60% India-based (mainly from Mumbai, Ahmedabad, Pune and Hyderabad)
2) 5% Australia-based
3) 7% Asian-Pacific countries based
Costs:
Contractors are 1.4 times costlier than the regular employees.
Customer Base:
Customers are across 35 countries with the following breakdown:
1) 32% in US
2) 27% in Middle-East
3) 20% in Europe
4) 21% in other countries
Sources of income:
Services: IT Solutions and Annual Maintenance Services catering all sectors
Product: Pre-made software and applications in Digital Marketing sector, DevOps &
Cybersecurity
Revenue Breakup:
60% revenue is from IT Services with the following sector-wise breakup:
1) 46% in BFSI Sector
2) 21% in Healthcare industry
3) 33% in Retail, Public sector, Manufacturing, Travel, Entertainment and others
40% revenue is from the software-based product business with the following breakup:
1) 90% in Digital Marketing
2) 10% in DevOps and Cybersecurity
Margin-wise Breakup:
48% in US
44% in Europe
14% in Asian-Pacific countries
9% in India
MECE ISSUE TREE:
Increase Margins
Increase revenue Reduce Costs
Increase in
Growth in Reduce Fixed Reduce Variable
Customer Life-
Customers Costs Costs
time Value
Improving Reduce Reduce Logistics
Improve Loyalty
Services/Product Overhead costs
Reduce
Improve
Increase Prices Reduce Rent Service/Product
Marketing
Costs
Increase Upsell & Cross- Reduce
Distribution sell Equipment Costs
PROBLEM ANALYSIS:
Based on the MECE diagram and the data given to us, we can say that the main problem is in the
Margin-Cost of Operations gap in the location India. Here, the company has only got a 9% margin on
a <21% customer base, in comparison to the 73% employee-base in India.
This pushes the payroll costs (Variable Costs) up, compared to the revenue and profits generated.
Also, the company needs offices and infrastructure for sustaining its 73% Indian-employee base,
which pushes up the Fixed Costs as well.
The company also encounters the same problem in the Asian-Pacific countries, wherein, it has a 14%
margin on a <21% customer base, but here, this problem is prevalent to quite a lesser extent.
The company’s decision to acquire small firms with large customer base that specialize in niche
technologies should surely be implemented in India and Asian-Pacific countries. This would increase
the customer base in these regions, and also provide the opportunity to Upsell & Cross-Sell related
products and services, further improving the margins.
Apart from that, pricing can be made higher as well to improve the margins in these regions.
When we acquire the new firms, the payroll costs are bound to go up, but we assume that the revenue-
generated through the newly acquired customer base of these firms would be sufficient enough to
boost the margin-percentage in comparison to the Cost of Acquisition.
GROWTH POTENTIAL & RECOMMENDATIONS:
The BFSI sector looks a lot more promising in India, with a projected 31.57% YoY (Year on Year)
Growth and 10.6% contribution to the Indian economy in the year 2024.
The company also enjoys a high-margin rate (42%) in providing IT services in the BFSI sector.
Investing in the services specifically catering the BFSI domain will help in selling more, along with
better margins, which will help them in improving their Year-on-Year Margin Improvement Rate.
Acquiring niche businesses with large consumer base which provide BFSI-specific services will
definitely help the company to improve on its margins and grow in the future as well.
The Healthcare sector looks promising to invest in the US and Europe. It is expected to grow annually
at a 7% CAGR in the period 2022-2027 in the US, and a CAGR of 7.6% for the period 2024-2031 in
Europe.
The company has majority of its customer base in the US and Europe and also enjoys high margins in
these regions. Investing in the Healthcare sector in these regions will definitely prove to be fruitful to
the company.
Apart from this, the company can also invest in the Healthcare and Retail sectors in India. The Retail
Sector is growing annually at a CAGR of >13% in the period 2022-27, whereas the Healthcare sector
is also expected to grow at a CAGR of 8% in the period 2024-2032.
Following these recommendations is going to prove fruitful to the company in the long run.
