Corporate: Microland's New Macro-Vision

STRATEGY
Microland re-knits its Net

While the company's e-nabling and back-end businesses are certain to do well, the same cannot be said of its foray into content and community.

By Dilip Maitra

His company has never been into software-at least, not in the Infosys or TCS way-but he has always managed to figure in the same conversational bracket as N.R. Narayanamurthy and Azim Premji. In the 13 months between April, 1999, and May, 2000, vcs and private equity funds invested Rs 400 crore in four of his companies, none of which look set to make money in a hurry. And he managed to get prodigal son James Murdoch, John 'Pepsi-to-Apple' Sculley, and The Firm's Rajat Gupta to invest in his group's horizontal portal venture. Meet Pradeep Kar, 41, the in-your-face Chairman of Microland, and, as has been widely reported in the media (most recently in Wired!), the founder of the Beer-drinkers Association of Information Technology (BAIT), a forum for young infotech CEOs with a partiality for the bitters.

Opinions about the country's second-largest privately held infotech major-after TCS, which is a division of Tata Sons-vary from the admiring to the cynical. Says the CEO of a venture fund which hasn't invested in any of Kar's companies: ''It's amazing that people keep pumping money into Microland which hasn't given any returns in the past nine years. I don't know what their secret is.'' Investors like Indocean Chase Capital, which has an investment of $11 million in Microland companies, believe the secret is a great business plan. Concurs Anil Ahuja, 37, Executive Director, Indocean: ''Microland is one of the few groups to have identified the Net as a major business opportunity, and to have re-positioned itself.''

The Business Transformation

In the nine years since its inception, Microland's businesses have changed radically. The company was founded by Kar and four others from Wipro as a systems integrator and networking company. This was the early 1990s; there was lots of money to be made in networking. The result: average growth rates of 650 per cent between 1992-93 and 1997-98; and a peak turnover of Rs 180 crore in 1997-98.

Microland, though, was in the middle of the networking spectrum. Post 1996, the market for networking solutions became polarised with network integrators like Datacraft RPG, Wipro, and IBM at the high end, and small system integrators engendered by the entry of hardware distributors like Ingram Micros and Pacific technologies at the low-end. Says a senior executive at Datacraft RPG: ''Microland was never into highly-skilled network integration work.'' Kar refutes this argument and points to the work his company did for Videsh Sanchar Nigam and Standard Chartered Bank as examples of high-end networking, but admits that the low level of value addition possible in the business turned Microland away: ''It was a equipment-driven business requiring few intellectual capital inputs. And the entry of many small players eroded profitability.'' In April, 1999, the company exited its hardware re-sale business which accounted for 90 per cent of its turnover. And embraced the Net.

All Things on the Net

The timing was right. Money proved to be a problem. Although Microland's reserves in 1997-98 were a healthy Rs 35 crore, the transformation from re-selling to services proved expensive: the turnover dipped to Rs 60 crore in 1999-2000. Investors like Indocean Chase, which chipped in $6.5 million around this time, bailed out Microland. Today, this integrated approach revolves around two business areas-services and portals-and five other companies. Microland is now the holding company which along with investors, holds a majority stake in all five companies. The largest is Microland.net, which handles the remains of the company's legacy networking business. Positioned as a hot-house in network applications, it earned Rs 17 crore through software exports in 1999-2000. It also dabbles in on-line education, although this business is shortly to be spun off into an independent company, Microuniv.

Second in size is Planetasia.com, which is in the business of e-nabling companies. It had close to 140 clients in early 2000, and registered a turnover of Rs 10.50 crore in 1999-2000 (2000-01 expectations: Rs 80 crore). The merger of Microland Software Services, a division of Microland.net, with Planetasia has already been announced and is due to take place soon. The merged entity will continue to be called Planetasia.com. Says Prashanth Prakash, 35, CEO, Netkraft, a Bangalore-based rival: ''The Web-building or e-Commerce e-nabling business is growing rapidly. Demand outstrips supply, and the margins are good. The future looks promising because the US market is generating demand.'' Planetasia is likely to be the first group company to go public.

In the last eight months, Microland has launched three more Net companies. Tech portal Itspace, horizontal portal Indya.com, and Net media-service Media2India. com. The third offers specialised services-on-line planning and space-buying. Says Suresh Raman, 42, CEO, Media2India.com: ''We launched our services less than two months back, have 40 clients, and between 65 and 70 running campaigns.'' The portals, though, are on a different wicket. Both face strong competitors-Indiainfo, Rediff, Indiatimes, and msn in the case of indya.com, and Zdnet and Cyber India Online in the case of Itspace.com-and will need to invest substantially in marketing and content development.

Six businesses; as many companies. While the activities of Planetasia dovetail neatly into those of Microland.net, which is into Net-infrastructure, there are very few synergies between the businesses of other group companies. Microland's e-nabling and back-end businesses are certain to do well as more and more companies rush to embrace the Net. However, the group's forays into content and community may not. If that happens, the group's future, while financially sound, won't be as high-profile as Kar and his fellow-founders would like it to be.

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