At PSI, the shift from hardware to software is paying off.

By Venkatesha Babu

If buildings and facades could tell a story, then the Bangalore-based PSI Data's new headquarters should tell an interesting one. A story of one of India's oldest hardware companies nearly getting wiped out and then making a stunning comeback under a new parent and a completely new business focus: software. Its plush new office on Bangalore's upmarket M.G. Road-a far cry from the uninspiring pit it worked out of as recently as 1996-tells you that money is not a problem anymore. From an anaemic Rs 15.70 crore five years ago, revenues have soared to Rs 80 crore; and losses have given way to enviable profits (Rs 20 crore) in the same time. Says Nagendra Venkaswamy, the company's 43-year-old Managing Director: ''The turnaround wouldn't have been possible without the active support of our parent company, Groupe Bull.''

It's almost amazing that PSI has lived to see this day. For a company founded in 1976, PSI had until recently little to show in terms of business acumen. For nearly eight years, the erstwhile hardware company struggled to get its strategy right. It has tried selling everything from cp/m-based (first generation) computers to mainframes to Unix mini-computers. In 1986, it also launched the first dos-based desktop pc, Triton, and an automated ledger posting machine. But the market for PSI's new products proved virtually non-existent, made worse by the absence of an ancillary industry.

When Groupe Bull came to India in 1988 to scout for a global software centre, it found a bargain in PSI. For starters, Groupe Bull-which is owned equally by a consortium comprising the French government, France Telecom, NEC, and Motorola-picked up a 26 per cent stake (it now owns 51 per cent in PSI). Bull wanted a low-cost, dedicated software centre to consolidate its position as a leading it infrastructure and services provider in Europe.

But it wasn't until 1996 that PSI got rid of its manufacturing facilities, and began focusing solely on software. Bull's impressive pedigree helped the Indian company quickly penetrate the European markets. Today, 43 per cent of its revenues come from Europe, 30 per cent from North America, and one-fourth from India. ''Having exited the unprofitable hardware business, we expect our margins to increase significantly,'' says Venkaswamy.

PSI acquired the financial services software arm of PriceWaterhouseCoopers in May, 1999, to reinforce its nascent banking and internet software business. It also has investments in two UK-based companies: a start-up, Accelrex, and an internet security company Advisor Technology, which markets a PSI-developed software, Security Advisor, that gives early warning signals of attack on a website. Says an analyst with the Mumbai-based Rooshnil Securities: ''PSI has a significant presence in the domestic financial services segment, where the potential is huge.''

Venkaswamy says that the future growth will be organic, with focus on higher value-added services like software consultancy, customer relationship management, and telecom software. In the next three months, PSI plans opening offices in Japan and Singapore, where it plans to hawk its e-commerce and application software solutions. By 2003, if PSI sustains the current rate of growth, it could rake in Rs 45-50 crore in profits and Rs 140 in sales. As the French parent might like to say, it's high time things got bullish at PSI.