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The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

July - 2008 - issue > Cover Story

Virtusa: Platform Driven Service Strategy

Pradeep Shankar
Monday, June 30, 2008
Pradeep Shankar
Virtusa CEO Kris Canekeratne has reason to feel good. His fundamental belief that software development practices could and should embrace the same efficiencies achieved by mature industries, such as automotive and manufacturing, is coming true.

Egregious inefficiencies, cost overruns and implementation delays in the software world seem to have no real solution. Canekeratne’s search for the answer led him to look at the traditional manufacturing industry, which implements what is called 'platforming' to achieve reduced field defect rates and increased efficiencies. Virtusa is pioneering the effort to apply platforming to software development.

Founded in 1996, the Massachusetts-based Virtusa [NASDAQ: VRTU] set out to find innovative ways to help software product companies succeed in competitive, fast-moving markets. In its initial years, the company solely focused on outsourced product development (OPD), helping independent software vendors in product management, product engineering, quality assurance and support. Virtusa continues to play a key role in delivering product releases for leading software companies around the world.

By 2002 Virtusa's top management started getting restless with the limited size and potential of the OPD market. The company figured it could sustain only 25 percent growth, which in hindsight is quite accurate when one looks at the growth numbers of other OPD players. "You cannot build a billion dollar company on OPD alone, because you cannot aggregate enough clients to get that kind of revenue," notes Santanu Paul, Senior Vice President and Head of Global Delivery Operations. Moreover, the OPD companies are at the mercy of economic downturns and of the high failure rates of software start-ups. "We wanted to diversify and not be at the mercy of one industry that has such strong dependencies," says Paul. Virtusa top management's appetite to expand the business quickly led to a focus on the Global 2000 IT services market over and beyond its traditional OPD market.

It paid off. The company has averaged 46 percent compound annual growth for the last five years, while the industry is growing around 35 percent. For the full fiscal year ending March 31st, 2008, revenue was $165.2 million and operating profit was $19.4 million. In August 2007 the company made its debut on NASDAQ and raised capital over $50 million. With delivery centers in Hyderabad, Chennai and Colombo, the company provides IT services to BFSI, Telecommunications and Media & Information industries.


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