October - 1999 - issue > Below the Radar

Though in existence for three years, Aztec Software has been a relatively unknown entity in India’s IT industry circles. Recently, the company shattered its low profile. In early May, Aztec launched its first product, Jpact — an e-commerce solution aimed at the “data merchandising” industry.

Common Ground
Aztec was founded in 1996 by a group of computer professionals led by S. Partha Sarathy and V.R. Govindarajan. The two shared a passion: to create a technology and products-focused company that would eschew the low-end services model prevalent in the Indian software industry. Partha Sarathy, Aztec’s CEO, is an IIT (Madras) and IIM (Ahmedabad) graduate who had founded Computer Garage, one of India’s first independent computer hardware services companies. “Partha,” as he was known within the company, has also had stints at Tata and Wipro group firms.
Govindarajan (a.k.a. “govi”), Aztec’s Chief Technology Officer, is a computer science graduate from the University of Massachusetts, Amherst, with more than 12 years of software development experience in the US (with DEC) and India (with Tata-IBM). His most recent assignment before joining Aztec was with IBM’s Almaden Research Center in developing a patent-pending technology that enables the building of enterprise Internet applications with access to legacy data.

Jpact with Technology
The launch of “Jpact,” (short for Java Powered Access Technology), is an indication of Aztec’s determined high-tech focus. Jpact is an e-commerce platform through which data merchandisers — companies in the business of collecting and distributing data — can package, distribute and securely sell data over the Internet. The product, which was created “100 percent in Java,” has garnered favorable reviews and since its launch a few months ago, is being used at two customer sites in the US.
Data merchandisers have traditionally used various proprietary methods, including dial-up networks, CD-ROMs, or, often, paper reports, to merchandise data from their huge repositories. The fact that a large part of the process is manual, has forced these companies to do business primarily with large customers making bulk orders, omitting a large number of clients with small to medium size orders.
Jpact helps firms transition off-line transaction to the Internet. By using the Internet route, data merchants can reach many more customers, increase revenue and reduce costs significantly. Jpact can be used by companies selling various types of data/information products, structured data-like lists, content data-like reports or both.
“The difference between generic application servers and Jpact is that while they are both aimed at generic in-house enterprise applications, Jpact is aimed specifically at Internet-based e-commerce applications. We aimed it at businesses where the fulfillment happens over the Web,” says Partha Sarathy. Essentially, Jpact will “sit” between the merchant company’s Web server and its proprietary databases and handle all the transactions. Apart from enabling electronic billing and payments, Jpact also helps ensure the security and privacy of data.

ASP Model
Aztec is focusing first on the $7 billion list merchandising business in the US. List merchandisers sell direct marketing lists of various types, mainly direct mailing or telemarketing lists, targeted at either business or consumers in specific markets.
Although Aztec started off with a direct sales model, it has since decided to partner with firms that already provide services to data merchants. The partner companies — mainly service bureaus — present Jpact as a value-added service to their customers. “We thought it was important to enter into partnerships with companies who are in this business, but are not necessarily techno-savvy, and work with them on a long-term basis. The service bureaus are already updating the data, hosting the data, maintaining the data, and so on, for list merchandisers. They are ideal partners for us since most of them are looking at how to ‘dot com’ their business,” says Partha Sarathy. For Aztec, the partnership approach lowers the costs of selling and providing support to customers.
In what is probably a first for an Indian software firm, Aztec is adopting the Application Service Provider (ASP) model under which it would be “renting out” Jpact-based applications and collecting its fees on a per-transaction basis and the amount of information sold over the Net. Aztec would provide customers with a complete solution with which they could run their businesses and pay for the service on a recurring revenue basis, rather than a one-time payment.
“This makes sense for customers, because the up-front costs are lower and they are able to pay as their business grows. Also, they now have somebody to continuously provide support and take care of the technology changes,” says Partha Sarathy. For Aztec, the ASP model ensures a “steady state” recurring revenue and, more importantly, a significant chance of upside as customers grow their e-commerce business. “As the Web-based business booms, as we expect it to, we get a piece of the action,” Partha Sarathy says. The first two orders for Jpact for example, are expected to fetch Aztec around $200,000 each over a two to three year period.

Power of Focus
The narrow vertical marketplace that Aztec has decided to enter is another beneficial aspect of the company; other Indian software firms tend to choose broader and more conventional verticals, like finance and telecom. “Unlike in the services marketplace, in product marketing it is very important that you go with a highly focused approach. The more focused you are, the better your chances for success, because that means your solution is going to fit that market better. Also, your ability to get visibility in that market is better,” says Partha Sarathy. “And, being a start-up company, your resources and time are limited; you want to focus them like a laser beam on a specific target. You can always expand later.”
Interestingly, there is an almost total absence of competitors addressing this particular area. “This is a very niche market and the customers are quite small in size and not large, glamorous businesses,” says Govindarajan. “So they are not on the radar screens of large players like IBM, Oracle, et cetera. That gives us an advantage in that we can start in a niche area and establish our credibility there before getting into other competitive spaces.”
But won’t Aztec’s success attract “me too” software firms? “Naturally, other companies can take some existing middleware and try to address this space,” says Govindarajan. “Obviously, if we can do it, somebody else can also. But the question is, what is the barrier to entry? We have a solution today that is being used by some customers. So, a new customer would be more comfortable choosing us over someone who says that he can get his product built in the next six months.”

Services Business
Apart from implementation solutions for Jpact customers, Aztec also provides other professional services on a per-project basis. In fact, Aztec started off by building products for mid-sized technology firms in the US – mainly to raise revenues that could be re-invested to build its own product. In fact, the core technologies and components behind Jpact — the company’s “Intellectual Property Library” — were created over a period of two years in which Aztec built its services business.
Even in the services space, Aztec is very focused on a set of core technologies that includes databases, Internet middleware, and now increasingly, XML (eXtensible Markeup Language). The company recently executed consulting assignments for several prominent customers including IBM, Microsoft, Keynote Systems, BMC Corporation, VMark and LG Electronics. “We tell clients that if they are just trying to shave off costs, we are the wrong guys; they should go to Wipro or TCS. But if they are looking for technology skills to gain time advantage in the marketplace, then they should come to us. Costs should be a secondary and incidental factor, rather than the most important one,” says Partha Sarathy. In this space too, Aztec likes to work with companies that are willing to share some success. It collects an up-front fee mainly for the cost of building the product, and gets the real payment in a recurring revenue model. “We are clearly seeing a new trend here. Over the last two years, we’ve seen a new class of companies that are looking at India not just as a cost-shaving option, but as a technology acquisition option. These are typically focused startups in the early to pre-IPO stage. They are competing in the US marketplace, which is very fast moving; and they need to get their product out very fast. They have good funding but don’t have the technical manpower to build everything in-house. So, they are happy to outsource to technology partners in India who can help them add more features to the product in a shorter time,” says Partha Sarathy.
“For instance, XML is now becoming very important and these firms realize that they need to soon come out with a XML story for their products. But the technology itself is so new that they don’t have skills and resources in-house to devote to this area. We, on the other hand, have already built up significant expertise in XML,” says Partha Sarathy. “This is a wholly different ball game from companies who come in and tell you that ‘I have some Oracle 6 stuff, can you maintain it for me?’” he adds.
Aztec has recently been attracting a steady steam of startups in the Web e-commerce space and Intranet-Extranet application integration space. The company has been able to leverage the large presence of Indians in key positions at such Silicon Valley startups for attracting business.

People Strength
Aztec has not traveled an entirely smooth road. Dependent on money from friends and family for initial capital, the company has bootstrapped its way so far. Interestingly, bootstrapping is something the founders sport like a badge of honor. Aztec’s Spartan facility in Bangalore’s Koramangala suburb, which had earlier housed a garment factory, stands testimony to the company’s unique attitude — at least among Indian companies.
“Our emphasis has never been on plush offices — air conditioning, carpeting, et cetera. Whatever money we had, we spent it on people, tools and data communication infrastructure — things that are essential to building our products. As long as we have guys who are more passionate about their work, rather than physical comforts, we are okay,” says Partha Sarathy.
Most of Aztec’s 50 employees are based in Bangalore, where all the software development takes place. Aztec’s “official” headquarters at Santa Clara, California, is mainly a sales and marketing office, run by just three or four employees.
Despite its bootstrapping, Aztec has been able to attract top-notch talent, including several software engineers who had formerly worked in the US. “One factor that makes us different from other Indian companies is that whether it is products or projects, the kind of technologies we work on are very closely related. If I take a person, he is sure about the area he is going to focus on. But, if he goes to another software company, which employs some 1,000 to 2,000 people, he has to be prepared to work in any area depending on what is required at that time — ranging from Y2K to very advanced applications,” says Govindarajan.

Clearly, Aztec is now well and truly out of its “garage phase.” Whether this company, which has recreated a Silicon Valley-type story in Bangalore, makes it big or not, one thing is for sure: its progress will be watched with keen interest by other Indian software startups that wish to break free from the country’s low-end services image.