This is do-or-die.
It's hard to be certain if that's exactly what was going through Samir Dhingra's mind, but it wouldn't be too far off the mark.
It was 2002, and as the managing director of a start-up, Dhingra had just pitched a OCR software and scanners' solution at the Reserve Bank of India--and he needed it to work. The problem was that the deal wasn't exactly going his way. The RBI wanted this solution but didn't want to dole out the capex necessary for the project.
It did, however, offer Dhingra the deal if he was willing to take an unusual route: A transaction-based model.
At that point, such a model was unheard of, says Dhingra, who remembers having to mull of the approach. "It would mean that we would own the solution and the customer would only pay to use it. We realized that the model was actually sensible, and that its profitability would be higher compared to ordinary box sales," he says.
Part of Dhingra's decision might have had something to do with the need to keep his company solvent. But whatever his primary motive was, one thing is clear: The transaction model has since made his company, Netspider Infotech, a lot of money.
Today, Netspider Infotech is one of the largest system integrators to offer transaction-based digitization solutions to government departments. Much of its success came after Dhingra took the formula he worked out with the RBI and offered it to other government departments.
"In 2005, we saw a major breakthrough when the government of Odisha decided to collect student data for state fund allocation on a transaction-based model. This 'e-shishu' project received the Prime Minister's Award in 2006-07. In 2007, the Ministry of Defence awarded us with a huge digitization project. It required handing about 20 crore documents for provident fund and pension disbursement across India. Post 2007, a number of customers including the Controller General of Accounts, the government of Rajasthan, the Ministry of Minority Affairs, the NIC, and Sahara India have all engaged us to digitize their documents using a transaction-based model," says Dhingra.
In the last year alone, Netspider Infotech, which has over 45 government departments on its customer-list, has quadrupled its customer base, and it's also doubled its revenues every year.
What Makes it Click?
Would you buy an entire five-star hotel just to enjoy the luxuries it provides? Or would you pay for a room and get the same experience? That's the logic Dhingra gives his potential customers. In addition, he points out to them that the service he offers allows his customers to capitalize on Netspider Infotech's expertise, something they would have to build--and maintain--if they were to go on their own.
"In most cases, the customer is not an expert in managing large-volume scanning. The opex model could be a little expensive for them in the long run, but if you consider the discomfort customers have to go through if they used a capex model, it's actually cheaper," he says. "Our logic is: If a customer has got a very expensive car, but one he doesn't know how to drive, he could crash it."
For customers, the transaction-based model eliminates a lot of the baggage that a traditional on-premise model comes with. With an on-premise model, the customer tends to face a lot of challenges with respect to troubleshooting. It also calls for a lot of involvement and know-how. "On the other hand," says Dhingra, "the subscription model gives more customer satisfaction. Additionally, all our processes are quite mature and ISO-certified."
The governments sector forms a big part of Netspider Infotech's business and it also focuses on large-scale scanning projects, where the volumes are very high. Over the years, it has achieved a high level of expertise, and customers trust the company enough for them to outsource all their digitization requirements, says Dhingra. Netspider Infotech scans its customers' documents and hosts it as a Web-based document and content management system, providing customers with a single solution for all their digitization needs.
For those who want to follow in Netspider Infotech's footsteps, it's important to be aware that a transaction-based model calls for a lot of investment initially. Netspider Infotech invested in infrastructure--servers on which it hosts the document management system--and a huge number of scanners and specialized equipment, as it has to address various customer requirements.
In addition, because most manufacturers only provide standard support, Dhingra says that Netspider Infotech has had to invest significantly in skilled manpower as well. Besides that, there are on-going investments needed to manage the infrastructure. It's also important to note that Netspider Infotech chooses to invest in equipment that are long-lasting, giving it a sizeable window before it undergoes a hardware refresh.
The investments it has made into the business have been worthwhile, going by the company's healthy revenue growth. "We are recovering the investments we made in equipment and software. We have, in fact, recovered the cost of critical equipment," says Dhingra. "Initially, profits were quite high. Currently, though the profit percentage is not very high, the volumes are huge."
Competition, be it from traditional resellers or players with similar model, is tolerable, he says. Dhingra says he often stumbles upon traditional resellers who propose on-premise solutions. But it isn't a struggle to convince customers of the advantages of an opex model.
Principals that Netspider Infotech works with are also bullish on the model. In the last few years, they have been very diligently promoting an opex-based model, Dhingra says, through their Indian service providers. Another thing that works for Netspider Infotech are the government rate contracts that it signed up for. These, says Dhingra, allows it to work with government sector customers without getting into tenders.
Dhingra believes the government sector is a literal gold mine of digitization opportunities. "The large digitalization projects, which are our core focus, come mainly from the government sector. We are planning to stay put, as our money is safe, though delayed, with government sector customers. Besides, digitization processes in the government vertical is never-ending. It gives us constant business," he says.
Do-or-die? More like wager-and-win.