An Indian Product Success

Elitecore
Technologies, a Carlyle Group-funded IT company based in Ahmedabad,
India, has business divisions in network security, telecom convergent
billing, and access gateway solutions. The company has a strong R&D
base and support center in Ahmedabad, along with global sales and
distribution channels spanning more than 110 countries. Today, it has
offices in the USA, UK, India, Bahrain, Dubai, China, Singapore,
France and South Africa.

Envisioned as
'Platform for Innovators,' Elitecore has grown to become a
dynamic IT product company from India. The company's clients are
spread across all verticals, including manufacturing, telecom, IT,
hospitality and hotspots, retail, education, government, and defense
sector amongst others. The man who envisioned all these is none other
than the dynamic Hemal Patel, CEO, Elitecore Technologies, who
started this company in 1999. “I faced two challenges while
starting this company. When we looked around we found that most of
the Indian companies are into IT services. Though there are product
companies as well, we can count them on fingers. So, I wanted to
start a product company with a huge focus on operational efficiency.
The second challenge was that I wanted to be at a place where my cost
of operation is not going to make my product expensive,” said
Patel.

Patel added, “Till
2005, I had mandated that I won't go to the US or Europe. I would
just focus on Middle East, Africa, and South East Asia-basically
the emerging markets. The reason being cost of marketing is low and
secondly, you get good ground for playing in those markets. Unlike
the US market, even though you get a bad name here, the market will
always give you a second chance. The failure of most of the Indian
product companies has been due to the cost of marketing.” However,
in 2005, the US venture capitalist doesn't like Elitecore's
approach. They said that the company won't grow if the focus is not
the US and the European market. But the company continued with the
same approach because its business was growing by leaps and bounds.
And to add to its luck, it witnessed turnaround of things in the same
year. All of a sudden, the US or the world capital market realized
that they will pump in the money in those companies, who have the
market focus in emerging markets. This helped Elitecore to come into
the limelight. And that's how, in 2006, the company ended up
getting equity partner in the form of Carlyle Group.

“My mindset has
always been on the profitable side, which ultimately gives longevity
to the product. The reason being that I wanted to be different from
the competition. Today, all my competitors are losing money. Being
just product differentiators, doesn't always help your cause. When
you are targeting an SMB customer, merely carrying an innovative
technology doesn't help. So, when you stand in the financial
market, you always look for better profitability. Besides, I just
focused on building the sales and distribution channel worldwide,”
asserted Patel. Till date, Elitecore has around 700 employees selling
in 110 countries, and supporting 3,000 certified engineers along with
70 distributors and 5,000 reseller partners. Majority of the business
comes from the emerging markets. In fact, this year, Europe got added
in the list as well. “We have two verticals, security and telecom.
In security vertical, we have roughly around 360 people in product
development and 150 in sales and pre-sales. We have also started
educating our engineers. Though there is no career value in Cyberoam
certification, it is the only certification which you get on UTM
appliances. It's a great pride value for us. It helped us that when
these students started getting the jobs, they became the first
advocates of Cyberoam. In this way, we have created a brand value,”
pointed out Patel. He further highlighted, “When we started, we
thought of expanding horizontally and not focus on becoming #1 in one
particular country unlike our European competitors who used to focus
on their country first. However, this became the base of our strong
learning.

Even though the
business is less, but you get the common perspective from the
different markets. This is one of the biggest reasons for our success
today.” As far as the Indian market is concerned, Elitecore became
#1 player in the UTM appliances last year. As its business is growing
consistently in India, the revenue sharing is 35% from the Indian
market and 65% from rest of the world. Besides, 65% is its hardware
business and 35% is services. And while the company gets new orders
every year, it is also experiencing 70% renewal rate from its
existing customers. On the other hand, the company follows a
break-even strategy in the US market. If it makes profit, it will add
one person but if there is a loss, then it will lay off one person.
The company's balance sheet should not show any negativity.
“Meanwhile, for our gateway security appliances, we have invested
heavily into providing a good pre-sales support. Our resellers make
at least 35% on selling our products as against selling competitors'
products where they make only 5%. We have also set up a VoIP network
for our partners, wherein we have given them a hotline to directly
communicate with the helpdesk,” said Patel. In 2011, Elitecore's
revenue has gone up and it has also built a strong channel ecosystem.
This kind of growth has put the company into Gartner's magic
quadrant. As per IDC's reports, Elitecore was ranked #35 in
worldwide equipment vendors list in 2008, then it came to #15 in
2009, and in 2010, it was ranked #11. Going forward, the company's
goal is to become #5 equipment vendor in the world, which translates
into $100 mn revenue. The company is also looking for acquisitions
for the last 2 years.

“We spent a lot
of money on channel development and that's how we have gained
channel loyalty in all these years. Our competitors try to
commoditize the UTM products. The market hasn't matured to accept
UTM as a commodity. Here, channel development becomes the key, as the
end of the day, the SMB customers believe the channel and that's
where you have to win their heart. In all the emerging markets, we
have mandated to grow at least 50%. Our distributors trust us a lot.
I know each and every distributor of mine. We are looking at doubling
our channel and that's why we are spending a lot to bring in more
partners, get more certified engineers, and lastly, we are looking
into building an enterprise product,” concluded Patel.