Deal Radar 2009: Cnergyis

By Guest Author Shailesh Otari

Filing income taxes isn’t always easy, and Prasad Rajappan had his own share of problems with the income tax department in India. While most people are just happy for such an experience to end, Prasad came up with a business idea to exploit this situation. Convinced that large organizations would be interested in having a tax service for their employees, he created Cnergyis in 2000. With over ten years of relevant corporate experience at Reliance and Ernst &Young, Prasad jumped into this venture and was soon joined by three colleagues who shared his vision.

Initially focused on building the technology for their tax filing products, today the company provides a wide range of employee life cycle management solutions including payroll (attendance, new employees, resignations), HR (performance evaluation, transfers) and tax compliance (electronic tax filing and validation, advisory services). Cnergyis’ revenues hit the $1 million mark in 2009.

Aiming at a promising market of 500 million professionals in India, Cnergyis got early traction with companies such as HDFC Sales (a subsidiary of HDFC Bank) and HBL Global in Mumbai. Growth, however, was slow, and unsatisfied with Cnergyis’s progress, Prasad became convinced that product-based positioning was not the way to go in this market. Changing its strategy, Cnergyis decided to offer its services under a SaaS model in order to differentiate itself from the pure software and services providers. The SaaS model was also offered by some competitors, but most of these focused solely on a certain aspect of employee management, either HR or payroll. Offering an end-to-end employee management solution helped Cnergyis to stand out from the crowd. The company also approached its clients differently: paying no attention to which industry its clients belonged to, Cnergyis focused heavily on medium to large clients with an employee base in the range of 20,000?30,000. The customer base grew rapidly following the adoption of the SaaS model, and prominent names in banking, financial services and IT emerged as typical clients. Manufacturing and retail companies with large employee bases also became regular clients. Today Cnergyis is proud to have clients such as Reliance (communications), Pantaloons (retail), Cipla (pharmaceuticals), HDFC Bank (financial services), and Tata Power (energy).

In its early days, Cnergyis was entirely bootstrapped; all revenue came from the sale of products. The company managed to grow to 2 crores rupees (roughly $500,000) by 2006. The SaaS initiative, however, was huge and would not have been possible had the company used only its retained earnings. External help was needed and VC funding was sought. Impressed with the offerings of Cnergyis, Accel Partners, and Mumbai Angels came forward, and through them around $1 million was raised. This funding proved to be a boon for the company, helping Cnergyis until it became profitable in April 2009. Today the company enjoys healthy profit margins.

Comparing Cynergyis’s performance before and after it switched to SaaS, Prasad says that there was no particular focus on marketing in the initial days. During the SaaS initiative, however, a clear marketing plan was established, and it has proven to be useful. As the company grew, quality also became an important focus in operations. Having built his management team in a structured manner, Prasad believes that Cnergyis’ top leadership has a perfect mix of complementary skill sets.

Growth is in the air at Cnergyis. The company’s goal is to become the top employee-management company in India, and it expects large-scale growth over the next three years. For the immediate future, the company is focusing on the Asia Pacific region. There are some discussions about an entry into the U.S. market, although this is not a high priority at this point. The company believes that there is immense potential in the Asia Pacific market, and a wave of employee management solutions is expected soon. To quote Prasad, Cnergyis is “ready to take on the world.”

Regarding the entrepreneurship ecosystem in India, Prasad is happy to see more and more companies being formed. He believes that India needs to have a good mix of product and service companies. Prasad is a member of The Indus Entrepreneurs (TiE) and also acts as a mentor to upcoming start-ups. In his opinion, a formal way of mentoring has not matured in India, and he hopes to see more incubation and advisory board support available. India is moving fast, and Prasad advises young entrepreneurs to focus on creating value and taking risks.

This segment is a part in the series : Deal Radar 2009