1Mby1M Deal Radar 2010: Greytip, Bangalore

Greytip, the second NASSCOM Emerge 50 company to be featured in Deal Radar, is a strong example of an Indian product company that has shied away from the body-shopping approach and been committed to the local market, recognizing that even though this market is small, it has significant potential. Greytip makes Folklore HRIS, an HR and payroll software suite designed to automate various processes, saving time and money.

The Bangalore-based company was founded by CEO Girish Rowjee and CTO Sayeed Anjum in January 1994. Rowjee and Anjum were classmates and friends at Sri Jayachamarajendra College Of Engineering in Mysore. As their studies drew to a close, they were not keen to join their classmates at Infosys or Wipro, as was the trend. Says Anjum, “It looked silly to join a big company and do maintenance of Cobol programs written decades ago when we could as well write new code and develop our own products. While we were not clear what domain we would work with or what kind of projects we would do, we were clear that we would create programs and not do body shopping. We also realized that IP was important, and we had to retain it for any sustainable growth, thus excluding contract programming.”

When the founders converted into a pure product company in 1999, there were few companies working exclusively for the domestic market; the primary focus of most organizations was the manpower export and IT services markets. The India domestic IT market was small and unattractive, and PC penetration was meager. But the founders recognized that HR departments were moving from being considered a mere support function to become a vital, strategic part of the company, and they also felt that the domestic market was worth focusing on. Says Anjum, “Our domestic focus ensures that we put top-notch manpower on and [give] attention to their needs rather than putting benched resources to work and treating local customer as an afterthought.”

On the basis of its current SaaS annual revenues (recurring) and website analytics for more than 18 months, Greytip estimates a lower boundary of at least $15 million as the annual TAM for its SaaS business alone. By a similar analysis based on current sales and estimated market share, on-premise TAM is around $150 million in the lower range. For a top-down TAM, a recent Google estimate puts the number of SMEs in India at 32 million, out of which around 200,000 have an online presence. Bharath Goenka, the founder of Tally Solutions, believes there are 8 million SMEs in India that can afford information technology. In terms of industry verticals, as HR and payroll are fairly horizontal functions that are obviously present in most organizations, the software is fairly vertical agnostic and finds uses across industries. Greytip targets the IT, ITES, healthcare, financial services, and manufacturing industries, among others. It serves companies in India, Malaysia, the United Arab Emirates, and Oman. For the SaaS product, its main target is micro SMEs, with 10 to 250 employees, and for the licenses product, companies with 250 to 25,000 employees. Clients include Flextronics, HP Software India, Ingersoll Rand, Samsung, LG, Texas Instruments, Sagar Apollo Hospitals, Columbia Asia Hospitals, Tesco, Novartis, Ernst & Young, Star News, and Mathruboomi Publications.

The Folklore HRIS suite includes modules for human capital management (HCM), payroll, training, and attendance. It Web-enables various employee-facing processes like leave approval, travel approvals, attendance regularization, training requests, and so on. These goal is to simplify or eliminate work, reduce transaction costs and free up time to do higher value work. Folklore HRIS is priced based on the modules procured and number of employees who will be populated into the application. At the lower end, the payroll module without employee self-service options starts at around $1,120 for a 250-employee slab and rates progress from there. A typical 250-employee organization looking to automate its employee database, attendance management and payroll administration will lead to sales of around $5,645. As the employee count and modules increase, prices reach $33,860 or more.

Partly because the market in India is fragmented and regionally based, there are numerous competitors in various segments: Adrenalin from Polaris Software, RAMCO ERP from RAMCO Systems, and Minvesta from Mafoi Technologies in the premium enterprise market; Sage Pocket from Sage Software, Spine Payroll from Spine Technologies, and Humanet from Bluechip Computer Consultants in the enterprise mid-market; and Saral PayPack and JSM Technologies in the low-cost enterprise market. In the SaaS segment, HR competitors include EmployWise from Global Groupware and EmpXTrax from Saigun Technologies. There are few visible payroll competitors.

Greytip believes it has a first mover advantage in SaaS with more than two years of experience, while many traditional ISV competitors have yet to offer their services through SaaS models. Further, the products offered by SaaS startups are far less comprehensive than Greytip’s. This comprehensive nature of Greytip’s modules also puts it at advantage over vendors with piecemeal solutions when going after bigger enterprises. Finally, Greytip claims to be the only vendor in India offering Amazon EC2 hosted applications on an ASP basis that delivers the complete Folklore HR suite to customers on a monthly rental basis. This is a distinct delivery model and a simpler and lighter product for MSMEs.

Revenues are in the region of $1 million to $2 million. For the licensed software business, EBDITA is around 30%. The company’s SaaS business is close to break-even, and all the profits from the licensed software business are being used to feed the burn on the SaaS business, which contributes about $150,000 to the total top line. Greytip has been entirely bootstrapped and has no external investors. The founders had a modest cash-credit facility from the bank against receivables. In March 2010, they shifted to receivables financing under the government CGTMSE scheme.

Greytip has “barely scratched the surface” of the Indian market and also sees good potential in the Gulf Coast. And while large and mature organizations already use SAP HR, PeopleSoft, and so on as their primary HR/payroll software, instead of writing off these companies as “not our market,” Greytip sees opportunities to provide value-added services to the core HR modules. For example, it is exploring an idea with a Fortune 100 company in India for specialized payroll services.

The founders have no plans to exit, saying, “We derive satisfaction from building and running a business. Since we see a lot of potential and growth in the existing business idea there is no reason to exit.”

Recommended Readings
Taking On Microsoft And Google From India: InstaColl Founders Sumanth Raghavendra, Kaushal Cavale, And Their Mentor Sabeer Bhatia
The 1M/1M Incubation Radar: SurgeForth
iWeb Technology Solutions

This segment is a part in the series : 1Mby1M Deal Radar 2010