However, the strategic shift isn't going to be cakewalk considering the complex business environments in the European continent. Europe as a continent, though bound a common currency, has an interesting mix of cultures, languages and business environments. This analysts, feel, poses a difficult challenge and IT companies need to have a calibrated approach to venture into hitherto new geography for many Indian IT companies

CEO,  Mind Tree, Ltd , Krishnakumar Natarajan, in an interaction with Idhries Ahmad of CIOL, is ready for the challenge as the company has a long devised strategy that, Natarajan feels, gives Mindtree a distinct advantage over rivals and build company strength in European market in long run.

"You need a horses for courses approach for the each of different countries in Europe based on what is relevant for that industry and individual country".

"Go local, build your own team, and ensure you can provide end to end services to the client", says Natarajan

Natarajan adds company also has been targeting enterprise who haven't gone for off shoring and outsourcing and be valued partner by which you build scale .

"Companies which are embarking first time to off shoring outsourcing see MindTree as a lot more value add partner that being one of the hundredth customer of a big large entity"

Natarajan, also talks in length about Mindtree dip in profits for Q2 , 2008 and company's update into diversification into new verticals. Natarajan also has a word or two on getting talent in product domain as opposed to the services side of business from India.

CIOL: Last quarter, Mindtree' revenues were at Rs 222 crore., However Q1 net loss stood at Rs 12.96 crore. The company also had a forex loss of Rs 50 crore. What do you attribute this loss to and where did the company go wrong?

Krishnakumar Natarajan (KK), CEO, MindTree Ltd: If you look only at the sheer revenues numbers, we had a fairly good quarter to talk about. Clearly if you look at proper growth we had a pretty good quarter. We had 5.5 percent growth in dollar terms. We had 7.7 percent growth in our R&D services and 4.8 % percent growth in our IT services.

Cleary if you look at the results, it was in top percentiles in terms of growth and even year on year growth of 39%. On dollar terns it was in top 25% percentiles of results which brought for Q2.

What I think was clearly was more in terms of adopting the AF 30 standards for accounting for hedge instruments which led to a notional provision which we had to make on our P&L which led to the loss for the quarter.

Clearly the way in which both the rupee has behaved after and as well since many of contracts unwind during the course of this year , that provisions will start getting reversed back as the year progresses, which is why we fell confident in terms of keeping our guidance for top line and bottom line for the year.

So growth in Q1 clearly was good and in Q2 you will find the growth currently is looking good.

However, we do see in last couple of weeks or six weeks, there is certainly lot more caution from customers which means they are really inclined to see how best to sort to leverage their existing budgets, how to really ensure they get real value for their money.

In the technology space in terms of investments into building and engineering new products, we are clearly seeing a downward trend which in turn will put pressure on some of our growth opportunities.

So we would say moving forward maintaining same levels of growth quarter on quarter will be difficult to maintain in Q3 and Q4.

CIOL: When you talk about customers being more cautious, does that also mean clients are asking for cut in pricing?

Krishnakumar Natarajan , See we don't see pricing pressure. Because customers do realize that talent for right quality and right experience is not an easy thing to find. Today off shoring is now more mainstream.

It is not one off project activity which companies are adopting, so people pretty much know that there is a market where talent is scarce and there is competition for talent.

Price decrease is only going to happen if man power costs are going to go down which clearly is not the scenario.

Man power costs continues to expand between 8-10%. Though market has slowed down, I don't think people are anticipating any price cut

However, customers are being more cautious in their approach. They are questioning whether they need to investing in four product lines to outsource and may be really confine it to only two and mainly increase the percentage of offshore.

CIOL : MindTree has been following a very calibrated strategy when it comes to focusing on the European market. How different is tackling European market as against targeting US markets.

KK: See the our approach has been pretty straight forward. You need a horses for courses approach and adopt a different approach for the each of the markets based on what is relevant for that industry.

For example, UK is highly penetrative market. There are close to 200 IT services company present in UK and most of them target financial market as that market is quite a huge market.

So MindTree approach for UK has been pretty clear. One we will grow our team in UK as understand the language, we understand the culture and will operate directly with our own team"

Second we look at the segments which are under penetrative in UK. Like the travel segment. We have done leading edge work for travel aggregators in UK.

So clearly for a market like UK the differentiated strategy was focus and build scale through under penetrated industry groups.

Go local and sort of build your own team because language and culture is something that you understand and look at you can ensure you can provide end to end services to that stockiness with the client

In contrast, now if you go to market like Netherlands, we don't understand the land, neither the culture. So went in with a premise that we need to have a local company which knows and understands the local culture and customers and partner with them together.

We tied up with local company Jetronix and that model has survived for last six years. The local company has been the front end and we together go to the customer. We both work together as one seamless team and together we deliver the value of understanding both the customer business and its language coupled with cost effectiveness of doing work in India.

Third element we have applied as a differentiation in Europe is the value proposition and focus we offer to our clients.

If you see north America as a market and Europe as a market, the first starting difference that comes to mind is that while 90% of the fortune 500 companies in US have adopted off shoring as a key activity, the same cant be said about Europe. Many of the key companies have not adopted approaches like outsourcing and off shoring as key part of their strategy which is happening now.

Our value preposition to these clients is that they are while they are embarking upon a very unique as well as important programme for your company strategy. We are a mid size company which is very hungry for your business which has the ability to give you the attention and which has the flexibility to work with you to make your initiatives success

Companies which are embarking first time to off shoring outsourcing see MindTree as a lot more value add partner that being one of the hundredth customer of a big large entity

Target large enterprise who haven't gone for off shoring and outsourcing and be valued partner by which you build scale .

CIOL: When you talk about partnering with local clients, does that also envisage hirIng local talent?.

KK: See there are two model there. When we partner with the local companies then the market access and hiring of local talent rests with the partner but in any of the markets that we have worked , we have hired only the local people because that is a key element of any service le organization because you need to have somebody who knows the culture understand language and business dynamics of the customer . This is what we have done throughout our existence.

CIOL: Is MindTree also envisaging acquisition of these partners in the long term or do you believe the present model of partnering is the safe bet?

KK: As of now we don't have any thought process or a road map to do any financial arrangement with the partner companies. It is primarily a win win relationship where we expand the crustier business based on what value we bring in. So it is purely a partnering arrangement.

CIOL: Mind Tree has been in talking about diversifying in sectors like defense, medical electronics and avionics. How are you place in making this strategic shift and how do you see the potential for these sectors?

KK: Clearly the industry segments that you mentioned are exciting and have huge potential.

We see medical electronics as very high potential segment as lot of transition is happening from the traditional equipments for analysis and control to some newer areas and new technologies which are based on the digital technologies and are becoming lot more popular.

This is a sector which gives MindTree a unique opportunity, because we have a probably have the whole competency and capability to build a product from scratch

Be it hardware design capability, the capability to build hardware board and put software in top of it . Right complex software like imaging and build a product for a medical space.

There are very few companies which can address the chain in media and electronics and we see a very interesting opportunity

CIOL: What time do we expect Mind Tree investing energies and gaining expertise in the sectors you have talked on the same level it has in other sectors?

KK: Many of the segments because of the transition and the need to build certain deep domain knowledge is not something that is going to happen in the course of 6-12 months. We see the time period for incubating a new industry growth to reach to a stage where there are experts who have a good business knowledge who can deliver value to customers. This I believe, will be anything between 18-24 months

CIOL: And getting a right talent will be huge challenge here?

KK: True but that is simpler. As long as you get a small team of core people who understand the industry. A lot of other capability like may be designing chips for a specially a medical application, we have that capability in terms of technical and engineering capability of that

And to take it form a concept to a design to building an end product we have all the capabilities

I think it is the ability to find people who have deep knowledge who work with this team of experts who have been, done that in the product engineering space . I think that is challenge to address as well to meet

CIOL: How confident are you in terms of getting talent in product domain as opposed to the services side of business from India.

KK: I think there is enormous amount of talent that is available. Again, we are not a product company nor do we want to be a product company. I think the value comes when work with the client, who understands the markets, who knows what are the features and functionalities that the market is expecting, understands customers and customers expectation ands we really work get to help them to get the product to the market faster .

I think that is the business we are in and we have done it for large number of clients and have been very successful in finding.

Now the capabilities we have in the emerging areas like medical electronics, we can do lot of work, what we done in other areas viz multiple products in consumers appliances, products in consumers space and industrial automation space, products in computing and application systems space.