Vikas Khanvelkar, Managing Director, DesignTech Systems Ltd
Vikas Khanvelkar, Managing Director, DesignTech Systems Ltd is a Bachelor of Engineering in (Electronics & Telecomm) from College of Engineering Pune (COEP), he has also pursued his Masters in Business Administration and specialized in Marketing. Prior to starting his own business DesignTech Systems Ltd in 1998, Mr. Khanvelkar was associated with HCL Infosystems for 9 years, where he was heading CAD/CAM Division as a Country Manager for 5 years. After promoting DesignTech in 1998, he has pioneered use of CAD/CAM/CAE software solutions in SMEs across all industrial segments all over India. He proliferated use of CAD/CAM/CAE software in Educational Institutes and popularized CAD/CAM as a career option among Mechanical Engineering students.
DesignTech is a leading CAD/CAM/CAE and PLM solutions provider in India. With offices spread across the country, it has served over 2000 customers across various domains in India and overseas. DesignTech also has a very strong Engineering Services practice and provide services to many manufacturing companies in India and abroad. DesignTech has been adjudged as top 50 Emerge companies by Nasscom. DesignTech was recipient of prestigious Maharashtra I.T Award by Govt of Maharashtra
Replying to Anil Mascarenhas of IIFL, Vikas Khanvelkar says, "We are open to invite private equity investments from Strategic Investors to fund and boost our growth. We are planning an IPO within the next 4 years."
Give us a brief overview of the CAD/CAM/CAE & PLM solution industry. What attracted you to this space?
I was handling CAD/CAM/CAE market for HCL-HP along with HP workstations along with country head and I developed liking for that market and thought this would be equally useful for small and medium scale industries as well if supported well. CAD/CAE helps develop the industry to cut down Design to Manufacturing cycle time substantially and as I helped industry to achieve this, I developed a liking for this technology and I looked for helping the industry to adopt this to their benefit.
What is the demand-supply gap you see?
More than demand supply gap, what I see is the lack of appreciation and reluctance to adopt these technologies on the part of industry. While it can surely help them compete with the best in the world, many companies are still reluctant to go for these technologies. The real challenge is to persuade and convince them to adopt these technologies and help them derive the benefits. The penetration of CAD/CAM/CAE in the Indian SME segment is extremely low and there is ample scope to grow the same.
What are the growth drivers for this industry? What are the current trends here?
There are following growth drivers:
- Competitive pressure on the local industry to reduce the development cycle time and also to reduce the development cost to compete with the best in the world.
- Setting up of captive design units by MNCs in India like GE R&D Centre and GM R&D Centre
- Outsourcing of Engineering Services by the global players to India
- Thrust by the MNC software vendors on the education segment to penetrate the software usage amongst the education institutes
- Technology upgradation and usage by the Indian Defense and Space sector
Explain to us your business model. What are your offerings and which segment do you cater to?
Our Business Model is based on a three-pronged approach:
- Product Distribution
- CAD/CAE Trainings and
- Providing Engineering Services
This is a very sound eco-system. We cater to Automotive, Aerospace, Defence, Industrial Machinery and Heavy Engineering, and Education Segment.
What are the new emerging technologies? Is there a legacy issue here? Which are the industry segments you cater to?
Product Life Cycle Management and Digital Manufacturing are the emerging technologies in addition to CAD and CAE Prevalent earlier. Many companies have been using 2D Design and 2D Drafting as a legacy design tool. The challenge is to convert all these 2D Designs to 3D Modeling based design processes.
You have some offerings for the SMEs segment. Tell us about it.
We offer special cost effective packages in CAD/CAE and Product Life Cycle Management to the SME Segment. All these solutions for the SME Segment besides being cost effective are also easily and quickly deployable.
What is the entry barrier in this business?
The most important entry barrier is the domain knowledge of the respective industry with the vendor. Unless the vendor understands the domain and the requirement of industry, they will not be able to understand the pain areas of the customers and offer solutions to address those pain areas. Only players who have sound domain knowledge can handle this requirement.
DesignTech Systems has joined the Siemens Solution Partner Program. What does it mean for your company?
Siemens Solutions Partner Program consists of a very comprehensive portfolio of NX (CAD), Team Centre (Product Life Cycle Management), and Technomatics (Digital Manufacturing). All the three solutions are world leaders in their respective segments and are cost effective. This opens up a very big business opportunity for DesignTech and will help us substantially grow this business.
What is your current order book and by when do you expect to execute the same? What is your outlook on the orders for the coming years?
We have at present a backlog of orders worth Rs60mn and this will be executed between in the next approx 6-8 weeks. In this particular case since the deliveries from the Principal Companies are very fast the order book position is not very critical. Whatever orders we collect we are able to bill those in the same months. What is important is what is a pipeline of orders and the expected business. We have a very healthy pipeline of orders and are confident of maintaining the growth rate of 25 % for the next three years.
What is your domestic/international mix? How are the margins in this business in India and abroad?
Our Product Sales Business is 100% domestic. our Engineering Services business caters to Domestic and Exports. Out of our total business, Engineering services Business is approx. 15%. Out of Engineering Services business, approx. 1/3rd is from Exports.
Brief us on your financials and what goals have you set for the coming 5-10 years?
We are a consistently profit making and dividend paying company right from the inception for the past 13 years. We expect to cross revenues of Rs1bn by March 2014 and expect to grow that by 100% in the subsequent three years.
Trained manpower has often been an issue. What were the challenges in shifting 2D-based designers to move to 3D modeling based design solutions?
We focused on the educational institutes to help students learn 3D Modeling techniques. We hired and helped our customers hire these people who had some exposure to 3D Modeling during their trainings and we trained those people with extensive on–the-job training to become expert 3D Modeling engineers. This helped us retain manpower for longer time and also develop and retain the talent within the company.
You popularized the use of FEA solution. Share with us some insights.
Traditionally, in many companies FEA was a separate activity from 3D Design and Modeling. FEA was started only after the 3D Designs were completed. If they observe some problems in FEA, the 3D Designs were modified to correct the problems. This kind of back and forth between design and FEA was delaying the development cycle time. We demonstrated the benefits and popularized the upfront validation and FEA usage within the Design Engineers. In this process there was no separate FEA department and design engineers themselves were trained to use FEA at the design stage to validate their designs to meet the FEA requirements. In this process, the detailed designs will be done only after all the FEA validation was passed. This reduced the to and fro traffic between design and FEA department and helped the customers to cut on their development cycle time. DesignTech popularized this concept of upfront FEA amongst all the SME customers.
Would you look at exiting this business if you get a good offer?
We are open to invite private equity investments from Strategic Investors to fund and boost our growth. We are planning for an IPO within the next 4 years. At present we do not have any plans of out-right sale of DesignTech Equity.
Could you describe your background and your formative years?
I developed appreciation about the utility of CAD/CAM/CAE techniques during my 5 year tenure as a Country Head for HP Work Stations and CAD/CAM product sales of HCL-Hewlett Packard (subsequently HCL Info systems). I always believed that if supported well, these technologies are equally useful to the SME segment and if the value is shown to them, the SME customers will be willing to invest in these technologies. This belief came true during my actual operation of DesignTech Systems as an independent entity. The single biggest factor which will make me continue in this business is the satisfaction which I derive from delivering the tangible value to the customers in reducing their development costs and time.
What are the key initiatives you have taken that has changed the company?
One of the very important key initiatives we undertook is to spread the trainings of CAD and CAE software amongst majority of the students. This helped create trained manpower which in-turn helped industry to adopt to these technologies due to the availability of trained manpower.
What was the biggest challenge in for you? What are some of the important lessons learnt?
The two biggest challenges faced were to hire skilled manpower to run the business and to generate/raise adequate funds to run the business. The important lesson learnt is that challenging assignments and freedom of operation and growth can help retain trained manpower. One more important lesson learnt is the funding for growth is possible by carefully re-investing the margins back into business to achieve critical mass.
In multiple areas China is compared with India. Any comparisons here?
China is known to have an edge in manufacturing. In the Engineering Services field they do not yet have much impact due to the language barrier. This will not remain forever and hence our companies must work on exploiting this competitive edge to surge ahead of China to keep our leadership position.
Give us your break-up from various segments.
- Aerospace Defense- 31%
- Education- 22%
- Industrial Machinery and Heavy Engineering - 17%
- Others - 6%
- West: 38%
- South: 36%
- North + East: 26%
What is your staff strength? Do you hire from B-Schools? What advice would you give B-Schools and B-school students?
Our current staff strength is 290 people. We do occasionally hire from local Business Schools. My sincere advice to B-school students is to plan and look for a career they enjoy and be willing to put in long innings at one place to achieve consistent growth. Changing jobs every alternate year to achieve faster growth in salaries is not desirable in the long run and will make them feel stagnated.
Your message to anyone wishing to join your company?
Anyone who wishes to work with passion and initiative and willing to go an extra mile to win will always succeed at DesignTech and will achieve rapid growth.