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Sunday October 2nd, 2022

Growing a software product engineering services business during a pandemic

Chief Operating Officer Shehani Seneviratne has seen the transformation at 99x from a back-office development centre to an extended engineering services company working with cutting edge tech

Most companies no longer build what they sell. This is particularly true in the services industry where corporate value is often intangible – mostly intellectual property, like processes, software and the people. Product engineering firm 99x, founded in 2004 builds core technology products at the heart of many of their clients, mostly medium-sized ISVs in Scandinavia.

During the pandemic 99x business grew as it expanded product engineering services for existing and new clients. Clients have come to trust the company to build their core IT products which give them a market edge.

99x started as a back-office development centre and later evolved to be an extended engineering partner. Chief Operating Officer Shehani Seneviratne says that thereafter they strategised to be a partner for winning products. She was joined by Chief Business Development Officer, Prasath Mahalingam for this interview.

Can you tell us how the last two years have been for 99x?

Shehani: We prepared for working from home, after the Easter Sunday attacks, out of an abundance of caution. At that time we didn’t imagine anything like Covid could happen.

When the pandemic hit in March 2020, almost overnight, everyone had to work from home. We did a few pilots to see if people could work from home seamlessly. The HR, IT and delivery teams were constantly with the 30 plus product teams at 99x ensuring that whatever they required was available to them so our work can be to the satisfaction of customers.

On the other side, we were constantly talking to customers ensuring they were receiving the same level of service. Surprisingly, our Customer Satisfaction Index was at a peak during this time.

The team went over and above to ensure customers were happy. We onboarded 100 people each in 2020 and 2021 to fulfil new customer accounts as well as expansions by existing customers. Most of these newcomers haven’t even seen the colour of the office yet. The on-boarded teams are 100% productive. I think that itself is an amazing story.

Can you tell us about the company culture? Do you find that is what made it possible to be fairly seamless?

Shehani: They say the culture of the company is on display during a crisis. We saw during this time how our teams stepped up and went beyond their level of responsibility.

Prasath Mahalingam is the Chief Business Development Officer at 99x.
He and his team onboarded a record nine new clients in 2021

You said you onboarded 200 people in the two years. Can you tell us about growth in the last two years?

Prasath: We grew 15% year on year in 2020 and 2021 and that’s one reason for hiring 200 people. Due to our business model and deep roots in the target market, we had new customers. In 2021 we onboarded nine new accounts, which is the highest over the last five years. That also says a lot about our stability, our focus and the niche model we have created.

Why did more customers come to you last year and how did you maintain growth during this crisis? Prasath: One of the main reasons for growth during the pandemic was companies deciding to accelerate their digital transformation; even if they hadn’t thought of it earlier. It was their survival instinct kicking in. That’s one reason for our growth.

For our customers, 99x is a long-term partner. We are part of their core value chain and work as a single R&D team. That’s why even during the pandemic they could not reduce product spending. In certain cases, our customers increased the team size they have deployed with us.

You help companies build their product. What does this mean?

Shehani: We do product engineering services. In some cases, our customers have a product idea and we build that product from scratch. In other cases, they’ll have an existing product they want to take to a new technology platform or modernise.

Your teams are here in Sri Lanka and your customers are trusting you with their core product. I’m sure it’s challenging in the best of times to win and maintain that level of trust. What makes this possible, what’s your approach?

Shehani: 99x has been focusing on the Scandinavian market. Most of our customers are in Norway. Over the last 15 years, we have built a reputation that if they need a good vendor to make the product succeed in the market, they have to come to us.

We win customers not due to cost arbitrage but due to our strong references and our market footing. Serving the Scandinavian market niche has helped us to grow. Our customers are trusting us with their major assets, their IP rights. For product companies, their IP is a major part of their balance sheet value.

The processes we have created over the years and the innovation that we’re able to bring, apart from the relationship, has helped them trust us, giving them the confidence that we have a safe environment to take care of their IP. We were the first IT company to get ISO 27701 (Privacy Information Management System) certified in Sri Lanka.

If you look at the typical product client, how much of their product do you do?

Shehani: For most product companies we are core and we work together as one team. Sometimes they have their internal R&D team. Either way, they come to us not because we are cheap but due to our competencies. The team here works with the client daily to ensure their objectives are achieved.

Is your primary billing model to a client based on time and skill level deployed?

Shehani: It’s mostly on time and material because we’re talking of long term agreements. Some of the things we don’t do are; we don’t sell resources or go in for very short term work unless it’s speciality R&D. Our longest standing customers have been with us for more than 15 years and in certain customer engagements the entire technical team is in Sri Lanka.

Who do you compete with? Are SaaS companies your competitors?

Prasath: Our primary competitor is our customer’s internal R&D team. We have to work together with them and ensure that they are convinced to share responsibility for the product that they have been developing for years. Apart from that, our competition mainly comes from Eastern Europe because of the short travel time and being part of the EU.

These products are specifically engineered, but can your customer subscribe to something similar, say SaaS, on the cloud?

Prasath: Our target market is ISVs. Hence all our customers own their Product and IP. Their product competes with off the shelf products. That’s why our clients engage us for the long term.

To give an example, one of our customers engaged in developing a product suite specializing in accounts reconciliation. They have an 80% market share in Norway and work with all the leading ERPs as an extended plugin. I don’t think they’ll ever try to find an off the shelf product.

I suppose most of your clients are in a continuous product development engagement with you and not just maintenance agreements. So it’s very difficult for them to leave you?

Prasath: Exactly. As long as they want to succeed and unless they build their own IT department and start taking up product development, which is difficult given the shortage of talent with product knowledge, it’s advantageous for them to work with us. If you want to succeed, you’ve got to have deep roots. We have customers everywhere in Norway and that’s hard to achieve.

Last year 99x had a new investor. What do you anticipate this will do for you as a company?

Shehani: Yes, In August 2021, 99x completed a capital restructuring program, from which we received a USD 20 million investment from private equity in Norway to drive the next phase of growth. We raised investments from 22 influential, high net worth individuals in Scandinavia who have placed their trust in our business model, value-addition and most importantly, our people. This will enable us to set up an office in Norway, grow by acquisition and provide opportunities for career growth and travel to Scandinavia on long term assignments for our people.

What do you think underlies your success?

Shehani: We are a people-first company. We’ve been recognised as a Great Place to Work for nine consecutive years, and a Great Place to Work in Asia for five years, a Great Place to Work for Millennials, a Great Place to Work for Women and a great IT/ITeS workplace, where people have the freedom to innovate, develop their personal brand, identify their passion and pursue it.

I think the innovation culture and the room we have given people to pursue their personal blue oceans has created a whole lot of leaders at different levels. We have this philosophy called ‘leaders without titles’ where you don’t need a title or a designation to be a leader.

People work on key result activities which are broken down from the corporate objectives. Finally, everything is mapped to a balanced scorecard, showing every individual’s contribution to achieving the corporate objectives.

We also focus a lot on processes, because we want to ensure quality and predictability in whatever we do, making them internationally compliant, always being audited internally as well as externally. That also ensures we maintain the same level of service when we are operating 6000 miles away from customers.