Subex, the Indian business assurance vendor, has announced that there will be no extension of the contract for current CEO Surjeet Singh, with the result that long-serving COO Vinod Kumar (pictured) will be promoted to CEO from the beginning of April.
The transition may reflect a change in expectations from Subex’s board and backers. During Surjeet Singh’s tenure there was often gossip about Subex looking for buyers, but no deals transpired. Singh would sometimes play down these rumors personally. His successor is a trained engineer who has been with Subex since its earliest days, suggesting that the management focus will be on organic growth from continued product development.
New CEO Vinod Kumar has already been employed by Subex for over 20 years, having been part of the original management team surrounding founder Subash Menon. That group oversaw Subex’s rapid rise during the 00’s, hiring a large team of developers that was able to create one of the most extensive suites of tools aimed at telecoms RAFM departments. Subex also grew through mergers and acquisitions until it reached a peak where annual revenues were worth over USD120mn per year, but then suffered a series of setbacks. In particular, Subex overextended itself by selling convertible bonds denominated in US dollars just before the Indian stock market and exchange rates turned against them, and they spent that money on acquiring a business which proved to be greatly overvalued. However, despite these difficulties, the core RAFM software business remained fundamentally sound.
As COO, Kumar deserves some credit for maintaining an operation which generated enough cash to keep unhappy investors convinced that Subex should continue as a going concern. He remained in his role following the departure of Subash Menon, making him the effective deputy to incoming CEO Surjeet Singh. The pair established a relationship where Kumar worked hands-on with the main team of Subex employees in Bangalore whilst Singh concentrated more on investors.
Surjeet Singh took the top role at Subex during a period when the business was beset by financial difficulties. Some dubious revenue recognition policies adopted prior to his appointment had seemingly been used to disguise deepening losses, and there was a need to secure the support of investors. Singh looked to be the right man for the job, being a qualified accountant that had previously served as the CFO of Patni Computer Systems. The company soon announced a significant provision for bad debt, and took further steps to cut costs. Though it took time to execute a turnaround, Singh has returned the business to profitability during his five years in charge, and the FY2017 results saw the company enjoy 10 percent revenue growth after many years of progressive decline.
Some of Singh’s promises proved too ambitious. In particular, he tried to generate interest by setting aggressive targets for top-line growth, and at one point stated that he wanted annual revenues to rise to USD100mn, a goal which still looks unrealistic. Nevertheless, his company succeeded in rearranging its finances so that it has what now appears to be a sustainable debt burden, and last year he raised USD12mn from new equity, prompting speculation about Subex reigniting its interest in M&A. Meanwhile, Vinod Kumar is credited with executing a strategy that saw Subex’s revenue streams become more predictable in the long run, thanks to multi-year contracts for managed services. Between them, the pair have placed the business on a much more stable footing than it was five years ago.
Kumar must continue to innovate in ways that will appeal to new customers, whilst also increasing sales to existing customers. Though the business has briefly flirted with other sectors, it remains focused on telecoms. At the same time, Subex has repositioned itself as a supplier of analytics rather than sticking to its original theme of RAFM. Recent work on IoT security also suggests that technology development will now seek to appeal to a broader range of customers. As such, this is a new phase in Subex’s history, and the market will be watching if Kumar takes a gently incremental approach to adjusting the corporate strategy, or if he will pursue some more radical product development in the hope of driving growth.