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COLOREDCOW: CREATING NEW MILESTONES FOR BUSINESS
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GROWTH
Ritu Sharma and Sandeep Puri wrote this case solely to provide material for class discussion. The authors do not intend to illustrate
either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying
information to protect confidentiality.
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permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
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University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com.
Copyright © 2017, Richard Ivey School of Business Foundation Version: 2017-06-13
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There’s no silver bullet or a magic wand for creating a great product. As engineers and designers, we break
down big problems into a series of smaller but interconnected pieces that together bring desired outcomes.
Prateek Narang
Prateek Narang, founder of ColoredCow, a web services company, had a good reason to be impressed by
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his company’s growth. His company reported net revenues of ₹725 million1 in 2016, which reflected an
increase of 140 per cent over 2015 (see Exhibit 1). Narang had set up his company less than three years
earlier in 2014. As he assessed the growth figures in early 2017, he was filled with hope for the future. He
began charting out a strategy for 2020, and set a revenue target for his company of ₹2.5 billion. Given the
company’s small size, as well as its involvement in multiple projects in many different areas, the target was
very ambitious. ColoredCow’s business to date mainly involved working with start-ups and small and
medium enterprises to implement their Internet business ideas.
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Narang began building a strategic growth plan for the company, remaining mindful of ColoredCow’s
challenges and opportunities. His company’s current growth was a result of word-of-mouth referrals from
satisfied customers who helped him reach more customers, but it was time to look ahead and give his
company some direction and focus. Narang realized that he had to address some important business issues:
What technical and digital capabilities would ColoredCow need to implement to achieve success in the
future? What possible scalability issues was the company likely to face? What should ColoredCow’s
strategic plan for growth look like? What marketing strategies should ColoredCow devise to increase its
customer base and achieve the ambitious revenue target of ₹2.5 billion by 2020?
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1
₹ = INR = Indian rupee; all currency amounts are in ₹ unless otherwise specified; US$1 = ₹67.97 on December 21,
2016.
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THE COMPANY
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Narang started ColoredCow in August 2014, with an initial investment of ₹200,000. With great zeal and
effort, he was able to convert his ideas into reality. Beyond the whimsical company name, Narang put his
heart and soul into his venture. He always dreamed of owning a company where the possibilities would be
endless. Despite already having a rewarding job, Narang could not resist the urge from his entrepreneurial
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spirit to set up a venture of his own.
Narang had worked for nearly 15 years in the information technology (IT) industry, which helped him build
expertise in both computer hardware and in software and applications. His previous jobs had all required
him to help build the organization from the start. After graduating with a bachelor’s degree in technology,
his first job was with the Mohali, India division of Tata Interactive Systems in 2000, where he was among
the company’s first few employees. In December 2004, he joined the National Cash Register as the
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company’s first employee for the new IT centre in Gurgaon, India. These jobs helped Narang develop an
entrepreneurial character, which defined him as someone who was able to resolve ambiguity and was not
afraid to take risks.
Capitalizing on Passion and Opportunity
Narang believed that a successful start-up needed more than just great ideas—it needed “a passion to make
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a mark and solve real business issues.” He shared his philosophy and desire to create a venture of his own
with Scott Hurst, a fellow attendee at a conference for the programming language PHP in Atlanta, Georgia.
One year later, Hurst called Narang to ask if he was still eager to start a new venture and introduced him to
two other entrepreneurs named Hector Javier and Randi James, who asked Narang to help them run a
software development company.
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Narang’s networking abilities and self-confidence helped him continue on his journey. A few months later,
Narang was introduced to the founders of a U.S.-based software development company that needed an
expert Java programmer. He managed to complete that assignment while holding another full-time job. He
worked for the software company after office hours from a café. His passion for the work made it easy to
adapt to different circumstances and work environments.
Narang gained the trust of his clients by delivering quality and timely results beyond their expectations. His
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work was cost effective, but Narang also provided an understanding of his clients’ culture, considerable
amounts of experience, and a strong work ethic. More clients began relying on him, and as the amount of
work started to grow, Narang recruited two people to form ColoredCow, a team of expert service providers.
Around that time, Stanford University had organized a 21-day event for Indian entrepreneurs called
Innovate Delhi. Narang had attended the event and was awarded one of the conference prizes for his work,
which had further fuelled his dream of building his own organization. Meanwhile, the software company
that Narang had joined as a programmer was split into two different businesses, which became two clients
for Narang’s team to provide technology services.
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Reaping Rewards
In January 2015, Narang was referred to the founder of a technology start-up in Canada’s engineering
industry who was building an application to better manage and maintain machines. Through this
association, Narang met Eric Smith, the owner of a start-up in the health care industry who needed help.
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Narang further developed the small health care application to the point where the company was acquired
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by a large NASDAQ-listed health care company, and Smith was appointed chief technology officer of that
firm.
The success from this venture, and the ability to build a major application from the start, became Narang’s
first major breakthrough. As ColoredCow continued to grow, he recruited more expert employees. Five
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members of his team were deployed to work exclusively on the health care project for one year.
However, Narang continued to seek new opportunities in all areas of the IT industry. Although his focus
had been mainly on web-based applications, Narang took on a project for a non-government organization
(NGO) to manage its social media profile. That NGO eventually became a regular client, and Narang
launched his flagship product, ManageMyNgo. Narang later rebuilt the application in a partnership with
the Haryana State Government in India.
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Narang insisted on creating a favourable customer experience with any of his clients. He believed that
people considered client experience more important than any other aspect of the collaboration. Towards
that goal, he made sure to meet all expectations and to be open, available, and accommodating.
As his work increased, Narang hired more employees who shared his vision to develop his business. At the
start of 2017, ColoredCow had 16 employees. He carefully chose new members for his team to whom he
would delegate his work, which allowed him time to develop new work opportunities.
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Services Offered
As a web services company, ColoredCow offered management services and applications, including
enterprise portals, knowledge management systems, information architecture, content management
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systems, transition from proprietary to open-source solutions, and content migration. ColoredCow used
pragmatic techniques to manage people, projects, and risk in an effort to create successful projects and
teams. ColoredCow became a software development company for Internet and mobile applications,
specializing in web-based usability and business. The company’s strategy of offering good-quality projects
at reasonable prices, which had helped it grow right from the start, continued to be a business asset.
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THE INDIAN IT INDUSTRY AND THE CHANGING SCENARIO
The size of the global market for outsourcing IT services was estimated at US$124–130 billion. As the
world’s preferred choice for outsourced IT services, India accounted for as much as 67 per cent of the
market. With an employee strength of nearly 10 million, the Indian IT outsourcing sector was poised to
grow at 12–14 per cent in the 2016–2017 period, and was expected to triple its annual revenues to US$350
billion by 2025. Indian companies were considered about three to four times more economical in their
provision of IT services than U.S. companies, which contributed to India’s dominance of the global
outsourcing market.2
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India boasted over 4,200 start-ups and ranked third among international start-up networks. IT sector
revenues were projected to reach US$146.72 billion by 2018. India’s Internet penetration had increased
considerably over the previous decade, enabling a marked rise in the country’s e-commerce industry. The
2
“IT & ITeS Industry in India,” India Brand Equity Foundation, January 2017, accessed January 26, 2017,
www.ibef.org/industry/information-technology-india.aspx.
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surge in Internet availability provided the perfect conditions for growth in IT outsourcing. India’s health
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care IT market had also benefited from the enhanced Internet use, reaching a value of US$1 billion in
January 2017, which was expected to almost double by 2020. Similarly, the country’s e-commerce market
was projected to reach US$700 billion in the business-to-business industry and US$102 billion in the
business-to-consumer industry by 2020.3
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India also saw an increase in international investment in the country’s IT industry over the previous decade,
especially in the sectors of computer hardware, software development, and IT services start-ups. Between
April 2006 and March 2016, the Indian IT sector received US$21 billion in foreign investment. In 2006,
start-ups garnered 307 deals worth US$14 billion. In 2005, foreign investment for small and medium
business amounted to US$11.6 billion. The market research firm Zinnov reported that this figure would rise
to US$25.8 billion in 2020, based on the premise that nearly 12 million of the 51 million businesses in this
industry increased their potential by using newer IT products.4
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Over the previous decade, the number of Indian start-ups had increased exponentially. By the end of 2020,
more than 11,500 new businesses were expected to enter the market and create jobs for over 250,000 people.
The unusually rapid growth could be attributed to favourable conditions, opportune mergers, and well-
timed funding. Many start-ups in the IT industry that were now benefiting from great inflows of funds had
endured more difficult times in the past, so their fortunes had improved.5
However, in January 2017, the Indian IT industry was feeling some adverse effects from the new political
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landscape in the United States. The U.S. market, which was crucial to Indian IT companies, was expecting
major changes as President Donald Trump introduced new and stricter immigration policies that could have
a considerable impact globally.6 Yet according to Ajay Kolla, the founder and chief executive officer of a
prominent job portal, these changes could also work in India’s favour because of India’s “cost effectiveness,
superior domain knowledge, and availability of quality talent,” all of which were attributes that U.S.
companies would find hard to overlook.7
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CHALLENGES FOR COLOREDCOW
ColoredCow had more work than it could deliver in its current size. Referrals and repeat customers had
helped generate generous amounts of revenue. According to Narang, scaling up the business was a missed
opportunity, despite warnings regarding the complex processes and challenging funding requirements.
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Having an expansion plan in place early in the business life cycle was as crucial as starting the business
itself, he felt. Narang believed that a solid business plan with well-defined milestones and triggers would
support growth, and that his business preferred to focus on growth.
Narang had found it easy to launch the business, but scaling up remained a challenge. Usually, small
businesses had a clear plan that defined their growth and success over a specific period. However,
ColoredCow’s business was spread across too many IT sectors. The company was eager to fulfil the needs
3
Ibid.
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4
Ibid.
5
“Indian Startups: Challenges and Opportunities,” Turning Ideas Incubator Program, June 21, 2016, accessed January 17,
2017, www.turningideas.com/blog/indian-startups-challenges-and-opportunities/.
6
Dhruva Jaishankar, “Donald Trump as US President: For India, It’s Opportunistic, but Concerns Remain over His Asian
Policy,” Economic Times, November 13, 2016, accessed January 8, 2017, http://economictimes.indiatimes.com/news/politics-
and-nation/for-india-there-are-opportunities-in-trumps-election-but-concerns-in-his-asian-policy/articleshow/55391027.cms.
7
“Donald Trump’s Win Will Not Impact IT Sector: Hyderabad Firms & Wisdomjobs.com,” ET Tech, November 10, 2016,
accessed December 7, 2016, http://tech.economictimes.indiatimes.com/news/corporate/donald-trumps-win-will-not-impact-it-
sector-hyderabad-firms-wisdomjobs-com/55346356.
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of a wide variety of clients, which meant that it was still struggling to establish stability and consistency in
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its operations. Because it was a small organization, a considerable amount of ColoredCow’s work was
completed manually, without automated tools to record the numerous tasks. Yet the company eventually
realized that it was critical to assess and optimize internal tools to streamline its multiple operational
activities.
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ColoredCow needed to resolve several issues if it was going to meet its self-imposed revenue target of ₹2.5
billion by 2020. Narang expected that the business would need 75–100 employees to achieve such a
milestone. He also hoped to build a direct sales channel.
With rapid changes taking place across the IT industry, ColoredCow faced some looming questions
regarding implementing new technical and digital capabilities, scaling the business, and strategic planning.
How would ColoredCow reach ₹2.5 billion in revenue by 2020?
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EXHIBIT 1: SELECTED FINANCIALS OF COLOREDCOW (IN ₹ MILLIONS)
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2014 2015 2016
Net Revenue 314 518 725
Other Income 10 6 16
Operating Expenses 162 201 278
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Profit before Tax 162 323 463
Source: Company documents.
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