‘Recession is part of a business cycle’

‘Recession is part of a business cycle’
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First Published: Wed, Mar 12 2008. 11 51 PM IST

Smooth ride: CEO Jeya Kumar says the company has added about 10,000 people in the last one year and its hiring plans are on track this quarter. (Photo: Hemant Mishra/ Mint)
Smooth ride: CEO Jeya Kumar says the company has added about 10,000 people in the last one year and its hiring plans are on track this quarter. (Photo: Hemant Mishra/ Mint)
Updated: Wed, Mar 12 2008. 11 51 PM IST
Singaporean national of Indian origin, Jeya Kumar, 54, took over as CEO of Mphasis Ltd in the first week of February. EDS, the Texas- based IT firm that ended 2007 with $22.13 billion (Rs89,626 crore) in revenues, owns 62% of Mphasis. Before signing on with EDS, Kumar ran a $ 5.2 billion operation for Sun Microsystems Inc. as senior vice-president, services. Mphasis has revenues of around $560 million a year, but Kumar doesn’t consider the shift a step down. EDS is likely to chop some 2,500 jobs in the US, even as Mphasis has grown from 12,000 to around 27,000 employees in two years, a fact that underscores the importance of the Indian operation.
Kumar has operated out of four countries in the past five years but isn’t new to India—he set up Sun’s service operations here. Since taking over as CEO, Kumar has tried to restructure and streamline Mphasis’ operations, and reach out to employees and customers. For a start, Mphasis is looking to reduce the number of offices it has in India from 29 (across nine cities). Kumar is also seen as the man behind an audit into Mphasis’ hiring and human resources policies that resulted in several people being fired for unethical behaviour. Kumar himself declined to speak specifically about this and said, “While I am a fan of Six Sigma (where 3.4 defects per million opportunities are allowed), in ethics it has to be 100%. It is non-negotiable.”
All that work has kept Kumar away from the media. In his first interaction after taking over as CEO, he spoke to Mint on a range of issues from a challenging external environment to efforts being made to retain the “soul and smile” of Mphasis’s agile organization within the ambit of a behemoth like EDS. Edited excerpts:
Give us an overview of where things stand at Mphasis now.
Mphasis still has the soul and smile of a small company. Last year, 47% of our business came from (our parent) EDS. It looks to us as an offshore extension, while we still have our own sales force. The EDS relationship helps in leveraging infrastructure and tools. We are a $560 million company, and growing, which (needs) to leverage the infrastructure of a $22 billion company. I think the challenge now is how to scale and scale fast without losing momentum. Mphasis has been known for its agility and customer-centricity. There is lot of stability in the management team and we have the depth and breadth of both company cultures. EDS tends to recognize the need (of Mphasis) to be different. While we continue to grow, at the same time we can learn faster from EDS. EDS has 135,000 people and we are about 27,000. There’s lot (one) can learn and leverage.
You continue to have a separate sales force ?
Smooth ride: CEO Jeya Kumar says the company has added about 10,000 people in the last one year and its hiring plans are on track this quarter. (Photo: Hemant Mishra/ Mint)
We have two sales forces. One that works on the core Mphasis channel. We need to grow that space. There’s another sales force that works into the EDS channel. Last year nearly 50% came through the EDS channel. There’s a joint selling of services such as application and IT operations, anything they want to move across (on an) offshore basis.
Recently the CFO (Alok Misra) departed and you announced a new head for the business process outsourcing business. Is this an effort to put in an EDS team?
The direct reporting structure to the CEO has not changed. I want to open up more positions. When a company grows at 30-35%, you as an employee want to know where (one’s) personal growth is. When EDS bought into Mphasis, it was 12,000 people and this quarter we will be 28,000. We almost grew over 100% in headcount. I am extending the number of positions and that’s how we are building the blocks. There is no push or pressure in terms except my own in terms of wanting to be a team. In the last one year we have added about 10,000 people. That is why I am surprised at some news reports (that we have sacked people). If we report our results it gets Page 3 but an incorrect report gets Page 1. (laughs)
What are the challenges you face, especially in the context of the slowdown in US?
Overall, we are not seeing a slowdown going into a negative growth territory. The market is generally slow in terms of projects (and they) are getting delayed but at the end of the day they will be completed. My view is recession is part of a business cycle. It will happen. We should be concerned more about the length of the business cycle rather than the impact. If it is going to be a short recession, it will be good for the Indian IT firms because (some) work will move. What we are really competing is for the right kind of people and we got to replicate our experience. There are good times and bad times, but the thing you have to worry is how long good time lasts and how short the bad time lasts.
Is there a significant ramp-up at Mphasis to compensate for the lay-offs that EDS has been doing in the US? Are your hiring plans on track for the current quarter and next year?
All the work (that) has been coming to Mphasis has been planned. I don’t think we are doing this as a ‘slash and burn’ kind of thing. If there is a transition delay it affects our bench size. Regarding our hiring plans, we are on track this quarter and I don’t see any hiccups.
Mphasis contributes only about 2.5% of EDS revenues. How much are you on the radar of your global parent?
Ron (Ronald Rittenmeyer, CEO of EDS) is very high on India and we see it as a great gateway for a global delivery model.
Your net margins, at 10.5-11%, and your manpower utilization is low compared with some of your peers. Comment.
There is always room for improvement. We are looking to increase our utilization rates.
Is EDS looking to increase its stake further given the current low valuations prevalent in the market?
There’s always a possibility, but there’s no published plan on the table. The current mode of operations works for them. We have a joint sales team and there has been no issue in terms of customer service level agreement. Internally, we look at EDS as our biggest customer rather than to look at them as the largest shareholder.
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First Published: Wed, Mar 12 2008. 11 51 PM IST