Bangalore: Bangalore-based MphasiS Ltd has bucked a slowdown in technology spending by overseas clients that has hurt the computer services industry. The company’s net profit more than doubled in the year ended October—MphasiS follows a November-October fiscal—to Rs908 crore on a 43% increase in revenue to Rs4,263 crore. As other technology firms either laid off employees or slowed hiring, MphasiS added 23% more employees over the past year, taking its headcount to 34,000. Hewlett-Packard Co., (HP) the world’s largest maker of computers, owns a 61% stake in MphasiS, started in 1992 as BFL Software by the Kolkata-based Bangurs. In an interview, chief executive officer Ganesh Ayyar talks about the company’s strategy to sustain growth. Edited excerpts :
You posted a 43% revenue growth in a year when most other firms struggled to grow. Was it primarily because of the HP relationship ?
MphasiS is an HP company. HP is also our single largest customer, contributing 12% of our revenues. An additional 16% comes from deals which HP had won (in the past) and it wants work to be done out from here. This we call the migration revenues. So 28% of our revenues are directly tied to the HP relationship and the billing for this is on a cost plus model for which we have an internal rate card. Twenty nine per cent of our revenue is direct business which MphasiS on its own has got. The rest 43% is business which is a part of our joint go-to-market strategy with HP.
Growth strategy: Ayyar says internal reorganization has helped MphasiS make its businesses tighter. Hemant Mishra / Mint
Remember HP has a large global delivery centre based out of India. So business is not handed out to MphasiS on a platter. HP also works with other service providers. The HP business is not some iron rice bowl...we keep ourselves competitive to earn the business. However, being majority owned by the world’s largest technology company has its advantages. MphasiS, however, operates independently, and the management of the company is answerable to the board.
What segments of your business have you been witnessing growth in?
Infrastructure technology outsourcing (ITO) is our youngest but fastest growing and most profitable chunk of the business. We have two other lines of business in application development and maintenance, and business process outsourcing. All the segments are witnessing growth. What has helped our growth is the compelling value proposition we offer.
Internally also, we have been reorganizing. The three business line heads also each look after sales in each of our three major geographies of Americas, Emea (Europe, Middle East and Africa), Apac (Asia Pacific) and Japan. This has enmeshed them into tighter integration and helped us to up-sell and cross-sell our services.
It is because of this kind of growth that even as other companies have been either laying off employees or freezing hiring, we (have) increased our headcount by 23% (in the last 12 months), taking our total strength to 34,000 employees. Over the next six months, we will add another 1,300-2,000 employees here.
Today (Wednesday) we have announced the setting up of a delivery centre in Sri Lanka which will employ 2,000 people in the next three years. The Sri Lankan centre is the second offshore centre apart from the one we have in China. While we have near-shore delivery centres in the US and the UK, the foray into Lanka is to have a derisked offshore model. Plus the government there has been actively wooing investors with incentives and, most critically, the talent available there is also good.
Do you compete and cooperate with HP globally ?
HP has a presence in more countries than MphasiS does. But in certain cases—be it size of customer or a niche offering or size of the deal—MphasiS might be better placed. But remember MphasiS is an HP majority-owned company. It is not a question of egos but what is best for our customers. Our fastest growth has come from the segment where we have a joint go-to-market strategy. We want to leverage our relationship with HP to win even more deals.