BackTech Mahindra bets on DAVID strategy to fuel growth
Tech Mahindra hopes that its DAVID strategy (digital, automation, verticalization, innovation and disruption) will help doube revenue to $10 billion by March 2020
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Pune: Tech Mahindra Ltd, part of the $18 billion Mahindra group, has made its big technology bets for the future through a strategy internally called DAVID.
DAVID is short for digital, automation, verticalization, innovation and disruption, and Tech Mahindra, which ended the year to March with revenue of $4.04 billion, is hoping it will help it meet the goal it has set for itself: more than doubling revenue to $10 billion by March 2020.
The strategy—unveiled internally in June and discussed by the management over a two-day event at Pune last week, as per two executives familiar with the matter— could see India’s fifth-largest outsourcing firm reporting revenue from some of its newer bets, such as cybersecurity and blockchain, by 2018.
A Tech Mahindra spokesman said the firm does not give out quarterly or annual guidance and declined to offer a comment on the management’s internal goals.
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In an interview, Tech Mahindra CEO C.P. Gurnani laid out the “five bets" the firm is making: “Cybersecurity, imaging as a service... where we use automation platform with a radiologist (for instance), and run imaging as a service. Blockchain, Internet of Things and network services will be the other bets."
“The way we look at it is that we will take 12-16 months to incubate them. So, out of the five, three will go into production phase. It is possible that not all five will go into production phase. And so, I believe that the three which go into production, we should be able to report the revenue or business once it goes into production after 12-16 months"
Under the initiative, Tech Mahindra is training its 112,000 employees through the user-centric approach of design thinking and making them learn newer technologies while also simplifying internal systems/processes.
It has set itself a target of freeing up to 1,400 engineers by March 2017 from doing repetitive tasks and using automation platforms instead. It also plans to put more consultants and engineers together with newer technologies in each of its current projects. Finally, the firm intends to partner with start-ups and invest in newer technologies that will eventually help it build revenue streams from newer technologies such as cybersecurity and blockchain.
Tech Mahindra’s DAVID strategy is similar to Infosys Ltd’s ‘renew and new’ initiative, and mirrors the approach adopted by Infosys and Wipro Ltd, as India’s $150-billion outsourcing sector battles an existential crisis. Newer technologies such as cloud computing, automation and artificial intelligence tools have made the home-grown technology firms look beyond the traditional model of deploying an army of engineers, and instead focus on investing in platforms.
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Infosys has set itself an ambitious target of becoming a $20-billion firm by March 2021, while Wipro eyes $15 billion revenue by March 2020. Like Infosys, Tech Mahindra also intends to brings elements of these newer technologies in each of the solutions offered in all service lines.
“We are focused on what we call run, change and grow themes in each of the service lines," said Jagdish Mitra, Tech Mahindra’s chief strategy and marketing officer. “This means, we have to relook at each of the projects currently underway, how we can improve our solution offerings, focus on M&A and partnerships, and at the same (time) strengthen our investments in IP-led platform."
Still, Tech Mahindra will have to function outside its comfort zone to achieve its internal targets, said an analyst. “To achieve its ambitious goals, Tech Mahindra has to manage two key challenges: first, to increase commercial traction outside of its core vertical TMT (telecoms, media and technology)," said Thomas Reuner, managing director of IT outsourcing research at HfS Research.
Tech Mahindra, which counts AT&T Inc. as its largest client, gets 55% of its revenue from clients in the communications, media and entertainment businesses.
“Second, to profitably manage the transition to a business model where automation is increasingly decoupling service delivery and labour arbitrage. These challenges will become even more exacerbated by a deteriorating macro environment," added Reuner.
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