Mphatically Forging Ahead - The Economic Times, Friday Sept 07 - Sept 13 2001

IT'S A LONG road ahead for MphasiS BFL, the software services company that calls itself an interactive integrator. The company aims to touch the magical Rs1000 crore revenue figure. A figure that will catapult it from its current number 20 slot on Nasscom's Top 20 software domestic exporters (2000-2001) list to be among the top six. MphasiS BFL's revenue last fiscal was Rs 290 crore.

Jerry Rao, chairman and CEO of MphasiS BFL, and Jeroen Tas, president, are not unduly worried. Size (read revenues) is important, but the goal is not that alone, according to them.

"We may not be the biggest software company. But we could be the biggest solutions company in the financial and logistics vertical," says Rao, who prior to founding MphasiS, headed Citibank's technology development and its global electronics cards division. Rao adds that the aim is not to scale across, but within. "Size will follow," he says.

This singular focus on financial and logistics vertical is what will see the company gallop ahead, Rao feels, and cites two specific reasons for his optimism. One is the technology spend of this segment and the other is the core competency in this segment.

Finance and logistics are large verticals, which have several sub-verticals within them. In terms of technology spend, the finance vertical spends more than the retail and manufacturing put together. Says Rao. "The business opportunity is big. The top 20 banks in the world spend $40 billion annually on technology, of which 50 per cent goes towards developing application software."

As the trend in the corporate world is more towards buying components and integrating them, the integration skills that MphasiS BFL has will surely help, he says.

The key to the new business model is effective integration, says Tas, citing banks as an example and the urgent need felt by them to integrate their credit card, investment, home loan and several other offerings internally and between banks to give their clients personalised attention. In other words, services that will help them outdistance the competition.

This strong belief in integration and the remarkable wonders it can do to managing customer relationship is what encouraged Rao and Tas, who in many respects show marked contrast with each other, to found MphasiS in 1998 in California. The company later acquired BFL.

Rao says that he, Tas and colleagues at Citicorp were convinced there was a tectonic shift in technology, with people managing customer relationship suddenly realising they had the technology available to do things that everybody wanted to do for years but could not. "It was not just the internet, but the technology underlying the internet that made it possible to take messages across multiple legacy system to create one unique customer profile," he says.

Rao candidly admits that the US slowdown has hit the company pretty hard, with several clients cutting back on spending. But he hastens to add that the relationship with them is still good. "We have to wait this out. When the spend comes back we'll be ready," he says, explaining that adequate cash, focus on quality and intense sales efforts are enough to see companies through the current difficult patch.

Tas says that in every corporate boardroom the oft-asked question is whether the company is getting full value on its IT spend. To get most bang for the IT buck, companies need to integrate their business processes and make their IT (specifically, the system development lifecycle) the most cost-effective. To do this, they need to build systems not from the top down but start with business processes. MphasiS BFL, he says, has realised this, which is why it is able to attract some of the blue-chip firms.

MphasiS BFL follows a new business model under which complex projects get done by virtual teams operating in different locations (large chunk being in India) and which are tied together through collaborative tools.

The advantage of this model, says Tas, is that clients can see how their project is taking shape by logging on to the project room of these virtual teams. "In this model, as the project in the strict sense stays with the client, they are lot less reluctant to have all their critical development moved out of their doors, " he says.

Focus on high end development work is what most software companies would like to talk about. It is the same with MphasiS BFL too. Rao says that for a leading bank in Japan, a complete new highly complex distribution system was designed and architected. The project involved integrating a new retail banking distribution system with CRM system at branches and call centres and tying them up with various banking back end system, through a transaction hub. A portal too was developed which linked both the call centre and the back end system.

According to Rao, executing such kind of high end work insulates the company from price pressures, and gives it the ability to go up the value chain with customers. He however is quick to point out that one of the issues with this business model is that, being project dependent it suffers when projects get cancelled in times such as these.

To ensure a greater annuity revenue business, MphasiS BFL has formed a company called MphasiS BPO, an e-services fulfilment company headquartered at Santa Monica, California, with operations in Bangalore. This company does IT-enabled services like inbound and outbound solutions, and backend transactions. The company is also considering a foray into software migration space yet another regular and consistent-income business.

In the highly lucrative financial and logistics space that the company targets, competition comes from big consulting firms like EDS, Accenture and Sapient, and some Indian domestic vendors.

"We understand the processes and technology as most of us come from this [financial] space. We operate at a fraction of the cost of the big five. While a lot of Indian companies are moving up the value chain, we're already there in the middle," says Tas.

Rao says that acquisitions will be considered. "We will not pick up small companies to do aggregation. Unless there's a compelling synergy and meaning, we will not look at acquisitions," he adds

. MphasiS BFL's strength lies in its domain expertise, strong integration skills and building intellectual property in messaging components and framework. Its weaknesses, says Rao, are those which are inherent of any young company.

The potential for the company, which has a manpower of around 1500, is huge. Rao is confident that when the ominous shadow of the current slowdown clears up, the company will move ahead much faster.