Weathering the downturn - Times of India, August 27th, 2001

Led by former Citibank CEO Jaithirth 'Jerry' Rao, MphasiS BFL is often touted as a company on the verge of the tier one league. The company recently received Rs 45 crore from Chrysalis Capital for a 7 per cent stake.

Rao spoke to Saikat Chatterjee on the challenges faced by the company in the backdrop of the US slowdown

What's your view on the US slowdown?

I am quite optimistic. It's not the end of the world for us. The slowdown will end, it's not even a recession. There will be some problem at times, but as long as you are focussed on your strategy with sound business principles, we can weather any downturn. Right now, it is not the time to get overly depressed or complacent. The tech slowdown is brutal, but it will go away

So what's the visibility in the next two quarters?

In the next two quarters, there will be pressure on both price and volume. There will be no easy sleep over the weekend. Calendar 2001 has not been the hottest year. Everybody is cautious. We were growing at such a blistering pace over the last two years that everybody feels that something has gone tremendously wrong. The slowdown is temporary and when an upturn comes we'll be in position to take advantage of it.

Do you think India can be a product country?

There is no doubt that there is a lot of opportunity in products, but it is a more risky path. Out of 100 products developed, only about one survives. The chance of getting a product right is very small, however, the returns are of course much higher. I think India should play to our strength in services. We have the talent and the numbers to make it to the top

Why do you feel India should forsake the product path?

Why should we do it and why do you think it is better? I think one or two companies in India will eventually do products... but as a country we should be focussed on the services business. Israel has world class security products even though it is such a small country. These products have mostly come out from its defence forces. And Israel does not have the numbers to play in the services area.

Does India have a sustainable advantage in the software services sector?

I don't think there is any real danger to our position in the next ten years.

Do you perceive China as a threat to Indian IT industry?

I don't see China as a threat to Indian software services industry. I see it as an opportunity for Indian companies. I think China will emerge more as a software product country. In software services, we have already established a reputation for delivering good quality at cheaper rates. In fact, I think each country will do well in a specific area of competence.

We're very clear that we do not want to be a product company. We will remain a product-neutral company

Moving to MphasiS, are you still thinking of doing an ADR?

Given the market conditions, we'll not think of the ADR for a long time. Right now we don't need money. We've recently raised money through private placement. At this moment, we are focussed on our short-term plans rather than thinking about what will happen in the future

And acquisitions?

It is not the right time to go for an acquisition. At this point, we are focussed on our business goals. If the right opportunity comes, we will go for it but we will not go after acquisitions actively. Now is the time to retain the loyalty of your customer and keep the staff motivated.

What kind of manpower additions do you plan this fiscal?

We are planning a very modest headcount increase right now. We have around 1300 now in our software business and plan to increase it to 1500 by end FY 02. In MphasiS BPO, we will increase it from 250 to 700 in the same period.