Q&A: Ganesh Ayyar CEO & Sushanto Banerjee CFO, MphasiS
Bibhu Ranjan Mishra / Mumbai March 09, 2009

MphasiS, the IT and business process outsourcing service provider, has seen some changes in recent years. First, the Bangalore-based company promoted by Jerry Rao was acquired by EDS. Then, HP acquired EDS last year. Despite uncertainties in IT outsourcing, MphasiS, which has now aligned its financial year with HP's accounting year (November to October), has shown satisfactory results. Ganesh Ayyar, its new CEO, and Sushanto Banerjee, CFO (interim), speak to Bibhu Ranjan Mishra on the growth strategy. Excerpts:

How many MphasiS employees have been affected following integration of EDS with HP?
Ganesh Ayyar: I can't comment. HP is a very important customer-cum-partner for us and we get 45 per cent of our business from them. But we work to earn it.

Your new customer addition in the January quarter is not so encouraging.
Ayyar: We added nine new customers in the quarter, which, compared to previous quarters, is not much different. More important, we had a revenue growth of 58 per cent in Q1. If we are able to achieve this growth without getting more new customers, this means we are building deeper relationships with existing ones.

Does it mean that none of your existing customers has left you?
Ayyar: Nothing which is material. If some customers have shifted a little bit, that obviously takes place. They still see MphasiS as a solid company and a long-term partner. However, if they are under financial pressure whereby they are cutting discretionary projects, that is their prerogative. It also means we have to figure out creative ways to help the customer be successful and tide over this crisis.

What kind of traction do you see from sectors that have been affected due to the recession?
Ayyar: We are predominantly in three service lines — BPO, Infrastructure and Apps. And all of them have grown. Some have grown faster than the other. ITO has grown faster than the other two, but the base is smaller. The growth has been reasonably good and along the planned line of MphasiS.

Sushanto Banerjee: On the vertical side, we are seeing vendor consolidation happening in the BFSI side. We are seeing tractions in verticals like healthcare and telecom. In manufacturing, there are some ups and downs. Automotive is down at present but other businesses are seeing some traction.

But you had a drop in BPO business on sequential quarter basis.
Banerjee: It was essentially because of two things. Our revenues from some European clients was hit to a certain extent because the rupee appreciated. The other reason is that we had a few clients who reduced their business in this quarter. We knew these clients were planning to ramp down. But that's always there in the business.

You said you were seeing traction in the telecom space — is it on the equipment or service providers’ side?
Banerjee: There is no growth but we are seeing some deals. We are seeing some pipeline generating in the telecom side. It's from both sides (equipment and services), but it's more in the services side.

Could you tell us how you are ensuring the financials stay healthy?
Banerjee: The situation is very competitive. So we need to have a competitive cost structure to deliver market expectations. We are trying to convert some of our fixed costs into variable, so that we can pull the lever whenever it is required. And that is something we will continue to do over the next few quarters, till the market bounces back. We are also increasing our coverage in terms of sales. That's an area where we will continue to invest deeper, so that we can cover more geographies and more verticals.

Will the variable component in the salary be linked to the performance of the employees as well?
Ayyar: Lot of things will be performance-linked — that's true and that's how we exist. But that has nothing to do with the salary base. Everyone in the industry is talking about salary cuts now. At this point, we are not using that option. If the situation really gets that bad, then we will revisit that decision.

Last quarter you added 574 freshers. What is your plan (now) for freshers' recruitment?
Ayyar: We added 575 freshers this quarter. We have started recruitment in this quarter again for freshers. That's an investment we want to make for our future business. That's where our cost optmisation comes in and that's where we can build a competitive cost structure.

There was some talk that many of Satyam's clients have come to you.
Ayyar: I don't know how true this is.

There is also talk that many Satyam employees have joined you.
Ayyar: But how much of that has happened? It's more noise than reality. We have a good customer base today and we, of course, are going after new ones. But our first focus is to delight our existing customers; retain them and grow our business with them in this current economic environment. Of course, we are going after other businesses. In that context, if Satyam customers are looking for some other service providers, we don't have any problem.