We'll bring down our US exposure to 70% by 2020: Hexaware CEO R Srikrishna

On the service lines, we have diversified to a great extent, says Srikrishna

Midsize IT services company Hexaware’s CY18 second-quarter results were in line with the Street estimates with consolidated net profit rising 25 per cent at Rs 1.53 billion when compared to the year-ago quarter while revenues saw healthy growth of 15.6 per cent over the year to Rs 11.3 billion, prompting the company to raise its revenue guidance to 12-13 per cent (from earlier projected 10-12 per cent) on dollar terms. The Pune-based company’s Chief Executive Officer R Srikrishna in an interview with Romita Majumdar says while his focus is to diversify the portfolio across services and geographies, imbibing a greater deal of automation is also high on his agenda. Edited excerpts:

Analysts have raised concerns over your overdependence on North America, which accounts for 77 per cent of Hexaware’s revenue, and service lines like ADM and IMS. What is the diversification strategy?

On the service lines, we have diversified to a great extent. There has been a very deliberate and material change in our service mix, with our infrastructure business going up from single-digit revenue share to almost 14 per cent of the business now. PeopleSoft and Enterprise Services have come down in revenue share whereas BPO has gone up. From the geographic diversity point of view, it is our desire to have APAC and Europe to outgrow the US. It’s a tough balancing act as two years ago North America’s contribution was 83 per cent and now it has come down to 77 per cent. By 2020, we want North America to be not more than 70 per cent through faster growth in other regions. Acquisitions can always change the picture.  

What are the capabilities you are trying to build through acquisitions and in which geography?

We have three main growth strategies — automate everything, “cloudify” everything and finally transform customer experience. A lot of growth in infrastructure services space is automation led while a smaller degree of it is cloud led. Over the next three years, we expect to spend up $300 million dollars on acquisitions through internal accruals. Out of our main three business strategies, we will focus largely on acquisitions to boost our customer experience transformation portfolio, followed by our cloud initiatives. Automation is one area where we want to grow organically. 

But analysts have been concerned that your automation might be putting pressure on pricing despite the fantastic client mining you have done?

The way automations works for us is that it will bring the total price down but not at the expense of unit price. Basically the resources required to execute projects will go down although the expense per resource remains the same so the total price reduces while not impacting the profitability. 

What that means for us is that the client has a choice now between an incumbent who has a higher total price and what Hexaware provides. Our strategy is to offer clients this opportunity to get the job done at a lower cost. This is where we are outgrowing the industry.

So, will your hiring numbers go down with increased automation?

Our revenue and headcount (growth) is still linear. This calendar year, we have hired 2,200 people, which is higher than last year and we will continue to hire. 

Of course, we are targeting (acquiring) competencies in line with our top three strategies. In terms of skill availability, we are finding a big shortage in customer experience.