Information technology services company MphasiS gets a majority of its clients from parent Hewlett-Packard. However, HP, undergoing global restructuring, is also going through a tough time. Ganesh Ayyar, chief executive officer of MphasiS tells Bibhu Ranjan Mishra the company is steadily growing its direct business but will take some quarters to establish a significant difference. Edited excerpts:
Given that HP is undergoing a restructuring, how do you expect that to reflect on your revenues?
Our dependency on HP for deals is steadily coming down. In the last quarter, we derived 55 per cent of our revenues through the HP channel; it was 67 per cent a year before. However, one should not look at the growth of our direct business on a short-term basis.
How does the deal pipeline of your direct business look?
The pipeline is healthy but at the same time, the deal velocity is very choppy because of the current market conditions. This means the deal closure time has become a bit unpredictable.
Can you give an idea, based on your experience, on how the deal closure cycle has stretched?
The delay in decision making is happening more in the case of mid-size or large deals. We are seeing an increase of 60-90 days in the sales cycle of midsized deals, depending on the type of services. That means what used to take six months earlier is now probably taking eight months.
Are you seeing many large and medium-sized deals happening?
We are clearly seeing an improvement in the average size of deals in our pipeline. This has moved to $300,000-350,000 from the $200,000 we were witnessing earlier.
In terms of industry verticals, financial services is believed to be under pressure due to a multitude of issues. Where do you see the opportunity?
People say concern is very high in financial services and there is a positive momentum in the healthcare segment in the US. But looking at our pipeline, I have not seen such a demand from healthcare or any significant decline in financial services. We are heavily focused on the latter sector. The hope is that compliance-related new policies will trigger an increase in IT spending by financial services companies.
How does the microeconomic environment look?
We are seeing a bit of softness in Europe. But we are not seeing any weakness in demand from the US, as of now. Of course, India and Asia continue to be stronger for us. We are now deriving 13 per cent of our revenues from the Indian market.
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The Indian economy is also not in good shape? Is it reflecting in the demand for technology services from the domestic market?
As I said, pipeline is not an issue but velocity (deal closure) is. India is beginning to fall in that category. As far as IT services demand is concerned, things are not as bad as people probably think.
Your headcount has remained almost flat for the past three to four quarters. What is your hiring plan and where do freshers stand in that strategy?
Our plan is to hire based on the demand. When you do that, the demand for freshers goes down. It does not mean we won’t hire freshers at all but their ratio will be low.
In the past couple of quarters, you have been improving profit margins. What are the elements you are bringing in to improve profitability?
We are focusing on operational excellence, especially by improving utilisation rate, improving the pyramid mix and reducing indirect costs. We are also focusing on higher margin business, with significant value-add to the kinds of services we offer to customers.