MphasiS in Business India

8/12/2019 MphasiS in Business India

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BUSINESS INDIA uTHE MAGAZINE OF THE CORPORATE WORLDCorporate Reports

Back in 2010, MphasiS was los-ing market relevance. Insteadof focusing on niche markets

and going deep, the company had adiverse portfolio covering eight ver-ticals, a sales force spread across 16countries, and a heavy dependenceon business from Hewlett-Packard(HP), its controlling shareholder sinceMay 2008. In effect, MphasiS wasbetting that with its broad offerings

and widespread geographical reach,it would be more competitive andincrease its market significance. Itwas wrong.

The strategy didnt work asexpected. MphasiS was quickly los-ing ground to competitors and itfaced steep decline in a majority ofits business areas. Says Ganesh Ayyar,CEO, MphasiS, This is when we madea few choices. The first was to grow

our direct business more than whatwe had done in the past four years.The second decision MphasiS tookwas to rely less on the so-called off-shore model, which banks heavilyon cost arbitrage to win overseas con-tracts. While this is important, it is

not sustainable for future growth,he emphasises. In effect, rather thancasting the net wide, we decided todo spear-fishing. We wanted to knowwhich fish we want and to have theright spear for it.

Ayyar, 52, is transforming thebusiness not by taking on more risk,

but by refocusing on select indus-tries where it has core strengths.Instead of going after everymarket segment, MphasiS ulti-

mately had to pick on domains

to show off what it could really doin select verticals. The company isbetting heavily on banking and cap-ital markets and insurance segmentswhere it will raise its investments.When we looked at the amount ofcreditable work we had done in theseareas, we wanted to make them ourfocus areas, says Ayyar. He adds thatalthough MphasiS would be servingclients outside these defined domains,they would not be making any inor-ganic acquisitions or pumping new

investments in those spheres.The banking, financial services and

insurance sectors in emerging marketsare burgeoning with increased spend-ing in areas of core system acquisitionby insurers and asset managers in par-ticular, explains Kalpesh Desai, CEO,Agile Financial Technologies. There-fore, these sectors will continuallyinvest to ensure effective systems andprocesses are in place. As a result, thiswill lead to increased activity in tech-nology deployment and ancillary ser-

vices, he opines.Sitting in a conference room in

his Bagmane Laurel office, Banga-lore, the companys corporate office,Ayyar confides that he was not wor-ried when he agreed to take over asCEO in 2009 to transform MphasiS.He inherited, among other things, acompany that lacked strategic visionand a business model that was notable to compete but relied largelyon business from HP. His decision tode-emphasize the HP business was

Ayyar:

no fear of

failure

A reinventedMphasiS isready to returnto significance

Back in the game


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surprising considering he was a 24year veteran of HP. I am a first timeCEO, so I have no baggage but onlyan upside, admits Ayyar. Every stepI took has been a step of learning. Ihave had the advantage of challeng-ing the status quo. In effect, I have

no fear of failure because I was pre-pared for anything. All said, heso intensely enjoys his job that headmits, I would not like to trade itfor anything else. Still, at a personallevel, it has been a transformation forhim from a manager to a leader.

Apparently doing one thing wellis sufficient, at least for now. Recov-ering from the malaise of spreadingitself thin across numerous domainofferings, Mphasis rode past expec-tations when it reported an increase

in revenues for the third quarterending July 2013 at `1,540 crore,up by 9.6 per cent q-o-q. Its netprofit stood at `193 crore, up 9.1per cent q-o-q. The financial year atMphasiS runs from 1 November to31 October.

A new beginningMphasiS has been a mid-size soft-ware solutions player that specialisesin providing a suite of applicationdevelopment and maintenance ser-

vices, infrastructure outsourcingservices and business process out-sourcing solutions to clients world-wide. In addition to banking andcapital markets and insurance sec-tor, other verticals it caters to includehealthcare & life sciences, transpor-tation & logistics, retail & consumerpackaged goods, communications,media & entertainment, energy &utilities and manufacturing. With37,000 employees, MphasiS has 63offices worldwide.

MphasiS Corporation was foundedin 1998 in California, USA, by JerryRao, a banker, having worked withCiti and its parent Citicorp in var-ious capacities in different conti-nents. After MphasiS Corporationmerged in 2000 with a then mid-size Indian IT services firm, BFLSoft-ware Limited, MphasiS Limited wasformed in the same year. In 2006,Electronic Data Systems (EDS) pur-chased a controlling stake in Mpha-siS for $380 million and it operated

as an independent entity of EDS. Theacquisition made sense for EDS, tocomplement its own applications,add ITO expertise, and completethe portfolio with BPO. In 2008, HPreached a deal to acquire a majorstake in EDSfor $13.9 billion. Not let-ting its huge holding influence thecompanys strategy, HP lets MphasiSoperate as an independent subsid-iary with an independent board and

management team.

Going deeper, not broaderIn embracing prudence at the righttime, Ayyar skilfully guided MphasiSback to relevance by refocusing andrestructuring its global markets thathad crippled its growth. Initially,we reduced the number of coun-tries where our sales force was spreadfrom 16 to 8 in 2011 and narrowed

our investments from eight verticalsto two, he explains. In 2013, thisstrategy was further altered, and thenumber of countries MpahasiS wasgoing after was brought down from8 to 3. Now, MphasiS has defined itsworld markets into mature markets

(with five countries including Ameri-cas, UK & Europe, Australia and NewZealand) and emerging markets (withthree countries viz. India, Sri Lanka,and Indonesia). The idea is to con-centrate our efforts and become aforce to reckon with, declares Ayyar.All said, MphasiS is once again on astrong trajectory for growth.

MphasiS is generally mum aboutdetails of all sorts, including its pro-jected earnings; that reticent cul-ture clearly starts at the top. Ayyar

wont confirm whether HP is sellingall or part of its 60.5 per cent stakeas reported in the market, or whatare the companys revenue targets,or what will be the ratio of its directsales compared to business from HP.

Far from speculating expected rev-enue for this year, Ayyar states, Theonly way to measure your future is byasking if you have become more rel-evant to your customers, and if youare able to work with them in theirthinking process in terms of their

priority areas, then that is what mat-ters most. But analysts think Mpha-siS may record growth of around 8 to10 per cent over its consolidated rev-enue of `5,357 crore in FY12, whichwill make it one of the largest in TierII ITcompanies by sales.

MphasiS is moving out of its com-fort zone in many ways. For one thing,it is changing the business componentit relied on. Business from HP domi-nated a significant 62 per cent of itsrevenue in 2011 and direct sales were

38 per cent. That is changing and thecompany is reducing its reliance onHP and balancing its client concen-tration risk. The business from HP,onan average, has been declining by 5-6per cent every year. Today, the busi-ness mix stands at 54 per cent fromdirect sales vis-a-vis46 per cent fromHPin Q2 2013. The same was 48:52 inQ1-2013. Overall, our direct businessgrew 38 per cent in 2012, comparedto 22 per cent in 2011, says Ayyar.

Describing Ayyar as a highly data

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Elango: empowering employee and customer


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driven man, Dinesh Venugopal, exec-utive vice president & head, banking& capital markets, says, Ayyar startswith data and numbers to understandany business problem. He adds, thisis especially true when benchmark-ing our company performance with

that of our competitors it is nothingshort of unique and effective.

Investing in peopleBut Ayyar isnt just focusing on busi-ness transformation. He has putmajor emphasis on talent acquisi-tion, knowledge and training. Wehave quadrupled our training budgetsimply because we wanted to ensureour people were learning new tech-nology to bring the benefits to ourcustomers, he stresses. One particu-

lar program for its sales force called,First Line Managers (FLMs), ensuresthe company does not lose sight ofthe customer. In effect, what eachmanager does and achieves every daywill define our moment of truth,he adds. There are around 3,000FLMs and this program has helpedthe company raise customer satis-faction. Our FLM initiative movedthe empowerment closest to theemployee and the customer, admitsElango R, executive vice president &

chief human resource officer.MphasiS has also started a Future

Leader Program since 2011 to build ateam of potential leaders to run thecompanys strategic operations. Wego to business schools in India andthe US and hire about 20 candidatesevery year and they are put throughan intensive 24-month program in8-month modules in different areas ofthe companys operations, explainsAyyar. The program for instance,attaches the potential leaders to key

areas of CFOs office, global deliveryleaders, sales leaders and some intheir US operational areas. We wantsuch people to challenge our statusquo and bring in new thoughts andideas, he asserts.

Ayyars collaborative style may, infact, be better suited to todays con-temporary business environmentthan the traditional command-and-control approach. I think the younggeneration today is very aware andknow a lot, he thinks. In fact, he

likes employees pitching new ideas; away of focusing their minds on whatwill most excite customers. Ayyar

is a leader who is a coach, taskmas-ter and biggest supporter, concedesElango. He sets the framework andsets you free to deliver results. Forhim, results are what counts.

Ayyar was born and grew up inthe 1960s in Madhya Pradesh. Hisfather worked as principal of a poly-technic institution. Both his par-ents came from south India. Ayyardid his entire school education inHindi, which was rare for a boy fromthe south. He learnt English only as

a secondary language. As fondly heremembers the school days, Ayyarsays, I am very proud of my Hindischooling as it helped me in build-ing lateral thinking. He then qual-ified as a chartered accountant. Still,he got so fascinated with the field ofinformation technology that he gotinto computer sales and gave up hiscareer in finance.

Ayyar and his wife of 30 yearshave two daughters, both of wholive in the US. Ayyar has homes in

Bangalore and Singapore. His wifelives in Singapore but visits him inBangalore every few weeks. At homein Bangalore, he has two dogs to keephim company.

When a group of CAs invitedAyyar to deliver a talk, they wanted

to learn about his lesser known per-sonal traits. Taking them up on that,Ayyar said, he still carries a straw inhis wallet, which was used by his girl-friend, now his wife, to have a drinkon their first date three decades ago.Clearly, it speaks of his commitmentand loyalty.

As a chartered accountant, Ayyarhas a deep understanding of accountsand uses this well with his sales skills.States Elango, he looks at numbersvery differently, has immense humil-

ity and the patience to listen. Allsaid, Ayyar likes to tell the story andthe lesson he learnt from a mistakemade when placing a sales order fora large system during his early daysat HPSingapore. Configuring thosesystems involved a lot of paper workand in placing one order I forgot tomention that it required a Singaporepower option, he explains.

The system landed with a USpower option and this meant losingtime and money in placing a new

requirement. Ayyar quickly placedan order for another power optionto be hot-shipped without wait-ing for his boss approval. His quickaction not only earned him his supe-riors approval but taught him a biglesson. My boss was patient andunderstanding. How he dealt withme became etched in my memory asthese moments are truly teachablemoments in life. I also realised thatHPstands committed to its customerat any cost, he opines.

Planning for futureAyyars transformation plan did notkeep the company from making newacquisitions. In 2011, MphasiS pur-chased Wyde Corporation that devel-ops and deploys Wynsure, a provensoftware platform for insurance car-riers in North America and Europe.Wynsure architecture allows insur-ers to make unique enhancementsto the system without affecting thebase code, thereby creating a simpler

Dhanyamraju: setting the pace


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upgrade experience for insurers.Billing is a fixed cost. With Wyn-sure, our effort is to make it variable,flexible and cloud enabled, explainsAyyar. A customer will gain by pay-ing only a per bill charge for usingthe solution and would thereby save

investment cost in the platform. Theaddition of MphasiS-Wyde Centersof Excellence is expected to help theWynsure development team meetthe demands of new and existingcustomers.

Another acquisition in early 2013is that of Digital Risk, an indepen-dent provider of risk, compliance andtransaction management solutionsthat complements the companysportfolio in US residential mort-gages. It offers a superior level of

specialisation where they have greatskills, says Ayyar. It is an analyticsplatform to analyse the risk associ-ated with it. With analytics gainingmarket credibility, Ayyar feels, thisacquisition will help MphasiS attainleadership position in the US mort-gage services market.

All said, Ayyar knew that Mpha-siS future depended on his abilityto change the company from a mereHPowned firm to a provider of soft-ware and services. Customers are

looking for more than reputation,now they are seeking solutions thatmeet their requirements and helpthem stay on top of their business,he emphasises.

Ayyar has a lesser known traitthat may serve him well amid thetumult of todays competitive soft-ware business: not to give up eas-ily. A 24-year veteran of the HPandMphasiS, Ayyar joined HP Singaporein 1989, where he focused on themanufacturing industry. In 1991, he

was at the centre of the HPinitiativefocusing on the telecommunicationsindustry. His efforts led him to holda key role in the manufacturing andtelecom team in 1992. In 1999, Ayyarbecame the president of HPIndia. Hesteadily rose to become Asia-Pacificdirector of marketing in 2001. Hetook over as CEO& managing direc-tor of MphasiS in 2009.

Ayyar is maintaining, by wordsand actions most of HPs unique cor-porate culture. He candidly admits,

my work culture and philosophy isbased on the HPway of life in manyways. HPfundamentally believes in

people having potential. As a man-ager, your role is to enable them,as your success eventually dependson them. As a leader, Ayyar is con-stantly setting the pace and ensur-ing his team keeps pace with it,explains Seshagiri Dhanyamraju,executive vice president & chiefstrategy & marketing officer, abouthis management style. He is a learn-ing leader, forcing himself and oth-ers around him to continually learnnew skills.

MphasiS strives to maintain itsindependence and takes its own stra-tegic decisions. The fact that wehave made inorganic acquisitions tostrengthen our offerings is sufficientto confirm that we operate as a sepa-rate entity, urges Ayyar. He may bevery composed, but hes anythingbut boring. He travels a lot, loves col-lecting wrist watches and artefacts.One of his passions is reading man-agement books.

Ayyar says his father played a

powerful role in his life. His fatherpursued his masters degree when hewas in his 40s. It was amazing howsomeone at that age can pursue theirinterests, he says. He was the rolemodel who helped me build persis-tence and will power.

Poised for next leapAyyar says it is hard to figure outtodays evolving technology changes.If you look at trends, the economiccycles are getting compressed. Theboom to bust cycles are gettingshorter. Around a decade ago, wecould see the cycle. Now you dontknow in which cycle you are in theboom or bust phase, he states. Buthe adds that a company must be alertat all times and respond to changes

to serve the needs of its customers.According to Elango, after the trans-formation, MphasiS has establishedstrong operational processes witha nimble strategic unit that is ableto respond to the market demandsahead of changes. Ayyars turn-around of MphasiS has earned himmany accolades.

The biggest threat to MphasiSisnt rival Indian software firms, butlargely unknown and unheard ofboutique firms, who pose the major

challenge. If you look at the soft-ware services business, you will rea-lise that the next generation playersare threatening the pecking order ofthe industry, explains Ayyar. Tothat extent, being large becomes adisadvantage. Your ability to act andreact becomes difficult.

Still, if such competition worriesAyyar, it doesnt show on his face. Ithink we can transform because wedont have too much baggage andwe are at it for three years now. So

I personally believe we have a goodchance. Ayyars transformation planhas helped the company grow outof its mid-size level to strive higher.In the last five years, we were in themiddle of the pack. In the next fiveyears, we want to be in the top quad-rant, he declares. The final judges, ofcourse, will be customers. If a trans-formed MpahsiS finds favour withcustomers, MphasiS could well dom-inate the game and be a winner.

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