We are working hard to crack the code with HP: Ganesh Ayyar

Interview with CEO, MphasiS

Despite continuous efforts for the past few years, India's sixth largest IT services company, MphasiS, has failed to arrest the decline in business from its parent company and largest client Hewlett-Packard. However, the company's CEO Ganesh Ayyar remains determined to Rs crack the code'. In an interview with Itika Sharma Punit, Ayyar says the success of growing HP business would depend on how much fresh value it can deliver to the client. Edited excerpts:

You had earlier said that MphasiS will do anything to woo its largest client HP. How far have you succeeded in doing that?I don't think we have succeeded.

We have attempted many things over the last three years and we still haven't found that secret recipe to crack the code with HP. The fact that we have not been able to arrest the decline in business from HP is a matter of concern. So we will keep trying because they are an important client, they give us close to 40 per cent of our revenue.

What are you doing to Rs crack the code'?

When you have a multi-year relationship or large relationship, your ability to inject something dramatically new gets curtailed many times because you live with the burden of legacy. That restricts our ability to deal with the legacy and bring a fresh value proposition. There is no problem in our relationship with HP; the reason for declining revenue from them is probably HP is also confronted with changing market conditions like us.

Over the past few years, you have been trying to strengthen your own sales engine instead of depending too much of HP. How have you fared in that?

Three years ago, our direct business was just 28 per cent of our total revenues. Our board and leadership team were quite concerned about the too much concentration on one client. From 2006-2010, our direct business remained flat in absolute terms. To say that we have been successful in this area is a tall claim, but we have achieved the milestone we had set for ourselves.

What is the next milestone you had set as far as direct business is concerned?

Over the next two-three years, I expect our direct channel business to grow at 1.5 times of the market growth. The ratio between direct and HP channel businesses entirely depends on whether we are able to crack the code with HP. But if the current trend continues, I won't be surprised if in the next 18 months time, direct business starts contributing close to 70 per cent to our revenues as against 60 per cent now.

How is your order pipeline?

It is good. Especially our large-deal pipeline is strong. Also, our current pipeline has a good blend of newer offerings and traditional ones. On HP front, we continue to struggle on how to bring better value proposition. If you extrapolate the data that we have had for the last 12 quarters, you will end up with a projection of decline in business from HP channel going forward. But I am very excited when I look at the direct-line business in the next 18 months.

Based on your discussion with clients and deal pipeline, have you started seeing a clear recovery for the industry?

Business momentum has absolutely picked up in the US, but the traditional demand patterns are not there. Clients in the US are bullish. If someone can come with a different approach, there is definitely god potential. In Europe, the demand patterns are not as clear as in the US. So, there are pockets where we feel that the growth has begun to happen, but the demand is not yet broad based.

What are your plans for hiring?

I think the success of the industry and MphasiS lies in how you can increase the value of each employee. Revenue per employee will become far more important in time to come than number of employees, and that is what we are focused on. Our hiring plan would be based on actual demand rather than building capacity. We will hire as and when needed.