MphasiS relooks at its HP business strategy

Ganesh Ayyar, chief executive officer of MphasiS, refutes the claim that his company has been reducing price to largest customer and shareholder, HP. But he agrees the company needs to work on a new business model to get more business from HP.

“We have not given any pricing discount to HP. The rate card remained the same through 2011. They have never utilised their shareholding to get pricing bargains. Every large customer asks for discounts and so have they. Rather, I think our HP business has not grown. I personally think we need to crack the code with HP,” said Ayyar.

At present, HP shareholding is 60.52 per cent and its contribution to the revenue, as a customer, is around 30 per cent. HP as a partner got around 66 per cent of business to MphasiS in 2011. This has come down from 71 per cent in 2010.

“I think, as a industry, we have been focused on rate-card based business. Majority of our business with HP is based on rate card. We are trying something new and would like to see how it pans out. The new business models will not be based on rate card. We have started the journey of transformation. I don’t know if this model will succeed, as HP also needs to push this with its end customers and that is where it is taking more time,” he added.

Over the past 15 months MphasiS has been on a transformation path with an aim to increase business from non-HP channels and also to increase the non-enterprise services (ES) business contribution. For the fourth quarter ended October 31, 2011, MphasiS saw direct business grow 18.9 per cent, sequentially. “We want to double our non ES business from the current contribution of $30-40 million (around Rs 147-196 crore) by the end of this year,” said Ayyar.

For 2012, the company will be focusing on three key areas — accelerating our direct business by creating hyper-specialised focus and emerging new geographies; to grow footprint beyond HP-ES; and to incubate newer areas of business, such as payment solutions and product engineering services. Non-HP business grew 24.9 per cent sequentially in the Q4.

When asked if HP plans to delist MphasiS from the Indian bourses, Ayyar said: “I have been hearing this for the last three years. I have never had any discussion with HP on this.” Ayyar believes that for companies to be able to grow at the industry level of 11-14 per cent will be possible only if they start investing in new business models.

“I think the recent Nasscom prediction on growth is a bit too optimistic if companies continue to look at traditional outsourcing sources. The whole buying pattern behaviour of customers have undergone a change. Offshore vendors who have relied on discretionary spend for growth will need to move up the value chain and specialise,” he added.