Mid-sized information technology (IT) services company Mphasis has seen 12 consecutive quarters of declining revenue from parent Hewlett-Packard (HP). The company gets about 35% of its total sales from HP.
Chief executive Ganesh Ayyar talks to Itika Sharma Punit about the company's growth strategy, the outlook for business and boosting the morale of employees amid rumours of parent HP selling its stake. Edited excerpts:
Revenue share from HP has been falling for 12 consecutive quarters. Are you considering a change in strategy to ensure stability in business?
If you visualise Mphasis as a collection of three businesses --- direct organic, digital risk & HP-channel business ---, until two quarters ago, we were growing in two of these (direct organic and digital risk). Fundamentally, our strategy hasn't changed; it continues to be focused on growing the direct business. In the past three quarters, we have added new deals with $173 million of total contract value.
The number of wins we have had gives us great confidence that we will continue to have robust growth in that business. In the digital risk segment, we had two wins in the past quarter, which tells the performance in the segment this quarter was probably the lowest and there will be growth from here.
We have not been able to arrest the decline in the business from HP. So, I won't be able to predict any growth. If I extrapolate data for the past 12 months, I expect the decline to continue.
After several rumours about a third party buying out HP's stake in Mphasis, there were reports the company's management was planning to buy out the stake. Is that true?
These reports have been haunting me for the past two years. I don't know where these reports are coming from; certainly not from Mphasis. I don't know which management they are talking about because I am not aware of any of these things. My focus is clearly on growing the business.
Based on interactions with clients, what is your outlook for 2015?
My discussions with clients show most are shifting investments away from traditional services into new areas. The three big investment areas are digital, data and compliance.
Overall, budgets are not going up; so, they are cutting costs in traditional services, there's no doubt about that. The fact is when contracts for traditional services are due for renewals, there will be intense threat to incumbents. Our pipeline gives us enough confidence to say we will see growth in our direct business in FY16.
How has employee sentiment been in view of the constant rumours of HP selling its stake?
It is a fact that our business with HP is declining, but our direct business is growing. So, employees understand this augers well for the company. We are engaging with our employees. In the third quarter, our attrition is down sequentially. But I won't take that for granted. I don't think we have completely shaken off the concern. We will communicate more with employees.
Have these rumours dampened fresh hiring for the company?
Rumours have been so many that slowly, they're becoming ineffective. As far as our ability to attract top talent is concerned, I get involved in reaching these individuals and so far, we haven't had any major problem in that segment.
But when you go to the mid-level, such concerns can prevent people from joining the company. Also, recent reports about some large companies carrying out workforce re-balancing add to the concern. At such times, I think our hiring process has to have a personal touch.