Information technology (IT) services company MphasiS, a subsidiary of Hewlett-Packard (HP), reported a fall of about 4,560 in its overall headcount, compared to the year-ago period. The company, dependent on HP for the majority of its revenue, also saw a drop in the number of clients added during the quarter ended April 30. Chief executive officer Ganesh Ayyar, in an interview with Bibhu Ranjan Mishra and Pradeesh Chandran, says the company has embarked on a journey of hyper-specialisation. Edited excerpts:
Since MphasiS became HP’s subsidiary, this is the first time a drop was recorded in the number of clients added through HP. Is this because HP is facing rough weather?
The HP (marketing) channel accounts for 58 per cent of our revenue. Of this, the contribution of the non-enterprise solutions (ES) business is small, about four per cent. However, the fact is the contribution of their ES business to our revenue has declined. So, the demand pattern that HP is seeing in the ES space is evident in our results, too.
How do you plan to address this challenge?
The decline (in HP’s ES revenue) is clearly being offset by our direct (marketing channel) business growth and HP’s non-ES business growth.
But the number of clients you added this quarter through the partnership with HP was just four, compared with 11 in the previous quarter.
We can attract many of HP’s clients using many options. Rate reduction (for clients added by HP) is one example. But we have not explored any of these, as it would not be beneficial to our shareholders or customers.
Can you fill the gap created by the absence, or drop, in HP’s contribution with your direct channel?
We are growing the footprint of our direct (marketing) channel. If you look at the corresponding quarter last year, our selling cost was 4.1 per cent of our total revenue. Now, it is 5.3 per cent.
Does the decline in headcount have something to do with HP’s plan to cut workforce by 27,000 globally?
No. MphasiS is an independent company. We decide what we want to do with our workforce.
As explicitly stated, our aim is profitable growth, and we are not changing that.
But has your headcount not declined by 4,560 this quarter, compared to the year-ago period?
Today, when the entire industry is focused on scale, we have started on a journey of hyper-specialisation. A year ago, we had 41,739 employees and now, we have about 37,000. So, if with the reduced workforce we are able to deliver a 5.7 per cent increase in revenue, it shows it is possible to build a revenue stream in which linearity between the numbers of employees and the revenue can be broken.
Did all these employees leave voluntarily?
We did not carry out any reduction in the workforce. What we did was not compensate for the normal attrition. Second, we have a bench policy like most other companies. If you are on the bench (a reserved employee without working in any project) for a long duration, you start getting a lower salary, and then people start leaving. You cannot run an IT company without a bench policy.
But many human resource managers say the ‘bench’ is like bank balance; it can be withdrawn when there is demand.
The bench can be considered bank balance, provided it is in the right currency. When it has the required skills, it should be viewed as strength. Because of volatility in the economic environment and the changing IT services market dynamics, I believe building a bench would not be fair to our shareholders and customers.
Would you raise salaries in this kind of an environment?
We are raising salaries by about eight per cent, with effect from May. A certain percentage of this raise would go towards variable pay.
