Mphasis set to launch automation product developed by in-house unit

Mid-tier IT services firm Mphasis is taking the digital adoption to the next level by launching the first product built by its in-house start-up in the area of automation and semantic web.

Mphasis’ first in-house start-up NextAngles, which is based in Princeton, is all set to launch a product for large enterprises, which can accelerate the compliance process three times over and reduce related costs and burden by one-third.

“NextAngles is going to come out with a semantic web, artificial intelligence-based regulatory compliance framework, which will compress the time for our clients to comply and reduce the cost associated to comply. It will automate selected portions of that,” Mphasis CEO Ganesh Ayyar, told BusinessLine .

“Since it is a high-science, high-margin business eventually, it will also enhance our valuation as a company,” he said.

NextAngles is part of Mphasis’ one-year-old initiative called Cart-Up to let employees build their start-ups with the company. “I said if you think this is the right thing to do, I will fund this internally, form it as if it a separate company. You can have your own HR policies, own premises, own logo. Two things you need to comply with: our audit and ethical framework. Other than that you have complete freedom,” Ayyar said, explaining how these start-ups function within Mphasis.

Recently acquired by private equity firm Blackstone for $1.1 billion, Mphasis prefers to work alongside start-ups instead of competing with them as the digital business turns into the biggest bet for the company.

“Start-ups can be a force multiplier rather than a threat because they are also looking for somebody who has a deeper understanding of the customer and so a start-up can go and pitch their business with these large firms,” Ayyar said. One such start-up that Mphasis is working with is Artificial Solutions, which can act like a personal assistant for financial queries using natural language interaction akin to Apple’s Siri.

“The traditional IT services business in under threat and is on the decline, which means if you just leverage the traditional IT services business, you'll continue to decline or you’ll slow down your growth. You need to migrate to new-generation services, where customers are spending money. If you look, of the $97 million of new contract value that we won in Q1, 75 per cent is in new-generation areas, which gives us greater hope that we can succeed,” Ayyar said.

New-age services, which include cloud, mobility, automation and GRC services, contribute over 33 per cent of Mphasis revenue.

Mphasis has also been able to come out of a bad spell with its HP business after almost five years. “Today, they (HP) do about 23 per cent of our revenue; I expect them to stabilise in the $200 million per annum range in absolute terms. So that's good news. Otherwise our HP business was declining for the last 4.5 years at roughly around 21 per cent per annum and if it hits a stable regime, that will give us some boost to the overall growth of the company,” Ayyar said.

Blackstone’s move to take over Mphasis is also giving it an additional fillip to tap new customers.

“As part of the transaction, new MSA (master service agreement) with HP has committed volume which gives us greater assurance around the HP business. They have committed $990 million of revenue over five years. Being the number one PE firms, they (Blackstone) have a number of companies under their portfolio. These portfolio companies are spending money on IT and IT services. We need to step up, compete and win that business. The addressable market for us is about $1 billion,” Ayyar said.

Mphasis currently has no business relations with any of Blackstone’s portfolio companies.

Ayyar said the company will also continue to consider inorganic growth, where Blackstone’s expertise could help. “Our areas are cognitive computing, automation, robotic process automation and next-generation GRC solutions. These are the areas where I would look for acquisitions and intense partnerships,” he said.

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