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Krishnan Thiagarajan
Abhrajit Gangopadhyay

"I see three types of companies in India. The big offshore players, captive (back-ends of MNC's) and the niche players."

Charming, articulate and forthright: Traits that one increasingly finds among the Chief Financial Officers (CFO) of most frontline or Tier-II software companies these days. They are positioning themselves as Chief Strategists, Chief Risk Officers and CFOs, all rolled into one. The CFO living up to this billing is Mr Ravi Ramu of MphasiS BFL. He spoke to Business Line on issues straddling the technology environment and threats from global MNCs to his company's software-BPO (business process outsourcing) strategy. Read on and judge for yourself.

How are the US technology environment and capital spending patterns panning out?

The point clearly is not the question of how big the overall IT spend pie is becoming in the US. The question is how much of that pie is coming to India. There is an overall theme behind this. Say, with big multinational clients, you do not normally have more than four-five competitors around the world. You take shoes or banks or whatever it is. If two of the four do India, the others are forced into it. It is a business imperative of the India factor. For India, I have coined something called the Triple-B bonanza, of brains, bandwidth and bottomline. Brains need no explanation. Bandwidth means the number of people with brains, experience and English language capabilities.

How are the sales decision cycles or client ramp-ups shaping up relative to the past quarters?

I think this Triple-B is coming home, and that is reflected in the sales cycle. I do not think the sales cycle is becoming longer. The traction, as analysts like to call it, is improving over the last few months. The sales cycle of six months is doable. But the range can be anywhere between six to twelve months. I think six-eight months is a good average. The traction that is essentially coming is from our existing client base. Most of our top clients are ramping up, some faster than we would have hoped for.

What kind of pressures are you seeing from global MNCs playing in the Indian IT services environment? And how will these affect the fortunes of medium-sized companies such as yours?

These are my personal views and to that extent not necessarily a company view. For the MNCs to set up operations and any meaningful effect to really hit home will need a major scale. I think that their path to scale will have more issues than most people anticipate. Based on the fact that they have to reach sizeable numbers.

One, two or three thousand is not going to affect them. You are talking 8,000, 10,000, 20,000 type of numbers, and that is not going to be as easy as we people believe it to be. Also, forget that their business models are not offshore centric, say the higher end consultants especially. Both the factors make it quite a challenge for them.

They know that companies like us are already established in India. We do half of our software business revenues say from systems integration, portal, e-business architecture and we have already dovetailed that with our offshore work. For somebody to come and set up that afresh and then grow it to massive scale for synergies to set in, it looks easier than it will be.

Who are the ones who have been successful relatively with this model? They are R&D types, such as Cisco, SAP, Microsoft. Not the pure services companies. Especially the more higher end services, the less the ease of transitioning into this model is. BPO is a difficult ball game. This is applicable mainly to IT Services.

We have found that moving up the software value chain has become difficult for Indian companies. Is it in a sense going to be easier to come down the value chain vis-à-vis moving up the value chain?

I think there are two ways in which one needs to look at this. I think moving up the value chain for Indian companies is going to be a huge challenge. Equally, the challenge will be as huge for others coming down the chain. It is the mindset, it is the business model. You are changing your business model, not only in geographic terms, but also in terms of actual production of your final deliverable.

When you are doing your deliverable, you are used to everybody around you. Let us say 50 people. Suddenly 30 people are 5,000 miles away. You will say videoconference and all those things. But you are not used to working like that. It takes time. I am not saying it is impossible, but it is fraught with all these kinds of challenges and issues.

How do you think medium sized companies need to position and differentiate themselves to survive in this competitive environment?

I only see three types of companies in India. The big offshore players, captive (back-ends of MNC's) and the niche players. And the niches are few and far between. In this context, we are finding that the area where fresh spends is happening in a marked, discernible way are in the e-business or consulting end. e-business is coming back into vogue and is here to stay. Especially, in the verticals that we are in, in the banking vertical.

Huge amounts of money are not being spent by financial institutions. What is happening is mainly tweaking. They are not replacing their computer systems as in the heydays. But they are building on their existing core systems. That is where a systems integrator comes into his own. We got hit badly when the slowdown hit everybody. That is when companies called quits on projects or product enhancements and do the maintenance jobs. We also did that and that is why we have survived to tell the tale. We have been in maintenance and the niches.

Do you think the floor price (or average billing rates) itself will settle lower as frontlline companies attempt to use their scale and size to get bigger in the near term?

There may be some pressure, but nothing to scream from the rooftops. But we will work on our niches to ensure that this does not happen. People who are generally "me toos" of the bigger models will face their own pressures.

You have indicated that the company is working in terms of software-BPO integration, which will help you improve gross margins and derive productivity pay-offs in the future. How do you plan to leverage on this strategy?

I think we are seeing are lot of synergies between IT and BPO. The synergies are at the point of looking at a vendor. A vendor who has relatively good scale in both businesses as opposed to a vendor who is in a lopsided sort of environment.

We have three silos: systems integration, ODC kind of work and BPO. If you look at the fourth quarter, just rule of thumb: one-third of the revenues streams are from each of these silos. We feel that one cannot be ignored at the expense of the other.

Having grown these businesses, if not in unison, they are some comparison in terms of strength and scale. More than half of our clients are common to both software and BPO.

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