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“We are projecting to earn US $ 60 m in FY01 and US $ 110 m in FY02”. - Views on News from Equitymaster
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  • Oct 6, 2000

    “We are projecting to earn US $ 60 m in FY01 and US $ 110 m in FY02”.

    Aditi Malik is the Global Marketing Director of Mphasis-BFL. She comes with a background in retail financial services & consumer behaviour and has worked with Citibank, AIG and UNU.

    In an interview with Equitymaster.com, Ms Malik spoke about the information technology industry in general and Mphasis-BFL’s strategies and the focus area in its existing business.

    EQM: The Indian information technology sector (both hardware and software) has been growing at a very fast pace in recent years. How do you see this sector performing in the future?

    Ms Malik: At least in the medium term there will be no bottlenecks for the industry to grow at a strong pace. When you are talking about software, there are many levels involved in it. At one level there is routine maintenance and on the other hand there is Internet technology. A couple of factors are driving the growth, one of them is Internet technology. The growth will continue with more and more players coming in. So we do not anticipate any slowdown in the software services. There will always be a demand for companies providing value-added services. It would always be differentiated by whether they are providing onsite or offshore services. We believe that for Internet technology that is e-business, the demand tends to be onsite. There are uncertainties in the e-business projects. They tend to be iterative and dynamic and hence there is some preference towards onsite engagement models. Nevertheless, there is no anticipated slowdown in the software service sector.

    EQM: How do you differentiate the current technology from maintenance, reengineering and migration?

    Ms Malik: The technology initiatives have moved from mainframe, to distributed computing and then the big market of ERP. In the last 2 years the corporate focus is on strategic applications i.e. those that either, help a company win loyalty or gain market share. Thus current technology focus is on improving customer access, quality of customer information, customer knowledge and relationship management. An important corollary is legacy system transformation.

    EQM: Kindly explain about your business mix in the current year and geographical break up of revenues.

    Ms Malik: Revenues from e-solutions are expected to contribute 50% of the total revenues and the balance from the more traditional business. The ratio would be changing in future more in favour of e-solutions.

    The US would contribute the major amount to the total business and it would continue for the next three years. However, revenues are showing a good trajectory in Singapore, Europe and Japan. We derive most of our revenues from exports. However, we also do occupy a specialized niche in the domestic market in the area of e-solutions.

    We have set a target to earn revenues of $ 60 m in the current year (FY01) and $100-$110 m in FY02.

    EQM: Could you please elaborate the e-solution business of the company

    Ms Malik: The e-business practice basically helps customers to leverage emerging technologies for a business advantage. To begin with in this e-business project, we draw up a detailed technology architecture beyond the immediate needs of the customer. The entire architecture requirement may not happen in the next 6 months but could happen over the next 18 months. We keep the big picture in mind, so tactical initiatives do not undermine the strategic advantage. So that’s how we talk about e-solutions. In the e-solution business our focus areas include SCM (Supply Chain Management), portals, eCRM and Channel Integration. From these areas we expect to derive revenues of around $25-$30 m in the current year and over a period of time we see these revenues going up. Also, our application areas with e-solutions will widen by foraying into technologies like WAP and broadband.

    EQM: What sort of marketing thrust did Mphasis bring into BFL?

    Ms Malik: The first thing we have done is the integration of global marketing operations. Creating a relationship with the company means that you have to create a value for them by being with them all the time. Basically to rationalise all the opportunities, we have created customer relationship management (CRM). Today lots of Indian companies are marketing at a CIO or at the project manager level or through business partners.

    Our marketing starts from CEO and Head of Marketing. Our focus on technology is not technology in itself, but adding value to the business through the use of these technologies. We are also focussing on verticals where we have good expertise. Mphasis has helped in bringing good referrals.

    EQM: Kindly state the offshore, onsite ratio and the billing rates of the company. Also state the percentage contribution from repeat business.

    Ms Malik: For the e-solution business 70% of the work is done onsite where the billing rates are as high as $120 per hour. But in case of fixed price contracts the rates are slightly lower. Overall the company derives 50% of its revenues from offshore development through which it gets a billing rate of $25-$35 per hour. We are in discussion with some of our old clients to ensure that rates are aligned to skill sets and/or engagement models.

    EQM: In which areas does the company have domain expertise.

    Ms Malik: We have strong domain expertise in financial markets. Apart from finance we are also strong in retail and logistics areas. We do not plan to go into the areas of telecom immediately, since we want to establish a strong presence in the existing domain areas. Over the time if you have finance and telecom domain than you have the two biggest domain areas in the IT sector.

    EQM: Kindly state whether the company has been able to employ all the employees efficiently after the merger with Mphasis and how many of them are billable.

    Ms Malik: As on June 2000, we have around 1,400 employees, 60-70% of which are billable. We are continuously working to move up our utilisation rate. There are lot of synergies between the two companies and they are now fully integrated.

    EQM: Could you please explain about SGA (Selling, General & Administration) expenses?

    Ms Malik: Typically SGA expenses in the interactive integration space tend to be higher than a pure software development firm. The reasons are you need among other things a higher onsite presence, flagship offices in key international locations, Customer Relationship Managers with domain expertise. In the last few years we have invested significantly in creating a marketing capability and we now hope to see SG& A expenses plateau and leverage higher revenues.

    EQM: The top 5 customers of the company account for 50% of its total business. Also revenues from Compaq accounts for 10% of total revenues. In this view kindly explain us how the company plans to de-risk its client concentration.

    Ms Malik: The company is not too concerned about its exposure to a few large clients. This is common in the early life stages of a company. However, today we are:

    • Adding new accounts e.g. Schwab, Chase, and Rabo.
    • Adding new technology skill sets e.g. embedded systems, WAP etc, which will broadbase the business.
    • Moving aggressively into new geographies i.e. Europe, Japan, APAC.

    All of these initiatives will eventually lead to more balanced portfolio across both accounts and geographies.

    EQM: Any personalities that have influenced you and a word on your favourite books?

    Ms Malik: The person I admire the most is Aung San Sui Kyi for making some of the most difficult choices in life and living with them. For being dignified and in control in the face of extreme sorrow, anger and aggravation. My favourite book is ‘Gita’ since it provides answers to questions we ask ourselves all the time.



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