Mphasis President Venugopal On Beating BPO Competitors, The Impact Of Automation And 'Significant' Cloud, Cognitive Plans

New Parentage, New Focus

In the 10 months since private equity giant Blackstone Group closed on a massive agreement to purchase HPE's majority stake in Mphasis, the nearly $1 billion solution provider has been charging full-speed ahead under its new controlling owners.

The Bangalore, India-based IT services firm is now able to pursue an entirely new customer segment – the Blackstone portfolio of companies – with the finalization of that deal, which it credits for improving its business relationships with HPE and DXC Technology. The business process outsourcing (BPO) specialist also added a fresh face at the top earlier this year, hiring Nitin Rakesh away from Syntel to become Mphasis' next CEO.

Dinesh Venugopal, who became president of the Mphasis Direct-Core Business and Digital operations in September 2015, spoke to CRN about the company's recent changes and how a renewed technology-led strategy will continue to position his company for success moving forward.

In the edited Q&A that follows, Venugopal discusses the leadership transition under Rakesh, how Mphasis has handled many of the challenges facing the BPO industry, its plans to renew focus on the financial services industry and its efforts to increase specialization in the cloud and cognitive spaces.

Nitin Rakesh (pictured) came aboard as CEO in late January. What has he brought to the table, and where specifically has he focused his energy?

Anytime you have a CEO transition, typically you have transition pains. I think Nitin has hit the ground running. It was good from our perspective to get a fresh pair of eyes on where we're headed. I think it's probably the quickest, fastest transition I've seen. He spent the first 100 days on the road – he was across the U.S., the U.K. and Europe – meeting all our customers, which is what we like. Because who we are culturally, as the customer sees it, is a services company. We set up almost 100 meetings. Then he went on a very intense investor tour; he visited about 15 cities in two weeks. That gave him some perspective on how investors see us. They're very excited.

How did investors respond to the Blackstone deal?

Our stock price is doing well. At the time of the transaction last year, it was around 430 [rupees] and now it's hovering around 600 [about $9.40 a share]. The significant improvement in the stock price gives us confidence in our strategy and where we are headed. Rakesh met the customers, met the investors and spent a lot of time with employees. He got the 360-degree view of who we are. Clearly we have a lot of different jewels, and his job is to bring them out and polish them and make sure our customers experience the real capabilities they have.

Automation capabilities have been a major area of focus for Mphasis. How has automation affected the services industry?

If you go back and look at all major trends, it's simply because those capabilities develop and certain use cases become possible. Not the other way around. Over the last couple of years, automation tools and technologies have clearly come a long way. There's been an exponential change in the number of players in the automation space as well as what they can and cannot do for us. That has really helped services companies like us take full leverage of the tools and technologies. That in a sense has caused customers to rethink their entire strategy and how they look at it.

What sort of trends are you seeing around automation?

Companies are looking to optimize operations significantly, in some cases up to 30 percent – not just to put back in the margin line, but also to fund new initiatives. They find the only way they can fund new initiatives is by bringing in automation. We see what we call front-to-back modernization, or transformation. You have your core systems and processes. If you try to change your core systems and processes and do the back-to-front approach, which a lot of people have tried, success is not guaranteed and it's not usually done in a timely manner. Because these are large modernization projects that take three to five years.

Why is "front-to-back" modernization a better approach for businesses?

Automation by itself will only bring you so much incremental value. What you really need to look at is to see how automation is going to have an impact on business metrics. If you want to get to that level, then you must do what we call front-to-back transformation. We're seeing a lot of traction in that space right now. We have healthier customers from that perspective. The next couple of years, 18 to 24 months, you're going to see exponential growth from the companies focused on cloud and cognitive [computing]. It will definitely be [growing] faster than the market. Companies are finding the funding by optimizing their operations, and automation is a key level to that.

What areas does Mphasis intend to prioritize within the cloud space?

We're primarily focused on the application migration space and native cloud development. How do you help enterprises move to the cloud and build applications in the cloud? We're not focused on the cloud operations pieces, especially some of the infrastructure players that manage the cloud infrastructure. Anything application-related that we need to move to the cloud and build in the cloud – we call it X2C2 – we are the ones to call. That's the first set of capabilities we're looking at. We're investing in it organically. We're building huge practices around cloud. But we're also looking for acquisitions in that space as well.

And how do you view cognitive computing?

We look at the cognitive play as a spectrum. On one end, you have basic automation, keystroke automation and maybe a little bit of robotic process automation. On the other side, you have artificial intelligence. We need to be able to play the entire spectrum because the customer's readiness is going to vary in each of those areas. They have to adapt. It depends on their systems and processing. We look at that as an entire spectrum, and we're building capabilities around the spectrum. One of the solutions that we've built is for the compliance area, we have an artificial intelligence-based cognitive platform called NextAngles. It's a cognitive solution that helps customers reduce their cost of compliance operations.

How would a financial services firm leverage NextAngles?

One of the use cases is anti-money laundering. There are a lot of false positives. Say you were used to sending money to China for $10,000 every month and suddenly you have $100,000 going in. It gets flagged as an exceptional transaction, then you have to spend anywhere from six to eight hours for a human to look through the transaction that's really a false positive. We find that 60 percent to 70 percent of these are false positives. That's a lot of time and energy spent. You have this real problem because you have to go through multiple systems to make this happen. We have built a system that learns. That can help reduce the false positives by 50 percent.

How do you see the cloud and cognitive technologies affecting the BPO industry moving forward?

In three to six months, this will become the industry norm: With any proposal, BPOs will ask, "How have you made this more efficient by bringing in automation?" You're going to see technology will help you reduce your human costs by 30 percent every two years. That's continuing to significantly change the way we look at our industry. Our investments are going squarely in those areas, but with clear understanding that we cannot win the entire spectrum. We're identifying very specific use-cases in compliance, in banking and in reducing the overhead of communications between the broker and underwriter where we bring cognitive and cloud to life. That is what we want Mphasis to be known for.

How is Mphasis positioned to handle some of the challenges facing most BPOs?

The column we are pursuing is technology-led. How can cloud and cognitive make that into a non-linear optimization effort, which you can then use to fund your front-to-back transformation? A lot of the BPO companies, they don't understand the technology that we bring. The larger companies that are both technology and operations, they are large separate groups. That's the legacy of how they run. They bring in piecemeal automation efforts. They're not transformative enough. That gives us a distinct edge when we go to market. They can catch up, they can do some acquisitions, but clearly, we are ahead. We are out of the gate before anybody else.

How do you expect Mphasis to grow relative to the rest of the services market?

We have been growing faster than the market. Direct-Core has been growing faster than the market. And we think we will continue to grow faster than the market. And the Indian IT services market is projected to grow 7 percent to 8 percent. From a Direct-Core perspective, we've been growing faster than the market last quarter. We're very excited. I think we're in the right spot.