While most folks are obsessing with the performance of the IT mainstays over the past 18 months, spare a thought for two IT services businesses that not only entered Covid on a long growth cycle, they also readjusted quickly and carried on their growth stories even during the worst of 2020. Just check out the quarterly revenue growth paths of LTI and Mphasis respectively:
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Why have LTI and Mphasis carried on their growth unphased?
Big enough to get to the table, small enough to keep client intimacy. It’s the oldest quote on the book for the mid-tier service providers, but couldn’t be more true in today’s market. Enterprise clients want to feel they have the personal attention of the CEO and the leadership team when it comes to signing over their technology control. Rewind 10-15 years, most enterprise CxOs had a direct line to Chandra (TCS), Shibu (Infosys), Jeya (Patni), Pramod (Genpact) or Frank (Cognizant). Client leaders wanted to feel the personal touch from their services partner leaders, and they were usually personally involved in the scope and negotiations. Today those same executives are most likely stuck with a client partner, who is literally horsetrading the rate card with them. Enter the likes of Sanjay and Nitin, who spend most their time talking to their clients, reassuring them, convincing them, but most importantly are available to them.
Flatter structures and visibility to leadership motivate staff. Staff want more from their companies these days than a good stock plan and competitive salary – they want to know what their leadership stands for, and want to learn from them. With less bureaucracy and promotion cycles based on merit, not purely tenure, it motivates staff to see how to get ahead, and and having more access to their leadership. Nothing demotivates staff more than seeing weak managers stay in their positions year in, year out, while the rockstars leave, or are sacrificed. I have even seen hierarchies in some services providers so rigid, you are instructed not to interact with people in the level beneath you. Yes really…
Sustained profitability helps high performers to be financially rewarded and retained. In a market where attrition is running at an all-time high, the smart players are identifying their talent engaging with clients and helping them execute and making salary increases to keep them. Providers like LTI and MPhasis have kept their profit margins in the high-teens consistently over the Pandemic and are in good stead to reinvest in retaining key talent and attracting new blood from start-ups and larger service providers suffering from low morale.
Savvy tuck-in investments and market moves. Mphasis continued to bolster its depth in largest industry, banking and financial services, with its Front2Back transformation methodology and NextOPs framework really bearing fruit during the Pandemic, while also venturing effectively into other industries, such as logistics. The firm also added delivery depth in the UK, notably acquired Seattle-based digital design house Blink and significantly de-emphasized its reliance on DXC as a client. LTI merged most of its cloud transformation under its Infinity umbrella mimicking Accenture’s Cloud First and Infosys’ Cobalt offerings, but at a lower price with a focus on outcome or risk-based pricing models. This bought their customer an extra ~20% of possible savings while the downturn driven by the Pandemic was underway. LTI also ramped up its CSP/Hyperscaler partnerships (mainly with AWS) at the right time and added some customers to their book through acquisition.
CEOs who can inspire and motivate their people. Simply-put, making themselves highly accessible to customers and staff has been huge in driving their respective businesses. Moreover, showing longevity and loyalty to their brands has been a key factor with Nitin recently signing on for a further 5 years at the helm with majority investor Blackstone.
Bottom-line: Big is no longer brand-beautiful
The days where you never got fired for hiring IBM, or ensuring high performance being delivered with Accenture, are not as vogue as they used to be as service delivery levels off across providers and speed/execution take center stage. Moreover, the top tier of service providers simply cannot afford to focus their A teams on smaller-scale deals that will not fit their high-pressured revenue models. The amount of new business becoming available to the likes of the LTI, Mphasis, Virtusa, Hexaware, Zensar et al is larger than ever and most of the Global 2000 opt for one to two primary global service providers and a couple of these nimble, energized mid-tier firms to keep everyone honest.