Let’s be honest, the services business needs dynamic leaders, if we’re ever going to step up to being these innovators and true partners we keep claiming we are.
One such character I have enjoyed getting to know over recent years is Nitin Rakesh, who spent a good part of his earlier career at Syntel, eventually taking the CEO mantle for three years, until moving over to Mphasis just over a year ago, to revitalize the $1bn financial services focused IT services firm, which spent many years are part of HP, before being divested.
Nitin is also very active in the thought leadership sphere as chairman of the IT services council for NASSCOM, and serves on the advisory broad for Knowledge@Wharton (among other activities). But one of the things you’ll get to know about Nitin is his brain typically works faster than most mortals, especially when it comes to his favorite topic about aligning technology to the needs of the customer, and working those desired outcomes right through to the back office, which is a philosophy very close what we believe in at HfS, with our Digital OneOffice conceptual framework.
So let’s hear a bit more from Nitin about how to get ahead in today’s IT services industry, and what we need to do to be effective in the wake of intense competition and the leveling off of traditional IT services…
Phil Fersht, CEO and Chief Analyst, HFS Research: Good morning, Nitin. It’s great to have you on here. To start with, I’d love to hear a bit more about you personally – you’re a technical guy, you’re an engineer at heart. So how did you wind up running a billion-dollar IT services firm? Tell us where this all started and why you’ve been so successful at it.
Nitin Rakesh, CEO Mphasis: Thank you for that, Phil. I think I am an engineer at heart, I love building stuff. Early on I started experimenting with newer areas – as I came out of college, back in the days in the early ’90s looking at how do you apply technology to things like image processing, character recognition. Those were very early days of artificial intelligence because you are teaching the software how to actually recognize handwriting.
So I think early on I got really excited about the impacts technology can have on our daily lives, and how we can change the world surely but certainly. I think from then I’ve never really looked back even though I’ve done a few stints in financial services. How do you apply technology and innovation? Back in the day, in the mid ’90’s, there was a field which is now also pretty prevalent called ‘Technical Analysis of the Markets’. And that was nothing but pattern recognition to see how do you analyze human behavior looking at the patterns in stock markets or their price behaviours.
So I think the theme started to get clearer to me over the years, but I’ve been lucky that I was at the right place at the right time as well. More importantly, I am really passionate about applying technology to everyday problems and ended up running a technology services company.
Phil: We got to know each other when you were at Syntel, but you’ve since taken over Mphasis, and now it’s free of the HP empire (or former empire). So how is that business refocusing itself… and where are you taking it?
Nitin: I think this company has got some unique capabilities despite having gone through both shareholders in the last 12 years. I think we have retained and maintained our focus on applied technology. The company was founded by two ex-Citi bankers, so the focus was always applying tech to financial services and banking.
One of them was a business leader and the other one was a technical leader, a CTO. I think they built a techno-functional mindset into the business more than just a functional approach to applying problem-solving. I think it was always about embedded technology. And I think under EDS and HP, some them flourished, but some of them were impacted due to the overall global empire of HP, and the fact that we were a small piece of their overall business.
But as I came onboard about a year ago, we do have a fairly progressive shareholder who encouraged us to find our footing based on our areas of strength. What we’ve really been doing over the last 12 to 18 months is, essentially, differentiating ourselves by being an applied-tech firm that focuses on looking at how to apply new technologies to everything that banks, insurance companies and financial services firms do.
This is really about looking at, in the current age, how we make every enterprise customer-centric for their end customers and consumers, and how do you apply technologies to help them get closer to their customer in order to improve customer experience, reduce downtimes, offer targeted products and services with hyper-personalization? And all of this at a lower cost, with a fast time to market. So that’s kind of the mantra that we’ve set for ourselves.
Phil: A billion dollars in revenue: Surely, Nitin, that should be the ideal size to be big enough to be dangerous, but small enough to be sort of nimble and disruptive. What does this mean though, in reality? Can you share an example or two of how you can disrupt with your clients, while also delivering the bread-and-butter work that keeps the machine going?
Nitin: Absolutely Phil. That’s a great positioning statement! We actually use a variation of that quite often. But I think our positioning almost always is that of a ‘champion challenger”. And from that, one, we obviously have the agility and the customer-centric focus on our side. We aim to give clients a personalized white glove service experience and we continue to invest significantly in our capabilities to stay ahead of the curve. In fact, there are multiple examples where we’ve been fairly nimble – but also aggressive – about going back to our clients and proposing to them things that challenge how they run their current operations, whether technology or business.
I’ll give you a small example: Why should we not apply something like predictive analytics to an offering as standard as infrastructure application management? Why should we not turn AMS or an IMF into a big data analytics problem, and why should we wait for something to fail or break, so that we can go and fix it, which is (let’s face it) the traditional IT outsourcing model?
So, I think, from that perspective, it means that we end up shrinking the overall footprint of the ITO team, but that’s okay with us because I think that’s the right thing to do for the customer. So, I think from our perspective, we’ve been fairly aggressive in moving clients along this journey of applying technology to traditional services as well.
And given that our scale is normally a fraction of some of the very large players, we are able to go back in and propose something very creative, even if it means that it actually shrinks the core and has an adverse impact on us as well. I just think that’s the right thing to do. So that’s how we are able to challenge the status quo, and in the process, carve out a position for ourselves.
Phil: One of the big discussion topics we talked about at our recent New York FORA summit centered on emerging technologies like automation, machine learning not being an end – they are just a means to get from one place to another. So, what are these places? What – in your view – is the real end-game for clients these days?
Nitin: Great question, Phil. I think I’m a big believer in the fact that every next technology isn’t anything more than a tool, and what you do with it depends on how you are able to align it with one or two objectives. I talked about the fact that one of the biggest reasons why we are seeing fairly high degrees of disruption, especially in consumer-facing industries, is because, over the years, enterprises became so complex in the way they ran their back office systems and operations, that almost every business that’s been around for 25-30 years is essentially run back-to-front what that means that the back office determines when you can launch the next product, the back office determines what’s the next recycle for you to be able to make changes to your system, so you can have the new functionality.
The back office determines how much flexibility do you have, and so on and so forth. Whereas if you look at the new age, truly digital companies, they actually put the end customer in the middle of everything, and work backward from that. So how do you really pivot the focus of large enterprises from being functionally operationally back-office driven, to being customer-driven. And that’s how you should think of applying all new technologies, whether it happens to be analytics, which should give you the ability to understand every customer, or whether it is some form of AI, machine learning or robotics, which should really be able to reduce the time and cost it takes for you to service customers.
I think applying this customer-centric transformation, starting at the front of the customer and moving towards the back office, is really what we think that today’s technology should be applied for. Beyond that, IT has always been about automation of an existing workflow or a business process, so I think automation is really nothing but the next generation of that.
So I’m a big believer that if you keep customers at the center of everything and if you apply this transformation, essentially to provide a hyper-personalized and a great experience to the end customer, I think every large enterprise will find the digital pivot that they are looking for to avoid disruption.
Phil: As you look at expanding your own company’s footprints, Nitin, does this have a big impact on the profile of people you are looking to bring in, the backgrounds, the talent base, the business mindset? How is that changing your whole growth and talent strategy?
Nitin: I think It’s very much central to the transformation, Phil, that we need to drive as service providers in our business. I think a little bit of everything you just said absolutely, first and foremost we need our people to be aware that this business is not about just throwing resources at a problem but it’s about applying technology to the problem. So I think that’s the first realization that we’ve driven through our org.
Secondly, it’s not just about understanding one aspect of the functionality. You can’t just be a tester or a developer anymore – you have to be able to understand the entire stack of what goes on and, from that perspective, I think what becomes really front and central is what we are calling the architecture or the design layer. i.e. How do you combine an architectural solution mindset with a developer (with a software engineering mindset) to create that sweet spot of what we call a T-shaped developer or a T-shaped employee . On the one hand, you want them to understand a certain particular functional domain and, on the other hand, you also want them to be steeped into the technology horizontal domain. So, I think driving this T-shaped approach has really been our core focus.
Again, we’ve had, as I mentioned, a long track record of a techno-functional approach. We’ve got an architectural mindset and are, in fact, one of the first companies, more than 12-13 years ago who set-up an architectural community, and we’ve got to double-down on that, which is why we are driving it top-down from that perspective.
Phil: Nitin, try and think ahead three years, beyond the current horizon. What do you think our world of technology is really going to look like? When you look at the pace of change, how fast we are moving today when you consider the speed at which we’ve developed in the last decade? What do you think we’ll be talking about in three years time?
Nitin: I can give you some guideposts and some megatrends that I think will continue to evolve. Which technology will be front and central is hard to call. A good example is, who knew 18 months ago that everything in the world would be powered by Alexa. So similarly, I think it’s hard to call these technologies, but I see no reason why we shouldn’t see the continued focus on applying all forms of new tech to the customer experience. If that means that we end up evolving to a contact-less UI, whether it’s voice or AR, VR, some combination. I think that will definitely be a good example of how all things customer-centric will probably drive a lot of the technology implementations.
Secondly, I think most the enterprises will continue to focus on shrinking their core technical debt legacy footprint, applying technologies like cloud, and some form of cognitive as well.
I think, directionally, how do you improve customer experience, how do you continue to drive personalization, how do you reduce time to market, how do you drive a higher ability to monetize and understand the customer to cross-sell? And, finally, all of it must be done at a fraction of the cost, because that’s essentially what the problems of new tech are. So I think those four or five business priorities don’t look like they’ll change in the short to medium term and I think that’s the reason why almost all large enterprises will have to learn to adapt everything to the customer.
Phil: Do you think that the IT services industry is genuinely poised for a massive change, or do you think it’s going to be slow, gradual and uncomfortable? What’s your prediction there?
Nitin: I think what’s definitely happening is that as the growth rates in the core services, (the traditional ABM/IMS/BPS/Service manager), those growth rates mature to the flat lining of the S curve – as they have been on a steady cliff for the last twenty years or so and now, as they settle into mid to high single digits, I think there are a whole lot of questions being asked by investors as to whether this is still a growth industry or are we genuinely starting to look at a value mindset. I think that’s what you are starting to see with some of these large activist investors.
I think there’s still growth in the industry, but the growth doesn’t seem to be just in traditional services, which is why I think it’s important to point new items of growth, new pockets of investment that the client is looking to put money behind. Whether it happens to be tangible consumer-facing tech, it happens to be large data initiatives, maybe triggered by platforms and all things AI. I think how you really add those engines of growth to your core business, and still continue to drive the business in a way that you are seeing in growth companies, is really the challenge that a lot of our peers will have to face, especially if they are public.
I believe we are in an interesting position because we have a large activist shareholder, and we are partly private equity as well, so we definitely think of how we can apply all things active to the way we run the business. I do personally believe that it’s possible to still be viewed as a growth business, however, it will require a slightly different bent of mind. It will have to be more than a functional pyramid driven people business, to essentially be something that blends in our core technology expertise, some form of IP and platforms, at a pace and scale that can complement our growth and move the needle.
I also think that whoever can find a way to blend new engines of growth – and stay above industry growth will succeed long term. This is an over simplistic view, but I think that’s the way I think about our business, I mean we’ve defined our top-most priority: growth, growth, growth and growth. And we talk about consistent growth, differentiated growth, profitable growth and responsible growth.
I think if we can continue to have that 4G’s of growth mantra, we’ll probably continue to look for above market growth, so we keep taking market share.
Phil: So, I’ll ask you one final question, Nitin. What can we do as both business leaders, but also as educational and government leaders, to help with some of these re-skilling issues we are seeing. At the NY Summit, for example, there was lots of talk about machine learning, and we had a session where 70 percent of service providers claim they are going to re-skill huge amounts of their delivery staff on machine learning, without any real clue on how hard and technical this is.
Is there a crunch coming here? What can we do to get a stronger alignment between these changing needs of the customer, and what we are delivering as digital business becomes so core to our clients?
Nitin: Absolutely, Phil. I think I’ll answer the question in two parts. One is what can we do to make this condition from the way our staff is currently to where we think we need to take them. Fortunately, or unfortunately, some of them probably won’t be able to make this shift because, keep in mind, the business model that they were hired under over the last few years was much more functional. You’re either a business analyst, or a programmer, or a tester or a production engineer. You really were focused to go deep into one of those functional areas, because that’s the way the business was defined. What this means is that since they were hired out of college, and I am talking about these large offshore labor pools, specifically focused on building skill and driving efficiency, since they have been hired out of colleges, they really have this very deep functional view of one activity.
In many cases (and I am not saying all), the students coming out of colleges today have the ability to apply new tech. I think there are two things we need to do there as well. Firstly, we need to be able to drive the most important skillset they need to be successful, which is to have is run-ability, because the applications for change (of all things new tech) mean you can’t be an expert in anything… so you have to be able to learn new things on-the-fly. Obviously, you need foundational elements of software engineering. So I think if you can drive this software engineering mindset, if you can drive the ability to learn new things, then I think we can definitely impact the next few years of generations coming out.
And secondly, I think we also have to – as an industry – go back, shift left, work with these institutions, work with the governments and create technology-driven platforms that can actually give the ability to drive some of this learning even while they are in college.
So I think there are multiple initiatives that have been underway. The Government of India has actually got a Skills Ministry who are focussed on this issue. I know that the Chinese government is doing a lot as well, and I know in the US it’s much more driven by the private sector and the universities. However, I believe we are going through a generational transition, and the realization of how we continue to apply tech to the new generations will effectively differentiate which demographic and which country with the right labor pool, comes out the winner over the next 15 years.
Phil: Thanks Nitin for these great insights. I really appreciate your time today and look forward to sharing this discussion with our readership.
Nitin: Phil, thanks a lot – looking forward to it.
Posted in : IT Outsourcing / IT Services