Phil Fersht — CEO, HFS Research[00:21]
Hey, it’s good to catch up with you, Ritesh. As you know, we’ve been following Firstsource’s growth for quite some time, and its evolution, and then obviously you taking over the helm about nine months ago. It’d be great to hear from you a bit about, one, how’s it going with you anyway — this move going back to the service industry — and then two, what have the results been like, and is this what you’ve been expecting?
Ritesh Idnani — CEO, Firstsource[00:50]
Thanks, Phil, personally for having me on this webcast. I was just reflecting back on this — you and I probably go back maybe a couple of decades, right? So we’ve seen our trials and tribulations, but great to be back chatting with you. I’m actually quite pleased with the progress that we have made in the 11 months that I’ve been here. I think we’re just getting started, but just to give you a flavor of some of the things that we’ve seen: we’ve experienced 4% plus growth every quarter over the last three quarters, which puts us firmly in the top decile of quarterly growth experienced by any company in the IT and IT-enabled services space. So we feel very good and proud of that. In fact, last quarter for us was probably a first of sorts. We had the highest quarterly revenue in the history of the company, at $215 million, but more than that, it was growth at about 6.5% quarter on quarter, which clearly was probably the best in the industry. We grew at about 17.1% year on year. Again, those numbers are something that we feel good about. There are a few things that I think are probably helping us in this journey. First and foremost, I think it’s the current environment. On one hand, there is the macro uncertainty, and we, like any other firm, are not immune to the macro headwinds that are there and so on and so forth, but I think we’ve been trying to use that to our advantage to go out there and play to our strengths — the technology shifts that have been playing out, particularly in the last year and a half, especially with generative AI coming mainstream. I think we’ve been using that again to our advantage. But more than anything else, I think we feel that the disruption actually plays well to a firm like ours where we are sized to scale, we’re sized to care. We’re in that nice sweet spot where we’re not too small that we don’t get a seat at the table, and we’re not too large where the size and scale come back to bite us. And I think that’s a good situation to be at. My sense is that the amount of disruption and amplification that’s possible on account of technologies in the automation and AI continuum is going to be pretty significant, and I think that’s creating an opportunity. Frankly, one of the things that I saw even during my time at Unifore and what I’m experiencing out here is a lot of work that has gone in in the past, Phil, has been largely around efficiency gains. So people have worked on cost cutting, they’ve looked at how they do right shoring, they’ve looked at some basic automation, process excellence, things like that as value levers. But what a lot of enterprise clients are still struggling with is the fact that while they might have gotten some bang for the buck on the efficiency side, I think effectiveness has gotten compromised, and certainly experience has suffered. So if you try to look at the trifecta that I think is probably going to be a recipe going forward — and this is where my sense is technology has a fairly meaningful role to play — it’s how do you balance the trifecta of efficiency, experience, and effectiveness itself.
Phil Fersht — CEO, HFS Research[04:17]
Exactly. I mean, we talked about this human-AI equation, and we’re looking a lot at what I think is really being termed as agentic AI. If you source people now, you’re sourcing people who have leveraged their capabilities with GenAI, so you’ve almost got an augmented-human approach to services. How are you seeing this play out in the CX domain, and how many of these recent deals you’ve signed built in this element of a human-AI balance?
Ritesh Idnani — CEO, Firstsource[04:51]
So, first and foremost, I’d qualify this by saying that all the deals that we’re doing today on the CX side have a human-AI blend that is reflected in the way we’re looking to transform the way the operations are run. And that’s not just on the CX side, but 50% of our business is on the back-office side. So even out there, we’re seeing where AI can play a meaningful role to transform the way some of the processes and operations are run. But some of this starts even more ground up, right? We’re trying to create an environment where people are not afraid of what AI is to bring to bear, and that’s a change management challenge within every organization. So we’re trying to go to the fabric of what enterprises, including our own, are facing, and we’re saying, look, can you get to embracing AI rather than running away from it? That’s one part of it. Second is, how do you inject AI in the fabric of the organization in every aspect of what we end up doing, from the time we recruit to how we train. We’re also trying to use some of the technologies that are available, particularly in terms of — we can deflect simple queries to self-service, which don’t require an agent in the contact center to even have a role to play, to when something goes into the contact center, how can you actually provide the agent with the right information when he or she needs it. So some of these are areas where I think there’s going to be opportunities, but frankly, I think we’re in the first half of the first innings in terms of how this entire AI landscape is evolving itself. And honestly, a lot of our enterprise clients today are still dealing with what they need to do at the front end, which is fix their data. Because most organizations don’t necessarily have the data ready for AI. So the readiness for AI is where I think we’re spending a lot of time, while trying to see how we can bring some of the benefits of some of these solutions that are available in the marketplace into our deals itself.
Phil Fersht — CEO, HFS Research[06:57]
Yeah, so you’ve consciously stayed focused on a few specific domains, unlike, I think, the bigger players in your domain. How’s that been working for you, and is that not limiting growth opportunity?
Ritesh Idnani — CEO, Firstsource[07:10]
Yeah, so, Phil, I think from our vantage point, we’ve been very clear that we don’t want to be everything to everybody. We’ve got our swim lanes very clearly defined. And this was frankly one of the things that actually attracted me to Firstsource when I was evaluating the opportunity last year — the fact that we’ve chosen to limit the swim lanes in which we operate. We play in four industry verticals: financial services, healthcare, telecom/media/tech, and energy and utilities. And frankly, if you think about it, these four verticals in themselves cover about 75% of world GDP. So it’s not a small addressable market that we’re going after. But within those markets, what I think is creating the opportunity for us is the ability to be an inch wide and a mile deep. We’re not trying to spread ourselves too thin, but instead double down on our investments in these verticals. So the nature of the conversation that we’re having with customers is very different. We’re able to solve very specific, hairy, complex problems for them, and I think that’s creating differentiation for us in the marketplace. Frankly, from our standpoint, size and scale is not going to be the factor that determines how organizations end up being successful. It’s going to be relevance. And as long as we have solutions that create that relevance and solve different problems for our customers, creating competitive advantage and differentiation for them in the marketplace, I think we’ll be good.
Phil Fersht — CEO, HFS Research[08:19]
How are you going about changing the mindset within your own people to embrace, for example, GenAI capability, and enhancing the knowledge and training that they’re doing? What do you find is working and what is not working? And maybe what’s your advice to executives today who are maybe struggling a bit with the current pace of what we’re seeing happening?
Ritesh Idnani — CEO, Firstsource[09:03]
You know, that’s a great question. And I think my sense is this is still going to continue to evolve as the landscape around us continues to change. But if you break this into three cohorts: I think most senior and executive leadership understands what’s coming down the pike, and they get it, and they’re probably all for it. They may vary in terms of the pace and how they want to go ahead and implement some of this, but I think everybody gets it, that this is something that’s real, it’s a secular theme, and so on and so forth. I think the frontline associate, who’s probably fresh off the boat, a couple of years of experience, maybe a few years of experience, junior in the food chain, probably also will go along with whatever the established ways of working are. Where the rubber meets the road is what you do with the middle of the organization, because they’re all used to certain ways of working, they’ve built their proxies of power around the number of people they manage, the control that they’ve exerted around those, and how you change those ways of working is where the hard work really is. So we’ve been spending a lot of time with that cohort, trying to tell them that it’s extremely critical to embrace AI rather than run away from it. This is coming. It’s important for them to understand the impact of different technologies. So, for instance, as part of our learning curriculum, we have tried to ensure that these folks understand the specific implications of how AI is going to impact their ways of working. We want to eventually make sure that 100% of the workforce is AI-enabled. But this is work in process, right? And my sense is that some folks will fall by the wayside, they will not necessarily understand what it takes, but there will be others who will probably embrace this and try to make it come to life. But my advice to folks would be that you try to make it as real as possible — showcase to people what the benefits of this are going to be, how it’s going to amplify the way they’re able to execute work, how it’s going to create the opportunities for more human-to-human collaboration. And I think if you’re able to do that in a real-world scenario rather than it being theoretical, people are likely to follow this more clearly. I think it’s also important to be very transparent and direct.
Phil Fersht — CEO, HFS Research[11:11]
Yeah, so it’s kind of drink your own champagne — changes in the organization yourself, so then you can work with your clients. We’ve conducted, including with you guys, a series of enterprise conversations, and while there’s a lot of awareness, there’s not a lot of action. But are you seeing a shift in mindset from clients in terms of how they view their partnerships moving forward? Are they getting away from this monolithic mindset of just sort of paying for headcount and same old, same old, or are you generally evolving into some more value-based relationships beyond the old model?
Ritesh Idnani — CEO, Firstsource[12:04]
So, close to about 60 to 65% of our business today is already outcome- or contingency-based, or has some sort of a value-based construct associated with it, for the different offerings that we have. And one of the things that, that being said, is playing out right now in the marketplace is, there’s just a lot of unknown unknowns. Customers don’t know what they don’t know because the landscape around them is continuing to evolve at a very rapid pace. And number two, service providers aren’t necessarily competing on an even keel, so it’s not an apples-to-apples comparison. So what I think it is creating is an opportunity for service providers to be extremely innovative and talk about how they can be a trusted advisor, guiding customers in their journey to take them from point A to point B, sign up for a value-based construct, and potentially underwrite outcomes.
Phil Fersht — CEO, HFS Research[13:03]
Well, this has been terrific, Ritesh. It’s great to hear about this rapid growth journey you’re on, especially during a time where it’s been tough for a lot of the industry we’re in. So it’s been a bright light to see the success you’ve had so quickly within Firstsource, and I look forward to seeing how this continues to evolve. It’s been a pleasure to hear from you today.
Ritesh Idnani — CEO, Firstsource[13:29]
Likewise, Phil, thank you for having me, and as always, very nice to talk to you.
