HFS Highlight: Will the pandemic grind the Mphasis growth story to a halt? We don’t think so…

HFS recently attended Mphasis’ Virtual Analyst and Advisor Day, which boasted 10 clients presenting and participating, to check in on how this dynamic mid-tier growth firm has been faring during this generally cruddy year. You may already know that the mid-tiers have been ‘killing it’ in recent years, as Phil Fersht declared in a 2019 blog post, but unfortunately, these firms face notable risk thanks to the pandemic. While powerhouses like Accenture, Wipro and TCS have significant capital reserves and broad client portfolios to help them weather the storm, many mid-tier players like Mphasis are not afforded that luxury – which means they must work tirelessly to ensure success, and survival. Mphasis leadership, helmed by CEO Nitin Rakesh, talked us through their pandemic pivot playbook – both how to best help clients, but also how to best recalibrate their operations and strategy to ensure optimal result internally and externally. Spoiler alert, while there may be a chink in the growth armor, Mphasis is going on the offense to help itself and its clients take full advantage of the pandemic.

Mphasis is sticking to its roots and betting big in Banking and Capital Markets (BCM), and that could just be their saving grace throughout this crisis.

Since it’s divestment from HPE in 2016 Mphasis has focused heavily on strategy and execution, leveraging domain expertise alongside the latest technologies to drive client outcomes and digital transformation initiatives. This led to a great deal of success, we’ve all heard the Mphasis growth story, posting impressive year-over-year revenue growth consistently since 2017. One key driver behind this was Mphasis’ BCM segment, which consistently contributes almost half of total revenues – exhibit 1 breaks down revenue contribution by industry for FY2019, with BCM making up the bulk.

Exhibit 1: BCM contributed 45% of Mphasis total revenue in FY2019.

Source: HFS Research and Mphasis quarterly earnings reports.

Now, betting big on any single industry, geography or client is always going to increase risk exposure – if that area declines for any reason your business will be impacted significantly, particularly in the crowded BCM space where you are almost always competing alongside your favorite dozen competitors. However, in Mphasis’ case, this strategy has paid off; the provider has consistently posted impressive BCM growth, frequenting the double-digits, with its proven high-touch, deep tech expertise delivered first as a challenger then evolving into a champion. It’s been a contributing factor to Mphasis success throughout this pandemic, as banking and financial services is one few industries where providers continued to report growth; helping banks deliver emergency stimulus packages and business loans while handling increased debt defaults, for example.

Part of Mphasis’ pandemic playbook is helping its clients go on the offense, taking advantage of the pandemic as a means to accelerate their digital journeys, and this helped the provider cement its position as a preferred partner for many BCM clients. And Mphasis’ recent earnings announcement confirms this, with BCM continuing to post remarkable growth of 22.1% YoY– however, it is worth noting that Mphasis adjusted its reporting slightly this quarter so like-for-like comparisons with previous years may not be entirely accurate.

But Nitin and his team haven’t stopped there; Mphasis is continuing its diversification efforts despite the pandemic – and they have the clients to demonstrate their success.  

In the Mphasis Q2 2020 restructure they defined Logistics & Transportation as it’s own vertical (it was previously in Emerging Industries), and it reportedly contributed 14% of total revenue. It’s worth noting, this includes less than 1% exposure to airlines – and logistics has been booming due to an increase in Ecommerce – thus the growth. This confirms that Mphasis diversification is gaining traction, growing its business beyond its traditional BCM comfort zone, continuing to focus on future growth as well as the ongoing pandemic battle. Further proving this point are 4 of the Mphasis’ clients who presented at the Analyst and Advisor day which were CISOs, demonstrating the clients the firm has in its Cyber business. Exhibit 2 proves just how important a strategy diversifying could be – as every industry experiences a different fight – some have survival on the line while others look to thrive.

Exhibit 2. The confidence and strategy to survive post-pandemic varies by industry

Sample: 400 executives across global 2000 enterprises

Source: HFS Research, 2020

One of Mphasis clients confirmed the success of the provider’s diversification efforts, and their Covid-19 pivot, at the recent event. From a leading global logistics company, the client explained how they had streamlined their business throughout the pandemic, and how Mphasis had helped. In his own words:

“We got together as a leadership team to reaffirm that all of these market and IT trends are still valid. We acknowledged that the future had arrived. We had to do something quickly. We had to pivot, which required some ruthless prioritization…”

And ruthless prioritization is exactly what Mphasis is helping its clients do, recognizing that firms had to rapidly pivot and deliver at speed.  

The outbreak of COVID-19 had catastrophic effects in every aspect of our lives, be it personal or professional – enterprises were forced to pivot their business model overnight and ‘ruthlessly prioritize’ initiatives which could deliver near-instant ROIs. Mphasis recognized this, and while amid their own pivot, developed four transformation pillars which allows the provider to support clients to rapidly complete their crucial digital transformation throughout the pandemic, and they’re outlined in Exhibit 3.

Exhibit 3: Mphasis four key transformation pillars blend traditional offerings with new demands.

Source: Mphasis, 2020

One key theme throughout each pillar is Mphasis shift towards a virtual business model, as Nitin explained; COVID-19 has put omnichannel on the backburner in favor of digital-native offerings. While omnichannel has been an elusive utopian goal for many companies, the reality now for survival is going digital first or digital only. This not only resonates for Mphasis client-facing activities but also their own internal business; the ‘Talent Next’ pillar exhibits the provider’s commitment to its newly decentralized workforce. Virtual recruitment, remote onboarding and enhanced productivity are all crucial elements of Mphasis’ new talent vision, and its ability to create productive cross-functional teams through Tribes 2.0 model, played a pivotal role in the provider’s pivot throughout this pandemic period. To couple this, Mphasis put even more emphasis on developing outcome-based commercial models and prioritizing speed-to-market, alongside quick value realizations, because ruthless prioritization demands both flexibility and swift action. Mphasis has once again pivoted its business model to support client’s efforts to transform at speed and survive in these testing times, as well as successfully taking advantage of any opportunities presented by this pandemic.

Bottom Line: Mphasis hasn’t forgotten who they are, it’s BCM roots are helping it weather this storm, but they are keeping an eye on the future as its re-pivots to address shifting client needs and looks to expand beyond its comfort zone.

If Mphasis is anything to go by it’s fair to say the mid-tiers are still ‘killing it’, as the provider has once again proven it is nimble, quick to adapt and willing to go the extra mile for its clients – and this really is helping Mphasis through these challenging times. Ultimately, the key to growth is the lethal combination of direction and adaptability, and Mphasis demonstrated its clear direction, using its footprint in BCM to underpin growth while diversifying into other areas, meanwhile rapidly adapting to meet client’s shifting needs.