Mphasis is the IT services industry’s hidden gem – Enterprise leaders must not skip past growing mid-tier firms

Market forces have combined to create a lucrative business environment for ambitious mid-tier IT services firms. While the largest IT services providers vie for big-ticket engagements and footprint expansion within their largest accounts, enterprise needs for technical skills and complex projects (that may not appeal to the P&L structure of the incumbent IT service brands) are increasing. New research across 355 Global 2000 enterprises reveals these needs are prime for third party engagements as shown in Exhibit 1.

Exhibit 1: Technical complexity drives external requirements

Source: HFS Research supported by KPMG, “State of Operations and Outsourcing” 2019

Sample: Global 2000 Enterprise Leaders = 355

Mid-tier IT services firms are more than happy to support these engagements and are doing so with a high degree of technical competency, impressive speed, very competitive costs, and white-glove high-touch service. This side door is enabling loads of interesting champion challenger opportunities. 

One of the firms leading the charge here is Mphasis. While its numbers show a great turnaround story (Exhibit 2), it has also started to climb the ranks in HFS’ Top 10 studies. In our just-released HFS Top 10 Banking and Financial Services (BFS) Sector Service Providers 2019, Mphasis rated sixth overall and secured the number two slot in the coveted “Voice of the Customer” sub-category. HFS stopped by Mphasis’ recent analyst and advisor event in New York, aptly named “Bringing ‘T’ back into IT,” to check in with its executive team on strategy and direction and, most importantly, to hear from its customers. 

Exhibit 2: The Mphasis turnaround story

Source: Mphasis 2019

Focus and consistency, with a side of commercial creativity

Throughout Mphasis’ recent analyst and advisor event and during HFS’ ongoing interactions with the firm, we’ve been struck by its consistency with both strategy and execution. This consistency stems from the top with a strong CEO, Nitin Rakesh (read HFS interview), at the helm since 2017, but it also permeates throughout the company. The mantra of leveraging domain expertise coupled with applied technology to drive practical transformation is a unifying purpose for Mphasis employees. This is perhaps one of the unsung benefits of being a mid-tier company: It’s easier to reach and unify 25,500 employees versus 225,000 at Infosys or 415,000 at TCS. 

This consistency and the following findings represent HFS’ views on key contributors to Mphasis’ current success. 

Mphasis found white space in banking and financial services 

Mphasis’ core industry is supporting banking and financial services firms; its sub-industry focus includes areas such as mortgages, cards, and additional cross-sector capabilities in payments and governance, risk, and compliance (GRC). Almost half of the firm’s revenues derive from banking and capital markets. There is literally no white space in these markets, thus wins and expansion are at the peril of less nimble firms. Outcome-based engagements and creative commercial agreements like its zero-cost transformation approach and willingness to start small and practical are helping Mphasis land and expand within BFS as well as to other sectors. The event notably showcased an equal roster of BFS and non-BFS clients. 

The company focuses on eight core “next-gen” offerings that give context to applied technology

Mphasis refined its capabilities into eight core offerings: DevOps, next-gen app development, next-gen data, modernization, enterprise automation, cybersecurity, application management, and infrastructure management. Mphasis does not purport to do everything; rather, this is its view of how it can best bring its “applied technology” capabilities to clients. Its Front-to-Back (F2B) approach uses these skills to help clients modernize interactions at the engagement layer, supported by intelligent operations and the use of existing core systems. Examples of this include optimization efforts such as any-device user experience and building new platforms like robo-advisory or millennial banking. 

It rebuilt its partner ecosystem to support its eight core offerings

Since its divestment from HPE in 2017, Mphasis has been rebuilding its partner ecosystem to complement its eight core offerings. The partners that got the lion’s share of airtime at the event were AWS, Microsoft Azure, Google Cloud Platform, and Pivotal. These partnerships, plus its Sparkle Labs program for enabling start-ups, are critical to their growth and client expansion. Mphasis noted a marked increase in partner-led deals and associated TCV (total contract value). 

The Blackstone ownership is yielding results

Blackstone acquired Mphasis from HPE in 2017. While Mphasis’ former parent HPE (now merged with CSC to form DXC) is a critical client and go-to-market partner, Mphasis has experienced notable growth with Blackstone’s portfolio companies. 

Mphasis continues to develop enduring customer relationships. 

The event showcased some of Mphasis’ mature customer relationships. The common theme among customers was that their initial engagements had been for engineering talent, but eventually, Mphasis’ proactive proposals spurred a movement to innovation-led engagements. In all cases, the relationships were marked by ongoing growth, palpable trust, and yet further benefits of the mid-tier: clear CEO engagement and the ability to develop personalized relationships. As we’ve noted before, the services industry is still ultimately about people and relationships. 

The bottom line: Don’t forget the “applied” in “applied technology.” The long-term winners must focus on enabling the end-customer. 

Mphasis is truly firing on all cylinders, operating very consistently internally and externally, and bringing much-needed value to clients. But the challenge with being a purveyor of applied technology is not to get sucked into the lure of technology for the sake of technology. It’s all cool tech. But if your IT service provider partner cannot make it relevant and beneficial for your enterprise, then it’s just another investment with lukewarm ROI. Mphasis needs to continue on its current march, but it needs to be sure it’s looking up—and forward—to:

• Support changing decision makers beyond the CIO;
• Cultivate business process expertise to support business needs and business buyers. Mphasis’ BPO business is much larger (by revenue contribution percentage) than most of its IT services competitors, but Mphasis doesn’t trumpet it;
• Refine its BFSI specialization while bringing the best of its learnings from these sectors to support other industries;
• Double down on marketing—loads of current customers refer to Mphasis as a well-kept secret. It needs to become more comfortable with contextual promotion. It can market itself effectively but retain its humble and practical culture;
• Remember the “applied” in “applied technology”—if the tech is not supporting clear business outcomes, then it’s just adding cost and complexity.