Phil Fersht — CEO and Chief Analyst, HFS Research[00:22]
Great. Well, good morning. I’m Phil Fersht, the CEO and Chief Analyst at HFS, so I’m delighted to have Raj Mamodia, who’s the Chairman of the Board and the CEO of Brillio, come to join me today. So, Raj, you’re one of these CEOs who came off that Cognizant CEO production line, and your growth story is now becoming one of the most distinctive. So I’d love to have you share a bit about your background in the industry. Were you always planning to lead your own tech business when you left college? Is this your calling?
Raj Mamodia — Chairman and CEO, Brillio[01:02]
First of all, I associate myself more as a founder than the CEO. I think it just brings a different level of commitment and intensity to my purpose. So, yes, it’s been about 11 years since I left college, and those were good days, but I think I’ve enjoyed the last 11 years the most. When I left college, I was just trying to find a job to not be a burden on my parents, frankly. I had no idea what life was actually going to be. For the first six years after my engineering, I actually built dams and canals, or helped build those. Then I found my way into IBM. In those days, any good engineer in India would find a good job, as you can imagine, and I think I did that too. IBM brought me to the US, and I spent about 12 years with Cognizant, and then I think it was clear to me that I wanted to either be an entrepreneurial CEO of a company that matched my cultural values, or start a company of my own. And you know how lucky I am — I got to do both of those things. It’s been exciting.
Phil Fersht — CEO and Chief Analyst, HFS Research[02:25]
So you’ve celebrated, I think, 10 years now leading Brillio. Tell us about that journey, and maybe start a bit more from the early days. How did you differentiate then versus what you’re doing today?
Raj Mamodia — Chairman and CEO, Brillio[02:25]
When we started, Phil, the desire was to build a company that is going to last forever. But as you know, digital was just taking shape, and most of our enterprise customers — our focus has been the Fortune 2000 — were all looking for players or providers who actually had the skills. But we were hellbent on differentiating ourselves on three dimensions: culture, capability, and credibility. In the early days, it was more horizontal; if you had good skills, and if you had a global model of those skills, customers said, well, here’s a new player that is hungry and all that. But as we grew, we formalized these parameters. Founders’ mindset is our culture — thinking big about our impact on our customers. In terms of capability, it’s people first, and then being able to retain them. And think about credibility: 60% of our business is outcome focused.
Phil Fersht — CEO and Chief Analyst, HFS Research[03:42]
What were the keys to getting the company from where you came from to the size you are?
Raj Mamodia — Chairman and CEO, Brillio[03:42]
The idea is that I’m not chasing revenue as the founder of this company — I’m chasing relevance, and frankly, that is an amazing purpose. Along the way, we did a few tuck-in acquisitions, and those have probably had about 15 to 20% overall impact on our revenue. But it’s small compared to the organic growth. Organic growth, a focus on relevance, and building that challenger model with our customers is my biggest focus.
Phil Fersht — CEO and Chief Analyst, HFS Research[04:22]
You’ve got the large companies, the big services firms, struggling just to stay in positive growth territory. You’ve got a huge amount of noise around Gen AI and a lot of frustration around it now, and how to adopt it at scale. What’s your take on the market?
Raj Mamodia — Chairman and CEO, Brillio[04:50]
So the larger companies are struggling with a lack of discretionary spend and a threat to their large-scale contracts. The small companies frankly don’t do 70, 80% of what our customers are looking for right now. So you obviously have a big part of the industry struggling. And I see a big opportunity in that. If you are a company that focuses on what matters now for your customers, and if you can evolve around that axis really fast, I think you are in business.
Phil Fersht — CEO and Chief Analyst, HFS Research[05:26]
It reminds me a lot of the mid to late 90s, where everyone was going crazy investing in e-commerce. We had companies like Scient, Sapient, Cambridge Technology Partners, Nervewire — a bunch of these businesses — and they were growing rapidly with enterprises, getting them to build their e-commerce solutions, their websites, their e-businesses. And I feel like this is now phase two, where people are wanting, I need you to build out my AI capability, my data architecture. I need you to help me write off years of technology debt and process debt in my organization. And we’ve almost had like 20 to 25 years in between where it was, let’s just implement at low cost. Now we’re getting back to, I need you to help me get to the next layer of value. So, one, does that resonate with you and how you see the market? And two, how does a mid-cap player like Brillio compete in this type of environment?
Raj Mamodia — Chairman and CEO, Brillio[06:39]
There are a lot of signs of those days today as well. They are very focused on one thing or two things that the customers actually need, and I think those companies are built to be sold, in my opinion. Our customers are looking beyond just talking about discretionary spend; they’re looking at a lot of other problems, and of course you throw Gen AI in that. So they’re looking for a partner that does two things well, in my opinion, Phil. One, their discretionary spend requires a lot of agile thinking, a lot of capability deployed very fast to drive impact on their businesses — call it Gen AI or not Gen AI. All of these ideas: you want to move certain workloads to cloud, or you want to try a few things. So you need a very agile, very capable partner who also can do these things without breaking the bank for our customers. But at the same time, our customers also need to reduce the inefficiencies that they have garnered over decades in technology. They have all these partners who have signed hundreds of millions of dollars of contracts, and those partners frankly haven’t necessarily been agile or accountable for disrupting themselves. So for us, while I can talk about Gen AI and cloud and digital all day long, I’m very focused on looking at things that matter for our customers and using digital and AI to deliver those promises. There are a lot of things we’re doing right now to really modernize and reduce the cost for our customers — just technology. Forget about the business process, business model and stuff, just technology.
Phil Fersht — CEO and Chief Analyst, HFS Research[08:28]
Yeah. And where are you seeing most excitement or demand from your clients today? You said you’re getting focus in some industry areas or some broad areas. Where are you seeing most of the traction?
Raj Mamodia — Chairman and CEO, Brillio[08:28]
So one, in front office transformation. While a ton of spend has come down in terms of discretionary spend, when you think about customer experience, customer engagement, sales, marketing — in those areas we continue to see a significant amount of demand. The second phase I see right now, Phil, is also a lot of cost takeout. And cost takeout could be of two types. You move certain workloads to, let’s say, cloud because of end of life or something else, but your focus is cost takeout in terms of how you reshape your IT landscape. And second, you have a certain spend rate — it could be running legacy, it could be running a discretionary project — how can you bring that cost down without being accused of losing value? So we’re signing several deals at this point in time that are indicative of that. The customers are very concerned, and I can tell you this is happening in healthcare, pharma, tech, and financial services, where customers are saying, hey, I need to reduce this by orders of magnitude. Now, they’re also looking at — as you know, and you’re the doctor in this — a lot of GCC stuff that has been happening in India.
Phil Fersht — CEO and Chief Analyst, HFS Research[10:05]
Yeah, India is fascinating right now with the influx and investment into — we call them capability centers, not people centers. But you mentioned areas like Gen AI. Do you feel it’s almost like a lot of this is being incubated in these GCCs for exploration and discovery? Now do you see more of those coming to prominence?
Raj Mamodia — Chairman and CEO, Brillio[10:48]
Yeah, long term. So one is what is happening now. I don’t know if Gen AI or AI is necessarily prevalent in GCCs right now, frankly. Those who have been there 20, 30 years probably are going to do it, but there are a lot of enterprises that are just moving in right now, and their focus may be more on business process or analytics. I think we also have to think about what Gen AI really is in terms of what capabilities we’re looking to build. But my view is that, given the mathematics and science and focus on engineering in a place like India, long term, as we look for a workforce that is able to marry a business process with technology, and has a significant appetite to learn and to do well, I think India is going to excel because they will have the scale, they will have the skills.
Phil Fersht — CEO and Chief Analyst, HFS Research[12:03]
I mean, let’s be honest, a lot of the Gen AI impact is very analytical, and it’s teaching business people to write prompts. We’re an analyst firm, so we love this stuff. I’m telling you, this has revolutionized how we do business. I was just coming off a call with my analyst team where we’re literally taking survey data in Excel flat files and pumping them into GPT-4. It’s incredible once you really learn how to fine-tune these engines how they can help with your analysis. We predicted work that would have usually taken us 6 hours is now being done in 30 minutes. This is just analysis. So this is making us faster and smarter. But it’s incredible the incentives you need to give staff to start using this. It’s almost like a mental laziness — I’ve been doing things the same way for 20 years, why should I change now? And I’m saying, hey, you walk into a dentist and they have 20-year-old X-ray equipment, you’re out of there in 5 minutes. I’m not using you.
Raj Mamodia — Chairman and CEO, Brillio[12:59]
That’s true, but I think what you’re experiencing — and I was thinking about the human side of AI as well — more private and public focus needs to come on the human side of the impact of this. The focus has to be on getting the workforce ready for an AI world. So it’s not just about teaching people how to code and how to use prompt engineering, but how to think in general. I feel like there is a ton of work that needs to happen in that area, just getting our populations across the world ready for that. I do feel, as we look at this Gen AI space, that we are overhyped in the short term, but maybe underhyped in the long term. So you see where this is heading.
Phil Fersht — CEO and Chief Analyst, HFS Research[13:55]
I’m very interested in what the conversation is going to be like in a couple of years. What would you say we’ll be talking about, if we reconvene on your 12th anniversary?
Raj Mamodia — Chairman and CEO, Brillio[14:06]
My view is that in 18 to 24 months, we will talk about three things. One, we’ll talk about a lack of delivery on the promise of AI. The world is so hyped up that in 24 months, when we look back, all we would have done is take some cost out and talk about this stuff a lot, without having really made material progress. The compute and storage around AI is obviously evolving really, really rapidly, but I still feel like our preparedness in terms of change management is not there. So that is one. The second thing we will talk about is, like I just mentioned, the ill-preparedness of governments and public-private partnership — so think about regulations and skill sets around AI. I think everybody’s going to find themselves surprised, because some bad actors probably will make more progress faster than the good actors, and we’ll suddenly start finding that. So that probably is the second thing we’ll talk a lot about. And third is really my focus area, which is the tech services industry. I think you’ll see some new and emerging winners in that industry, because they could move faster, they could place their bets where the customers wanted them to, and not just think about their own growth and revenues. I genuinely feel that digital gave rise to a lot of companies, but this will create an environment for many companies to not thrive. And I think that is going to be an opportunity. You talk about the lower demand environment — I think it actually can get worse, and it might actually get really, really bad in that arena. Then there are going to be companies that will thrive, and I think we’ll talk about those in two years.
Phil Fersht — CEO and Chief Analyst, HFS Research[16:26]
Yeah, well, there are a few of these large companies who are buying renewals at 20% less cost, and you wonder where the pipeline is. They’re almost borrowing from the future just to keep their stock prices up and their revenues up. So you do wonder, does this come crashing down? What do they have to do to dig themselves out of these holes? Do they start consolidating? I personally think we’ll see consolidation. There’s nothing like masking business failure with big messy mergers and buying in revenue. But yeah, there’s definitely a pivotal moment coming in our space.
Raj Mamodia — Chairman and CEO, Brillio[17:20]
Right. So consolidation has two or three issues as well, Phil. One — and I was trying to think about it — we brought Bain Capital in about 5 years ago, and at that time we were probably among the first ones to do something like that. And then a frenzy started. You see so many private equity investments in services firms. And last year, we sold half of Bain’s portfolio to Origin, and I remember that about 20 to 30 companies were trying to exit. None of them actually could. So we’re really proud of what we achieved, but the fact is that did not take place for others. The reason was, obviously, the performance started to look bad, the demand environment is tough, and the expectations on the multiples are very high. So I can tell you those companies are coming up for sale, mark my words, and that will drive one. And consolidation is also happening because many companies are just not going to be able to see a long-term future on their own growth. When either one is doing bad, or when two are doing bad, they consolidate with each other. I feel like you will see that significantly. I can actually see, just based on the market activity right now, that there are a lot of conversations taking place. Some public companies will go private, and yeah, it’s going to be exciting. I feel like there are tons of people who will just give up. And that’s good. That’s good for folks like me.
Phil Fersht — CEO and Chief Analyst, HFS Research[19:20]
Thriving on disruption and change — I get it, I’ve done it myself. So we have that in common. Well, this has been a fantastic conversation, and we took a very interesting direction at the end there. But it’s true, this is a pivotal time for an industry which has enjoyed 25 years of growth and has now maybe hit a little bit of a bump in the road. And who’s going to make it over the other side? Thank you very much for your time today.
