Mastek’s Chairman and Managing Director Sudhakar Ram relocated to India this month after about three years in the US. Isn’t it a rather surprising time for a software chieftain to leave the US, given the uncertain economic environment? No, he says. “Processes for sales and marketing have been laid out and it is ready to run on its own steam. The long-term plan for me was to return to India.”
Ram spoke to eWorld on the global economic situation, his company’s business model and the threat from a volatile currency.
Excerpts:
Delivery of applications for the UK’s National Health Service is delayed. What is the impact?
We had anticipated applications sourcing to peter down by now and revenues from maintenance would have begun. But because of the delay, revenues from application development have increased.
The scope of the deliverables has expanded so quantum of revenues would also increase. In other words, more scope, more business.
With the rupee being so volatile, what is your message to your CFO? Do you have to bet against the movement of the rupee or do you only avoid downside risk?
When the rupee appreciated last year, our board decided to move from receivables-only hedging to hedging against 50 per cent of net visible inflows.
Now, with the rupee depreciating, we have gone back to hedging against 1-2 months of receivables. Since Europe, particularly the UK, brings us a good chunk of revenue anyway and the rupee-dollar-pound relationship has seen volatility, we came back to indicating our guidance in rupees.
For long, you have stuck to Intellectual Property (IP)-based solutions, compared to the only-services model of peers. In this environment, what is your take on that?
We are more bullish than ever on that count. At the fundamental core of business, there has been a breakdown of systems. The level of sophistication and ingenuity you see in creating risk has not been there when it came to managing that risk. So, now there is increasing demand that businesses must move from the 70:30 model (70 per cent of IT investments in keeping the ‘lights on’ versus 30 per cent for new initiatives) to the 30:70 model.
If 70 per cent of IT investments went into new initiatives, that would mean a huge amount of business from the solutions viewpoint.
You had revised dollar guidance downwards for the full year, the last quarter. What signs do you see?
So far, none. But we had to be cautious given the environment. Hence, the five per cent change in guidance. (If currencies were to remain stable at end-September rates, then revenues for the full year ending June 2009 would be $285 million instead of the $300 million projected earlier, or growth of 25.6 per cent from $227 million in FY2008, instead of the earlier projected 32 per cent.) Also, the sectors we service predominantly, the Government and the insurance industry, do not have the liquidity problems that other sectors face.
How is the US insurance market responding to you?
We are bullish about the prospects of STG, which we acquired last year. We are trying to establish beachheads, or companies that would be willing to test our product, Elixir. How fast we progress would depend on the economic situation there. Once we establish those beta sites, adoption of the product and growth would only go up.
As a company, where do you cut costs?
Traditionally, our manpower has seen a bulge in the centre. That is, 50 per cent of the workforce had more than five years of work experience. Now is the opportunity to have new additions at the lower end of the pyramid (which means lower wage expenses).
That means no change in capex plans?
No. We are on track on our plans for the new campus in Chennai.
0 comments:
Post a Comment