Q&A: Tech Mahindra Exec On Brexit, Growth, And Why Technology And Style Go Together
U.S. Growth Seen As Help For Tech Mahindra
On the heels of last month's shocking Brexit vote to pull the U.K. out of the European Union, Tech Mahindra executive Lakshmanan Chidambaram said the falling value of the British Pound was hurting the company's bottom line.
Although he said his firm doesn't think the Brexit effect will be long lived, he said Tech Mahindra is looking at the U.S. as a stable market for the company to grow its digital practice.
Last week, Chidambaram, the head of the global service provider's North American operations, sat down with CRN during his company's gathering of analysts in Boston. He also discussed how the Internet of Things is transforming the ways technology interacts with people. He also addressed the impacts of recent acquisitions, including a controlling stake in Pininfarina, the Italian design company that has been behind the looks of nearly every Ferrari model since 1951.
Tech Mahindra, the $4 billion technology services arm of the Mumbai-based Mahindra Group, employs 107,000 and operates in several vertical industries.
Here's what Chidambaram had to say.
What trend in the market is Tech Mahindra focusing on as it looks toward growth?
From our perspective today, we are seeing a number of organizations [that] want to reduce costs in what you call "business as usual" and move money into digital.
Digital is opening up new streams of revenue and it is also changing the business landscape.
In the last 60 days, Tech Mahindra acquired two companies in the U.K. How do the acquisitions of BIO and Target fit in with Tech Mahindra's acquisition strategy of opening up the digital opportunity?
Today you have the chief marketing officer … playing a bigger role … The BIO acquisition is an interesting acquisition because they bring that skill [in using technology to solve marketing pain points] and open up avenues for us to establish relationships with the CMOs and understand business problems better to be able to come out with solutions that can help us win.
Target, which is basically a platform company in the financial services space, [has many] customers in the European heartland and they do end-to-end mortgage processing, … They also do back-end services for a number of financial services companies and have a very rich customer base. …
Our philosophy for acquisitions is based on the idea that they should fill up a space that we are not in now. ... [These acquisitions] take us in that direction and give us something that we don't have.
What about your acquisition of Italian design company Pinafarina? How can a Ferrari designer help an IT solutions company?
If you are really focused on style, you will know [Pininfarina] is a legendary name. … They are a styling company and it fits in to our manufacturing vertical very well because, earlier, due to our parent [company's manufacturing industry] heritage, we could take a part … through the entire product lifecycle and retire it.
Now, with the Pinifarina acquisition, we can start even earlier, and work from styling onwards. It is now a soup-to-nuts kind of thing when you are addressing an automotive client or any of your manufacturing clients.
There is a lot going on in digital with design and marketing. You mention about dealing with the CMO. Are they becoming more technically savvy?
There is a cross-pollination. CIOs are beginning to understand the minds of the CMOs better, the CMOs are trying to understand the technology part, just enough to be dangerous.
But once the solution is conceptualized, you will see the heavy lifting being done by the CIO organization. … It is going to be a collaboration between both, and in some cases the CIOs are stepping into the role of the CMOs, the CMOs are stepping into the role of the CIOs, and we are seeing all kinds of changes in the market. It is interesting.
Does Tech Mahindra have concerns about Brexit, especially with 34 percent of annual revenue coming from Europe?
All of us have concerns about Brexit. The first concern is [the devaluation of the British Pound]. It's going to hit our bottom lines because you are going to do the same business and get less for it now. So, it starts with the currency and we will see as it plays out.
We believe that the European business will be strong, the U.K. will be strong. The business fundamentals don't change, but Brexit has brought in a whole lot of fears: Fears from an employment perspective, fears from an immigration perspective. We will have to give it a little more time to play out. …
So, we don't think it will be catastrophic for us; it can have a minor impact. It is not something that we are losing sleep over, but we are watching with concern.
With those concerns then, are you looking at your U.S. business as insulation against the negative impacts of the Brexit?
The U.S. has been very strong economically, and from a business perspective for us for the last couple of years, and with everything that is rolling out from all over the globe, we strongly believe that the U.S. economy is one thing that we [can] bet on for at least the next decade. It looks to be very strong, the potential is very high. … We feel that fundamentals are very strong comparatively with the rest of the world.
Where are the best opportunities for growth right now in the U.S.?
People are conservative right now across industries from a spend perspective. Some industries are spending more than others; traditionally, banking and financial services has always spent more on information technology services than a space like manufacturing.
All of them are spending, but what they are doing is that they want to reduce costs from "business as usual," pull out the money and take it to digital and new-age opportunities, which can help them get into newer markets.
For example, retail bank people are finding [that] it is costly to operate a retail bank, so they are moving [toward digital] to become as automated as possible. So, they are willing to put money into more automation.
Automation is one area, artificial intelligence is another, robotics is a third, and all of these technologies help build new-age solutions, reduce cost from existing business-as-usual operations, and that is where the biggest focus is.
We've heard about the shift of moving toward strategic spending instead of outsourcing. Where do you see the outsourcing market going in the U.S.?
The values of large deals of sales are coming down.
There were times when you would hear of a $1 billion, 10-year, deal and you don't hear of them anymore. Now, people are doing smaller deals; people want to be sure of the partners they want to work with. Customers don't want to put all of their eggs in one basket and they want to select partners for the long run, for sure, and they want to start [with mid-sized contracts], ensure that they get more for their money and then build partnerships with those partners who are stepping up to the plate.
And that is how there is a separation of the men from the boys, and then an increase in spending.
Tech Mahindra says it is looking to grow its digital business by 20 percent, and even looking to grow by over 25 percent in the U.S. What opportunities are there in digital?
We are excited about what is happening in the digital world, because with digital, we are now talking about technology that can transform the way that we people live and work. …
We are talking about how this can transform life. So we are pretty kicked about that and Tech Mahindra is well placed to capitalize on the digital wave.
… Our solutions are an internet of beings. These solutions are not just touching things, they are interacting with human beings and touching each one of us.
Which verticals do you see the most opportunity with in those type of IoT offerings?
You can monitor anything that moves, it can be a car, an airplane or a patient in a hospital. We do remote monitoring of turbines for a very large turbine manufacturer, we do remote monitoring of patients and we are now talking to a railroad that wants to do remote monitoring of trains.
And so, the platform, like old wine, will get better with every implementation.
You could have a hosted solution on a cloud with one customer being turbines, one being a patient, one being an aircraft. It can touch everybody.
How is Tech Mahindra poised to start working and differentiating itself within that digital space?
Fundamentally, we have a key differentiator when it comes to playing in the digital space because we have a rich heritage with telecom.
We understand the telecom space really well, we work with most of the major telecom providers globally, and that is very crucial because information, high loads of information, [is] coming and the telecom wires are the ones that are going to carry that information.
Also, we understand core engineering very well, and that is a key differentiator.
And third is our ability to play a systems integrator where, in digital, you can't deliver the services end to end. … You have to work with others but be the single point that is responsible to the customer and be able to deliver.