Mindtree sees Europe's share in revenues rising

Krishnakumar Natarajan, CEO & MD, Mindtree, who has been  recently appointed Nasscom vice-chairman, spoke with Beryl Menezes about unique trends in the Indian industry in the next fiscal, and how Europe is expected to grow faster than industry average for Mindtree in calender year 2013.  Excerpts from the interview:

What are new trends in the IT/ITeS industry to watch out for in the next fiscal?
There is a lot of scope for IT to be a $300 billion industry by 2020, especially given the potential of $75 billion in revenues from emerging markets and verticals. The domestic IT industry is growing faster than exports, and this is predominantly enterprise-driven. In fact, almost 9% of the $76.8 billion IT revenues this fiscal, came from around 4,000 SMEs. But the biggest trend in India’s IT industry is convergence to cloud, especially with government applications moving to the cloud and technology for cloud, mobility, social media, analytics becoming far more affordable.

What is Nasscom doing to leverage non-linear models like cloud as well as digital security?
Nasscom has set up a digital security agency, tying up with national security forces for the same. Egged on by Nasscom, the government has also formed a committee to leverage cloud services and has introduced a Bill in Parliament towards citizen delivery services – 300-plus e-government solutions developed by Nasscom member companies. Most state governments are also at various stages of cloud implementation, after Nasscom held 82 workshops for the same.

What makes Nasscom confident of meeting its 12-14% guidance for FY14?
This is based on a survey of 300 Nasscom member companies. So for example, in the case of Mindtree, Q1 was flat, Q2 grew 1.3%, Q3 grew a little over 2% and Q4 is expected to be the same as Q3 or better. This is because we believed decision-making has become faster, and short-term factors like the US pre-election rhetoric against outsourcing being obliterated and Eurozone concerns dissipating slowly.

Many IT companies have reported better Europe growth, higher than key outsourcing market – the US in the last quarter...
Europe lagged in outsourcing investments last year due to the Eurozone crisis. Thus, post that bottoming out, it is investing in earnest. Also, traditionally closed economies in continental Europe like Germany and France are beginning to outsource more to India, as the latter is not only a cheaper option, but provides a wealth of domain expertise. Thus, while North America, which makes up 60% of revenues is expected to grow at the same rate, Europe is expected to grow incrementally faster than it has been doing, year on year. So while 26-27% of IT revenues are expected to come from Europe, Mindtree expects Europe to contribute 28-30% to its revenues in CY13, as compared to 26% in FY12.

SAP and re-branding. How has it helped Mindtree?
Our recently re-branded, outcome-partner model has helped in better client mining in terms of greater vertical focus in manufacturing, BFSI, travel and transport, and building domain expertise in these segments as per customer demands. Our SAP headcount has increased from 350-750 employees, and by first quarter of the next fiscal we are hoping to increase the SAP headcount to 1,000. This will help to tap a larger share of our 40 Fortune 500 customers SAP and annuity business.

Recently, the breakdown of large deals into smaller ones has reduced. How has it affected you?
No – we are still seeing a trend of break-up of some large deals into smaller ones, and the contract term of deals has also reduced from 8-10 years to 3-5 years.

How has increase in local hiring helped Mindtree?
Setting up of our local delivery centre in Florida has helped solve the visa shortage issue, while providing clients with local skill-sets and breaking down of language barriers, especially in Europe. This has also helped the Indian IT industry create some 238,000 jobs in the last two years in the US. All this helps in winning more contracts.