If only Mphasis was single again!

If Bangalore-based mid-tier offshore services player, Mphasis, was an independent company you might consider its Q3 results (to 29 August) to be rather dull, with headline revenues up 5% yoy to Rs13.6b (c. $245m) albeit with a modest 70bps operating margin boost to 16.7%.

But it isn’t independent. Mphasis is majority controlled by HP through its 2006 acquisition by EDS (see OffshoreViews: HP/EDS India—a Game of Two Halves) through which channel it now only derives 55% of its total revenues, down from 67% a year ago. In stark contrast, revenues from Mphasis’ ‘direct’ customers are nearly 50% higher than a year ago.

What’s wrong with this picture?

‘What’s wrong’ is surely part of the reason that HP CEO Meg Whitman gave erstwhile HP Enterprise Services chief John Visentin the royal order of the boot, replacing him (pro tem) with his EMEA report, Mike Nefkens (see Leo’s services man leaves HP ($8b 'poorer')). Rather than pushing its captive offshore delivery centre harder and faster, HP has seemingly taken its foot off the accelerator. Mphasis’ revenues via HP customers were 10% lower yoy in Rupee terms and I reckon that’s nearer 25% down in ‘onshore’ currencies (64% of Mphasis’ revenues derive from Americas and 15% from EMEA).

The ‘answer’, by the way, is not to sell Mphasis! Nefkens has to make Mphasis work for HP, and a lot better than it has done for the past 6 years. At the moment, it’s as if nearly half of Mphasis’ employees don’t work for HP! Nefkens should bite the bullet (as HP and indeed EDS should have done years ago) and buy out the minorities. That way, all 37,000-odd Mphasis employees will know precisely who they’re working for!