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Episode 2: The Trillion Dollar Question - Nitin Rakesh, CEO of Mphasis
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In the second episode of Season 2, Phil Fersht is joined by Nitin Rakesh, CEO of Mphasis, for an engaging discussion on the evolving landscape of the IT services industry in the age of AI and digital transformation. Drawing from his 30 years of experience, Rakesh highlights the critical inflection points shaping the sector, from the rise of cloud and mobile to the current AI-driven revolution. The conversation explores the challenges of adapting to rapidly shifting client demands, the growing importance of hybrid human-machine workforces, and the necessity for companies to invest in learning, innovation, and talent evolution to remain competitive. With insights on industry disruption, the future of talent, and the delicate balance between automation and human ingenuity, this episode offers a visionary perspective on the opportunities and challenges shaping the next decade of technology services.
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Transcript
Introduction and Guest Introduction
00:00:12
Speaker
You're listening to From the Horse's Mouth, intrepid conversations with Phil First, ready to meet the disruptors who are guiding us to the new great utopia by reshaping our world and pushing past corporate spin for honest conversations about the future impact of current and emerging technologies. Tune in now.
00:00:35
Speaker
Great to have an esteemed executive in the technical services world, Mr. Nitin Rakesh. Join
Nitin Rakesh's Career Journey
00:00:44
Speaker
me today. I've known Nitin for several years now, actually, and we've been sharing a lot of ideas and views on how this industry has evolved over recent years. But I'd like you, Nitin, can you come in and give everyone a bit of your background and how you got to where you are today?
00:01:04
Speaker
Thanks for having me, Phil. Firstly, it's ah it's a great ah privilege and an honor. And I think, as you rightly said, you know I've enjoyed our friendship over the last many years. And in a way, I feel like I've seen the birth of HFS and then the scaling of it. So amazing amazing to you know be part of that journey.
00:01:22
Speaker
ah a Quick background, I think ah I've been in ah in in the IT services tech and financial services industry for about 30 years. A software engineer and a geek at heart spent a fair amount of time early on in my career writing software. And then of course, ah you know, post business school ended up in financial services, mostly on the buy side, asset management, roads management, prior equity.
00:01:46
Speaker
ah For the last 12-13-14 years, I've been running you know a couple of companies in the tech services space. The last eight years, I've been running Emphasis, partnered with Blackstone in 2016 to buy the majority stake out of HP and you know public companies. so I've had the rare privilege of running a brand private equity-controlled public company for the last eight years, and it's been a lot of fun.
00:02:10
Speaker
ah you know We've
Technology Hype Cycles and Impacts
00:02:11
Speaker
lived through, well as we speak, we're living through the third big you know tech wave that I've seen in my career. you know Started with the internet and then came the digital revolution and now we're going through the the AI pivot. I think it keeps us all honest, keeps us on our toes, keeps us excited about looking around corners and crafting strategies to not just you know ah you know live through them, but drive through some of these these tech changes. so Really, really privileged to to to be born in an age where you can witness so much technological advancement and change. Yeah, i and we've been talking about inflection points for a good 20 years plus now, right? But are we generally on the cusp of generally disruption of beyond our wild comprehension? Is it really the fact that we can now replicate ourselves perfectly in video and text? Is this really going to impact our livelihoods and jobs as as much as the hype suggests?
00:03:06
Speaker
You know, the beauty of inflection points, Phil, is that most of them go through the hype cycle that you reference to. And human beings by nature overestimate the impact of tech in the very short run and then underestimate the impact in the long run because that's just the way it is.
00:03:23
Speaker
yeah ah I
Digital Technology's Industry Transformation
00:03:24
Speaker
mean you look at almost every big wave of technology that we've lived through, not just in the last 30 years, but in the last 100 years since industrialization, it's pretty much been the same way. Just in the last 30 years, I mean internet was a big hype cycle, everything was about eyeballs, and until it wasn't,
00:03:41
Speaker
But some of the biggest companies we know of today in the world were born in that era. So it's clearly become a very, very foundational power, a fabric of power, daily lives, economic lives, social lives. 99% of banking transactions happen on a combination of internet and digital channels.
00:03:58
Speaker
which just 25 years ago, that number was less than 1%. So I think this is a fundamental shift that we we went through in the last 25 years in in ways of working, ways of you know engaging with customers. You know about the e-commerce boom, you've talked about the media, you know a change that came about with OTT. so Almost every industry got touched, impacted, disrupted. ah you know There are well-documented stories of of disruption that just happened in the last 25. I think AI is a little bit like that as well. ah you know Yes, there are some some fun things around AI, such as fake videos and hashtag take news, but more importantly, ah definitely a fundamental shift in the way we think about using technology. and so so
AI's Disruptive Potential in Services
00:04:42
Speaker
You know, there's a lot of talk, as you know, in the industry about ah the services model being flipped on its head. You've got the software companies trying to eat into the services market. And so Salesforce now thinks they can sell a platform of agents to replace a lot of your call center people and other types of people who are servicing you. um so Services forums are trying to do something likewise creating software driven approaches that are going to be disruptive to require less human engagement and these types of things.
00:05:19
Speaker
um It still feels like a lot of talk though and and not a lot of activity and at the same time we're still seeing most of the leading services firms continuing to at least post positive numbers and and in fact if anything it's improving with this new yeah regime coming in and that sort of thing. so ah How real is this change? Is it really a recipe for wholesale change in services in the next three to five years? Or do you think it's going to be a slower moving trend than that? I think one of the riskiest phrases in investing and businesses this time is different. ah you know It feels like that every time we go through a pivot, it feels different. But the fundamental tenets of change management and adoption
00:06:09
Speaker
don't necessarily differ that much. yeah I think it's early days. We are probably in the first or second innings of a baseball game when it comes to adoption of AI. We're probably in the sixth or seventh innings when it comes to adoption of of mobile and and on data and cloud. So I think this is a congruence of multiple different ways kind of colliding into each other. It's not uncommon for traditional services models to be disrupted. We've seen that happen over the last 15 years when cloud was effectively but you know launched and in the in the mid 2000s and became a massive option over the last 10 years. And we've seen companies that were focused on servicing enterprises around the data center infrastructure needs, obviously haven't really been able to find their footing in the last 10 years. So I think it's a lot to do with where your portfolio is, what kind of investments you're making as a services company in R and&D and capabilities to actually orchestrate the ecosystem as you call it.
00:07:05
Speaker
ah if Because if you don't really continue to invest and stay forward leaning on on where you think enterprises and customers need to get to, it'll be too late by the time they force you to get there. So I think, to me, this is ah change is the only constant. It has been for the last 50-60 years since ID Services was born. And I think it will be for the loss you know for the next 10 years.
00:07:24
Speaker
The pace of change, of course, has changed. We are now seeing rapid deployment. We are seeing faster adoption. I mean, Genia is a good example. ChatGPD went from 0 to 100 million users in a fraction of what it would have taken for any other consumer tech to do to do that. So I think oh keeping all of that in mind ah this time isn't any different. There will be opportunities and there will be threats to our businesses. If we don't adopt where we think we can be better at delivering to customers and and and bringing value, then those service lines will get disrupted very, very quickly. I did this concept
Evolving Talent Needs in the Tech Age
00:07:57
Speaker
of you know SaaS and services as software. It's an interesting one because you probably see a nice ah you know little rivalry, everybody wanting to you know enter into each other's space type of thing, but in the end,
00:08:11
Speaker
What makes sense to the enterprise is really what's going to drive the right business model. I mean, we've seen this and in cyber. I think that's a very good example of where services will end up. If you think about you know providing managed security services, there's just no way to do it without using automation and platform. If you apply the same mindset to any every other service type, I think that's kind of where we're headed. So I think it's it's good. We have some really good ah you know established models that have evolved in the last few years around cyber services.
00:08:38
Speaker
and And that's kind of a very good template for us to adopt in the rest of the business as well. Interesting. Is this impacting the types of talent we want to have in technology type organizations, the service clients? are Are you looking for different types of people, different attributes, different attitudes? How's that shifting for you?
00:09:03
Speaker
I think, ah so firstly, Philar industry was born out of lack of available talent in the right place, at the right time, at the right price. site So our value proposition as an industry very much includes the ability to create net new talent, especially in what we used to call niche skills. ah So we absolutely focused on on making sure that we we create this net new talent pool.
00:09:28
Speaker
because it's impossible to go find that talent because technology you know that we're talking about is just so new. ah So that's you know having said that, I think there's definitely a few characteristics that are more important today today than they were 10 years ago. ah Probably ah also maybe five years ago, but I think we started seeing that change through the digital transformation revolution as well.
00:09:49
Speaker
What you need is you need you need employees who have the technical capability, who have the ability to go deep, um so so the depth of tech has become important. and That's why we use this full stack but but over the last few years. But we also need need employees who have the ability to learn fast. So I think this learning quotient applied with the the thick the tech quotient, or the e-quotient as we call it,
00:10:12
Speaker
is extremely important because that's the only way you can stay relevant. Otherwise, you probably get very, very quickly outdated and in the set of competencies that you noted it. And I think that's well i'm well understood by our employee base. That's well understood by our client base. And if if anything, the last 10 years have actually proven that for almost every employee that we have, that unless you keep yourself current, you're not going to actually be relevant to the ecosystem. So creating net new skills, promoting learnability,
00:10:41
Speaker
creating the ability, providing the platform to employees to actually upskill themselves on a regular basis, gamifying it, and using the the open source ecosystem ah to kind of leverage the power of everything that's out that's out there, including the platforms that are made. A lot of these
AI's Impact on Job Markets and Skills
00:10:56
Speaker
these ah knowledge packs available is the way we are thinking about doing it. And of course, the the big red herring also is, do you actually see Uberization or the workforce going forward? And I think the answer to that is you will actually see much more of of of a gig workforce getting adopted and and and accepted. Of course, you know it's an evolution path that we we go through. So keeping all of that in mind, I think we are we are absolutely in for some exciting times. You talked about using soft software to deliver services. ah you know You talked about agentic AI. All of that's in the same value chain of augmented workforces ah you know in terms of using the the man-machine combo to deliver.
00:11:36
Speaker
And how do you think this impacts you know the younger folks coming into the workforce now? And all they're hearing about is people trying to automate work, trying to replace people effort with AI. um And the challenge is how do you make yourself available as a human being? is What is this having to the younger generation today in terms of, is just is this just making this a less appealing world to work in or is this driving behaviors in a different way?
00:12:07
Speaker
I think it will be a less appealing world to work in because the availability of less appealing, easier to do jobs is going to continue to shrink. And I'll give you a couple of examples from the last 50 years, because I genuinely believe that this time is no different. If you think about the telecom business that was booming 75 years to 50 years ago, every every you know country in the world was adopting telephony. And of course, this was even before you know mobility was was launched in the 80s.
00:12:36
Speaker
And there was a very large workforce that was actually employed by these telecom companies that were typically regional, baby bells as you call them in the US. And a large part of their job used to be switching calls. You had to call an operator for for the operator to connect you to a trunk call or a long distance call. And very rapidly as software became more and more prevalent, all of those jobs disappeared.
00:13:02
Speaker
But you look at the growth that happened in the telecom industry, and they had to go higher, replace those jobs with software engineers versus telephone operators. i So the nature of jobs shifted. It's not that the industry disappeared. The industry actually rapidly grew because there was no constraint of human you know limit to to growing how many subscribers you can have. And and and of course, data became a big deal with telcos right after mobility was launched and and and the internet was launched on the mobile phone. So that's one example. Think about,
00:13:31
Speaker
how um how much transformation happened in the job profile of people who work in telecom companies. Let's take another example of an unrelated industry, airlines. If you looked at the mid-90s, almost every airline had a few thousand people in their back office that were processing paper tickets because every airline ticket was a stub that had to be reconciled, paid the agents, paid to the other airlines, paid the commissions, and so on and so forth.
00:13:58
Speaker
All of that disappeared after the internet and the and the emergence of e-tickets. So those thousands of people that worked in the airline companies processing tickets at stubs at payments, on it's all software today. like So I think we are going to see something very similar in every industry. ah Of course,
00:14:14
Speaker
The level of impact depends on how manual or how archaic the process is, but we've seen a lot of that change over the last 25 years anyways with the emergence of internet and digital tech. So this is kind of think of this as a third wave in that direction. ah You will have to constantly find ways to to be relevant.
00:14:32
Speaker
in terms of having the right skill set. You may be a back office operator that is still answering you know customer service calls, but your ability to work with an AI agent will determine whether you stay in that job or you get automated by the AI agent itself. So I think for
AI's Role in Job Documentation and Creation
00:14:45
Speaker
a software engineer, same thing for ah for a claims processor, same thing for a sanctions screener in the compliance department and so on. So I think but We have to just embrace the this combination of of human worker with a digital worker or an AI agent and and and the power of two combined is is is more than individual each of them. And I think if you embrace that and and you really, really find the ability to to to to learn how to use technology, I think you have to throw off opportunities that will come up. But if you don't, then less and less opportunities there.
00:15:17
Speaker
But this is like the first time we truly got to a point where ah companies are under pressure or leaders within companies under pressure to replace ah human effort with technology. um We grew up in a world where companies were outsourcing. So it was moving work from humans to other humans maybe offshore.
00:15:39
Speaker
but um and There was a process which was easier to do it was a human to human process there was still a lot of human interaction and human involvement now we're asking people to say. ah Document your job so we can start to replicate it in an agentic. Tool application.
00:15:57
Speaker
um I think people are gonna be very happy to do that cuz they know what the endgame is here so do we have to go to the managers of those people to say you need to figure out what all your staff are doing so you can start to replicate their jobs in software and you have to work with us and you're gonna become a leader of a gent an agentic workforce I mean There's so much talk about this, but the reality is, if you think about the amount of change and stress and paranoia that's going to be involved in this, you almost wonder if companies can go through this. and Is it going to be a whole new wave of firms appearing who are starting up from Greenfield and building out purely digital workforces that can but can operate? because
00:16:41
Speaker
you know I find it very hard, I've sat through so many client work roundtables and workshops and interactions where you can tell they just can't get from one to two, let alone one to five. A few are, but it requires amazing dynamic leadership to do it. Most are just really struggling to to to move that needle at all. so I think, ah Phil, it's ah that's really the I call it the trillion dollar question because think about services being a trillion dollar market. ah If you include business services, it's obviously much bigger than IT services. but and This kind of has an impact across every element of services. Legal services, accounting services, IT services,
00:17:26
Speaker
So I think there is definitely a case to be made for a massive change in the way we work. AI for work is going to become more and more real. But I think we may be overestimating the the very short term you know change dynamic. I think it's ah it's a process. I don't think every enterprise has quite got to a point where they have the maturity to actually implement an agentic framework. I think it's it's still very, very early days.
00:17:52
Speaker
and And along with any ah any other type of change, I think cultural change, behavior change, resistance to change, but all of those that you know all of those are very, very real things. I don't think the dependency is on a human documenting what he does and how he does it, or she does it. I think the dependency that dependency can be taken care of by just having Scraping tools and software actually to document every keystroke and every I mean we've done this for years with RPA and process mining tools I don't think you know we are dependent on the human You know documentation so to speak and I think we have the ability with Gen AI today to even have software You know ingest software and and extract logic right so so this whole software eating software phrase is here and now I think the the real issue really is what's the balance that you want to drive between human oversight human controls and human ingenuity, insight and context. And yes, you know you can have a lot of context coming out of other lens, but is that necessarily ah you know the same level of of you know output you need? So I think water
Client Perspectives on AI Adoption
00:18:54
Speaker
will find its own level. Change will definitely be hard. We'll end up unlocking a whole new series of all all jobs and skin sets that we probably don't think of today. I mean, we've talked about for the last couple of years just data providing such a big opportunity.
00:19:09
Speaker
model management, model tuning. ah you know We've talked about curation of data sets, traceability and governance. So I think there is a there's a whole new body of capability, skills and jobs that that are starting to pop up.
00:19:25
Speaker
But as always, I will again you know remind us all that let's not over expect you know what what this will do in 2025. I think it's a journey. We've started roughly two years ago. Of course, it has been around for 50 years. But really, the big retail revolution started about two years ago. And this is going to be a process that will take its own sweet time. It may be faster than you know you know the internet adoption or digital adoption, but it's still going to take take its own time. OK.
00:19:52
Speaker
So looking at maybe, I don't know, 10 of your biggest clients, how many of them are pushing you guys to challenge them and say, help us start to shift this model? And how many of them are sort of just more of the same, keep costs low, that sort of thing? Because I got a bit of an attitude that some um Some of this is vendor push right now, supplier push to say you need to do this because, whereas the clients are just saying, hey, can you use technology and deliver me the same for 10% less, right? So but when you look at maybe your top 10 clients, how many of them are generally pushing you to help them move the envelope versus those who are just saying, I just want more for less? I think a great question. if you If I look at my top 10 customers, I'd say about
00:20:46
Speaker
between 30 to 40% of them probably have a point of view or ah a very strong desire to be forward leaning on it. There's another 25-30% that is doing a lot of experimentation but hasn't really committed in a big way. And then there's the last 25-30% that is wait and watch. We don't need really need to be the the early adopters and we'll see where the time's up.
00:21:10
Speaker
Even within the top 25-30% that are actually very power leaning on it, again, there are innovators and then there are fast followers. And I think it's a you're absolutely right. In some cases, there is a ah lot of top-down pressure, not just from vendors actually, but from C-suites and boards, because everyone's looking for an AI strategy, so to speak, because it's just being been blown out of proportion with the hype cycle.
00:21:34
Speaker
So, I think the it's like all sizes and all shapes of positionings. But there is a ah consensus that, yes, this is something we will keep an eye on, this is something we'll have to continue to find ways to invest in. And I think, the again, the trillion dollar question, right are they releasing new funding into this? The answer is they're looking to repurpose a lot of investments, but they're not necessarily saying, I'm going to allocate another 2% of my revenue as budget, so I can be better at do it using AI.
00:22:01
Speaker
I think it's ah it's a lot to do with let's repurpose all the tech investments we have. Can we find the money? We probably not be efficient as we can be. So efficiency really is the number one reason
Consulting Firms vs. Tech Companies in AI
00:22:10
Speaker
why they're looking at this capability besides, you know, just experience transformation. Yeah. And and who are they turning to to help here? Are they going to the hyperscalers, the tech companies? Are they going to consulting firms or are they going to Indian heritage outsources? You know, who who's getting the, who's getting the business here?
00:22:29
Speaker
I think the very forward-leaning, very mature players, and we have a couple of customers like that, have actually spent a fair amount of time building up their own teams first because they want to make sure they have their own opinions before they start inviting third parties to give them a point of view. And of course, they will all work within the ecosystem of the tech partners they have, whether it's the hyperscalers or some of the other platforms.
00:22:52
Speaker
ah there are There is a category of of of ah you know customers that also have created ah chief a chief AI officer role. like we We saw the emergence of CDO and chief digital officer and chief data officer. I think some of that is getting, you know where I won't say repurposed, but they're kind of evolving that further into an in an office of AI or or or data governance and and and the like. so i think Very, very mixed bag, so to speak. There is no one-size-fits-all. There is no one established model. Of course, there is a role that consulting firms are playing. There is a role that global assets are playing. There is a role that hyperscalers are playing. And of course, funds like ours that have also made a very big investment.
00:23:35
Speaker
very early on, even before 22,
Future Technology Predictions
00:23:37
Speaker
23 timeframe, you know, we are we are ready to, we have an opinion on a point of view and we we believe we shouldn't be, you know, waiting for our clients to ask us, we should actually be taking ideas to them. So I think it's ah it's a pretty broad combination of things. Interesting.
00:23:53
Speaker
Yeah. um Well, ah I think we and know we're definitely venturing into new waters. um It's interesting to hear the shifts going on at the town level and have the at the delivery level now. So um what do you think we'll be talking about in two years' time? If we we sit down here and You've gone through various inflection points. Are we going to be on this same inflection point, or do you think there's something else just hiding around, lurking around on the horizon? I think we'll, in a number of cases, we'll still be talking about how far have we come and how far from further do we have to go. We'll probably also be talking
Concluding Discussion and Future Engagements
00:24:35
Speaker
a little bit about, you know, how real is the it the technologies around the horizon. You know, we've talked about quantum for a long time. You know, does it really have an impact?
00:24:45
Speaker
We'll see how the the crypto digital assets boom plays out once the new administration comes in. ah you know Let's keep an eye on that because there there may be some fundamental shifts depending on what stance the Fed or the SEC takes on some of these crypto assets and in how real they become embedded into the into the financial services ah you know DeFi framework, so to speak. So I think there'll be some interesting things to talk about two years from now, but we'll still talk a lot about what we talked about today.
00:25:14
Speaker
probably at a different vantage point than we are at today. i So we're now on a definitive curve and we know where it's going. Well, this has been terrific, Nitin. It's great
Closing Remarks and Contact Info
00:25:24
Speaker
to have you back on the conversation and look forward to seeing you soon and keeping more of the focus that we've got right now going because these are definitely interesting times. And this year we're seeing some, I think we're going to see some real action happen compared to maybe ah wait and see that we saw last year and the year before.
00:25:45
Speaker
Sounds good. phil Thank you for having me. i Always a pleasure talking to you and keep doing the great work that you and I are doing and you know, be a good time for yours. Thank you very much. Appreciate it. Thanks a lot. Cheers.
00:26:00
Speaker
Thanks for tuning in to From the Horse's Mouth. Intrepid conversations with Phil first. Remember to follow Phil on LinkedIn and subscribe and like on YouTube, Apple Podcasts, Spotify, or your favourite platform for no-nonsense takes on the intricate dance between technology, business and ideological systems. Got something to add to the discussion? Let's have it. Drop us a line at From the Horse's Mouth at hfsresearch dot.com or connect with Phil on LinkedIn.