How is the calendar year 2023 panning out? We have got mixed signals so far…
Previously, we said there was a certain level of uncertainty in the macro. I think it hasn’t changed. (Based on) what we have read from some of the large companies in the tech sector, there is this macroeconomic context that has driven a certain slowdown. There is no question.
Having said that, we just ended the best-ever quarter in (deal) bookings. In my view, discretionary spending is certainly reduced or cut in some particular companies and industries. However, the overall outlook for the tech service industry is still strong.
Can you give us some indication on the deal wins? Are there more expensive takeout-based deals?
There is a good balance of net new and renewal deals. I’m satisfied with relationships that we have developed for several years where we are able to easily convert existing (deals) into bigger ones.
There is a certain level of consolidation happening in the market. I suspect (there are more cost-based deals now). I’m always being a bit cautious about that as a quarter doesn’t make a trend.
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We have a growing number of opportunities to help our clients reduce the cost of running the operations…as companies tend to be more focused on what is real in terms of payback.What are client budgets looking like for 2023?
It is a little early to tell on the client budget as our next budget season is starting in three months. But some of them have already completed the budget process. I’m speaking to CXOs of large companies every day.
The sense I get is that technology is still a driver of efficiency and performance for companies. So, the companies are not slashing the (overall) tech spends until there is less uncertainty…But (the time) between the decision is made and the execution on the ground, there might be more time taken. That’s where I see a little slowdown.
I would call it more of a slowdown in the ramp-up of those larger programs.
How should we view the 0.6% negative growth given in the guidance range?
We are talking about a company that has grown 45% in the last 10 quarters. This quarter we have an outstanding performance in bookings. Then, a little bit of volatility or a sector or two could be more exposed (to a slowdown). That creates some less visible growth for this quarter but there’s no trend here.
Why have you given record promotions recently? What are the other steps being taken to attract the top leadership?
We have been investing tremendously in talent, whether they are talent in our organization to whom we are getting more opportunity to grow or by bringing talent from the outside. The arrival of a new chief operating officer, who is really looking more agile or how to improve our delivery excellence…we will only continue to improve our impact (on performance).
What is your outlook on margins? What will be the levers to improve?
We have made significant investment in some areas. We have invested in IT and automation. That is driving more efficiency. Whatever we are recommending for our clients, we are doing it for ourselves as well. The 16.3% operating margin this quarter is our new baseline and we (will) continue to improve.
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