AI-Led Deals Unlocking Opportunities For Large Transactions, Says Mphasis CEO

Enterprise customers are moving beyond experimentation and are now showing a "little bit more ambition and desire" to scale their AI initiatives, according to Mphasis Managing Director (MD) and CEO Nitin Rakesh.

He described this shift as a major tailwind for IT firms that are correctly positioned to capitalise on the demand.

“I would say the appetite to do transformational AI-led deals is definitely improved. This is definitely unlocking opportunities for companies with the right set of value propositions and the right set of AI-led offerings to be able to construct some large transactions,” he said during a conversation with NDTV Profit on Wednesday. 

He explained that clients who have already built their AI infrastructure are looking for scale, while others are seeking partners to help them get there, creating a dual-pronged opportunity. Meanwhile, Mphasis has witnessed billion-dollar deals in the last two quarters, Rakesh outlined.

"We've had almost a billion dollars in deals done in the last two quarters, which is definitely a much higher run rate of TCV (Total Contract Value) closure," he said. 

On the macroeconomic front, Rakesh noted that fears of a recession, which have loomed over the industry for the past three years, are finally receding.  

"We are potentially getting to a point where, without really breaking down the growth momentum, we are getting to a rate cut cycle," he observed. This "softer rate environment” removes a major headwind and provides a potential upside for macro-dependent segments of the business, Rakesh said.

On the evolving relationship between revenue and employee numbers, Rakesh described a "foundational shift" away from the traditional linear correlation between revenue growth and headcount growth. He explained that the industry is pivoting from a purely people-based effort to a more sophisticated model that bundles people and technology into orchestrated solutions.

"The linear correlation between revenue growth and headcount growth is the one that is actually in debate right now," he said, suggesting a historical correlation of nearly 1:1 could potentially drop to 0.7 or 0.6.”

According to Rakesh, the future will demand a different type of talent, focused more on configuring and assembling code using AI tools rather than writing every line from scratch.