Mid-sized IT services firm Happiest Minds Technologies reported a year-to-date revenue growth of 26% in constant currency and Ebitda of 26.3% during Q3, above its guidance for the year. Joseph Anantharaju, executive vice chairman and CEO – product engineering services, Happiest Minds, talks about the company’s acquisitions strategy, return to office plans and demand environment in an interview with Ayushman Baruah. Excerpts:
What was the strategy behind the recent acquisition of Sri Mookambika Infosolutions?
We encountered SMI while interacting with one of our customers who had moved jobs in 2020 and were impressed by the customer centricity and the depth they had in the customer’s business and technology platforms. Apart from this, the core rationale for the acquisition is healthcare domain knowledge and customers, strong customer relations, talent base in a tier-2 city with ability to scale, business fitment in our product engineering business unit and cultural alignment.
Can we expect to see more such acquisitions?
When it comes to acquisitions, we are consistently looking at possible candidates and constantly in touch with our advisors and management of the prospective sellers. The process is slow and time consuming, and our filters on cultural alignment, technology or domain focus, growth and profitability focus make it that much more difficult. When all of these are met, realistic valuation and expectations is another threshold to cross. That said, we are constantly evaluating possibilities and when we see a strategic fit and value, we do not hesitate from making an offer.
How do you see the demand environment in Q4 and the subsequent quarters?
We see customers continue spending on their digital initiatives, which we don’t see as a discretionary budget but a mandatory or strategic one. At the same time, customers are keeping a very close watch on the macroeconomic environment, which continues to remain dynamic to ensure they can react quickly and adjust. Separately, some of our customers are also breaking up and releasing budgets to owners either quarterly or half yearly to avoid front-loaded investment or spending.
What is your return-to-office plan?
We are targeting to have all our staff return to working from office starting April 1. We strongly believe that in-person interaction and working from office are required to help us build and sustain our culture, which is a critical differentiator for us. Our assessment of attrition shows that we have had the maximum impact from amongst the people who joined us remotely and worked remotely with absolutely no connect to the organisation, colleagues, managers and peers. We must balance customer satisfaction and the well-being of our people. If you recollect, we were one of the very few companies who had a work from home and flexible work timings policy even before Covid. We would like to go back to those once we have people working from office.
What are some of the technologies that clients are investing in?
Some of the initial digital technologies — cloud, mobile, analytics, big data, etc, — have become a core part of many of our customer’s technology stack and infrastructure. They are in the process of adopting some of the technologies that gained traction a few years back like automation, low-code no code platforms, cybersecurity, internet of things, robotics, etc. When looking into the future, customers are playing with newer technologies like blockchain, Web3.0, metaverse, etc, to identify compelling use cases and implementations.
What type and size of deals are you focusing on?
From inception, one of the strategies that have worked well for us is Land and Expand. We typically break into many of our large customers by helping them with some point needs around complex technology issues or strategic business problems by carrying out discovery, consulting assignments or doing proof-of-concepts (POCs) to demonstrate the viability of solutions. We then continue to do larger implementation and also expand into multiple business units over a period. This has led to a consistent increase in our average customer revenue over the last few years.