00:00Obviously, there's a positive results. The broader kind of narrative or crisis of confidence in this sector, though, how has
00:07that impacted your business?
00:10Thank you for having me, Heidi. It's great to be here.
00:12I think it's a very interesting time in enterprise tech for a simple reason that we are, over the last
00:19couple of years, starting to see emergence of the AI narrative and how that gets infused into the enterprise tech.
00:25I think instead of thinking of AI as a tack on, this is really quite a fundamental opportunity for enterprises
00:33to take care of a lot of the legacy issues that they've been facing for many years.
00:37And it was prohibitive for them to modernize. It was not that easy to build new platforms and applications because
00:45a lot of the intelligence is locked into legacy applications.
00:47So from our standpoint, while there are lots and lots of worries around what this means from a cost of
00:54labor or the labor-driven model,
00:57but this also opens up a whole new segment of opportunity around really building foundational AI platforms, data platforms, decision
01:04layers,
01:04and truly helping enterprises identify their operations and their businesses.
01:08So I think the reason that we were able to report such strong deal wins in the last 12 months,
01:14followed up, of course, by our fourth quarter numbers for the March quarter,
01:17is really a reflection of the fact that we were able to play that cycle and that trend really well.
01:24When you take a look at the near-term margin crunch versus perhaps the longer-term operating leverage and trade
01:33-offs,
01:33how do you contextualize that in terms of the opportunities for perhaps some of those short-term losses that a
01:38business like yours might have to go through?
01:40Yeah, I think the AI cycle is a little bit less like a typical deflation cycle.
01:45Yes, there are productivity gains. A lot of those gains can definitely be passed on to the client.
01:49But if you play this well and you're truly playing the transformation game,
01:53helping clients really unlock value from their own systems and their own operations,
01:57you have the ability to actually then divert a lot of those savings into new areas,
02:01and that actually helps you create larger programs and engagements.
02:05I think the issue of margin will always be an issue in our industry where cost of labor is the
02:10biggest cost that we've had.
02:12This actually provides another opportunity to add on operating leverage if we can also adopt new ways of working.
02:17And actually, a lot of the tools that are coming out that are driving this care trade are also very,
02:22very beneficial when it comes to driving operating leverage.
02:24So, infusing the set of software assets that either we build or we infuse from third-party providers like Anthropic
02:33or OpenAI gives us the opportunity to find the operating leverage as well,
02:36because the issue isn't so much managing inputs, but driving outcomes that are measurable with ROI for customers.
02:42And for the right outcome and the right ROI, I don't think pricing is an issue.
02:46So, I think there are multiple ways to manage the operating leverage and actually expand it for a business like
02:50ours.
02:51But at the moment, do you see traditional services sales pools being threatened by agentic AI?
02:56Is that a defensive pricing strategy that you need to take at the moment?
03:01Yeah, I think there is no such thing as a defensive strategy, because from our standpoint, yes, while the unit
03:06cost is decreasing,
03:08for example, the unit cost to write a piece of software is definitely decreasing,
03:12but at the same time, the backlog and the volumes are increasing,
03:14and this new wave of spending that is coming in and building these new platforms is also driving demand.
03:19So, I think it's a little bit of the yin and yang.
03:21So, from our standpoint, we are using this as an opportunity to go back to customers,
03:26be transparent about the productivity gains, and use that opportunity to really drive a lot of value for them.
03:31And I think the other thing that is unique about this cycle is, while a lot of the focus has
03:36been on tech spends,
03:38and that's probably, you know, historically the biggest barometer for what happens in our sector,
03:4380% of AI spend is going to go towards driving either operations transformation or business transformation opportunities,
03:49like higher revenue, you know, better customer experience, optimization of demand and supply chain.
03:55While they'll be routed through, you know, the office of the CIO,
03:58because a lot of those require foundational AI elements, they're really driving business outcomes.
04:02So, I think this focus is really more towards, you know, making sure that you understand what customer pain point
04:07can you solve,
04:08and how can you align yourself with the outcomes, and that, you know, from that context,
04:12I think the time of the market has really gone a lot bigger than it used to be in the
04:16traditional tech services play.
04:20Tell us about your deal pipeline.
04:22How much of that is revolving around the theme of AI transformation?
04:26About 70% of the deal wins have actually been in the, you know, what we call AI-led deals,
04:31which means there is an element of either infusing AI into the IT value stream transformation,
04:35or what I just talked about, which is driving a certain outcome that drives adoption of AI.
04:42And I think agentic AI is obviously the phrase word right now,
04:45but what that really means is you should have the ability to provide these agents with the context
04:49and the knowledge within the enterprise, as well as help make deterministic models that drive that agency.
04:56And I think the new IP suite that we launched last year has been tremendously helpful,
05:00whether it is IT value stream, you know, modernization, that's been our biggest, you know, driver of opportunities and deals,
05:07or even areas around business transformation that we just talked about,
05:11underwriting, mortgage, lending, you know, supply chain.
05:15So there's a fairly, you know, strong focus on an AI native or AI first approach,
05:21which I think is resonating well, at least with our client base.
05:26There's data showing that over 80% of enterprise AI spending expected to go towards business transformation rather than experimentation.
05:33Is that a space where emphasis is fitting as well in terms of the broad breakdown of how much that
05:39spend will be dispersed?
05:42Yeah, I think, again, we've made certain moves over the last few quarters,
05:46especially I would say the last three or four quarters.
05:49The first thing we did was we launched the new IP stack because that provides the ability for us to
05:54very quickly stitch together
05:56the enterprise knowledge and the context layer.
05:58Unless you have all enterprise knowledge in one location, one platform, one system of record,
06:04think of that as a digital twin, you're not going to be able to drive the workflows required for agents
06:08to operate.
06:09And, of course, recently we made another acquisition of a business intelligence company out of Canada
06:15that is actually specialized in driving decision AI.
06:18And that really becomes another context, another layer on top of the context layer that helps us play in the
06:25segment
06:25that I just talked about, which is business transformation or revenue optimization.
06:30You mentioned theory and practice business intelligence.
06:33How quickly do you expect that to translate to revenue gains?
06:37I think FI27 should be an interesting year because we have the ability to not only infuse that as core
06:42part of our AI stack,
06:43we are also starting to see opportunities that can be driven across the spectrum,
06:48not just for one segment of the business.
06:50So I think FI27 is going to be an interesting year.
06:53We are going to make a bunch of additional announcements around the stack
06:57and how we are not only developing it, how it has been deployed,
07:01and not only the efficiency side, but also the business transformation side.
07:05So more to come on that over the next few weeks.
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