In this episode of The Staffing Show, David Folwell, President of StaffingHub, interviews Mahfuz Ahmed, the CEO and principal founder of DISYS. They discuss the revenue-generating power of glowing reviews, high-performing mercenaries, intelligent automation, and moonlighting til you make it.
StaffingHub: Well, first of all, Mahfuz, I’m super excited to have you on the podcast today. I’ve heard a lot about your business and am very excited about to learn about how you’ve grown your business and hear about how you’ve come up in the staffing industry. I’m just excited to have you on the podcast today.
Mahfuz: I’m excited to be here. Look, it’s been an interesting journey and as far as I am concerned, we are only about a third into where we want to go. So, a lot more to write about and hopefully all good that’s going to be coming next.
StaffingHub: Yeah. And, from what I can see, it looks like you’ve grown DISYS from the ground up, literally started it from day one and built it to now it looks like it’s over a $400 million firm. Tell us a little bit about your story and how you started the business, why you started it, and how you got to where you are now.
Mahfuz: Sure. So, yeah, the story truly is that it was me and one of my friends — we went to college, George Mason, together. When we graduated, like most people, we thought we could do things better. And we started this business in his basement and for two years, not much really happened besides us wasting weekends and coming up with great plans.
Our revenue at the end of the second year I believe was like $6,000 or something like that, mainly hardware sales. My wife and his wife, they both give us ultimatums saying, “Look guys, it’s wonderful that you guys have great ideas, but we would like our weekends back, so either do something it or let’s call this a good attempt.” And as luck would have it, we landed our first major deal a month after that.
So, my background is in electrical engineering with a minor in computer science, and I actually came here to study. So, I was on an F1 student visa, graduated in 1993, job market was a little iffy at the time, and I needed a sponsorship to stay in the country, the H1 visa sponsorship.
So, when I applied, I got a few job offers, but the one that I liked the most was where my brother was working, which was at the Mobil Corporation. And I joined there, not as an engineer, but a quality assurance software engineer. Again, in my case at that time I needed a job, and as long as it was in line with what I could do, I would take anything.
So, once I got into Mobil Oil Corporation, what I saw there in the quality assurance group — they used to have proprietary software that they would have a couple of releases a year. I was in the group that would test the software to make sure that everything was working okay, that nothing would break. It was a really boring job.
So what I did was I found a software that would capture your keystrokes. So, I did my entire test strip on this computer and recorded all the keystrokes. And then I played it back and I added some, because again, I had my engineering background and programming background. I added some additional code in there where I could run this software on that machine and what would take about two hours to complete in testing it would do it in about five minutes. And I have to do nothing. I just have to look at the screen. It was beautiful. And if it broke, then we could restart it. And we knew there was a problem.
From day one, my philosophy has always been that there are things that we can automate and accelerate and make things better, help us use our time more efficiently.
That little gig that I did, it made my developer team very happy because now they had more time to actually do coding rather than wait for us to test. It made my then boss very unhappy because he ended up letting go half the team because we didn’t need that many people anymore.
StaffingHub: So you automated the jobs away.
Mahfuz: I automated the jobs away. But you know what I mean? This is a philosophy that I hold to this day that I wasn’t afraid that my job was going to go away because I said, “Well, look, look what I did. It’s fantastic. It saves people money and time.” I was sure somebody would notice it. And in a good company like Mobil Oil Corporation, somebody did. So I got promoted into the infrastructure support group, which was predominantly working with moving computers from mainframe to the mid-range servers like the HP servers and the Sun Solaris servers.
It’s kind of funny that in every generation, new technology comes in and becomes a big buzz and everybody’s on it. And if you’re in on it, you’re going to get a gazillion dollars, but nobody really knows how to work it. So, that transition was the same way — everybody wanted to move to mid-range, but they didn’t know how to do it.
So, I worked with some of the HP engineers and figured out how to make the mid-range systems more robust, because one of the problems that people did not understand is that mainframes never went down. But when you have these things that were mid-range servers that were sitting in your server room, they did go down, they had disc failure, that CPU failures, all kinds of bad things happen to them. You could have flooding.
So, you need it to build a fault tolerance system that would be a lot more robust than a normal machine would be. And I learned how to do that and we were able to pull that off.
That’s really what launched the company because, in the IT side, in general, in middle management, there’s pretty high velocity. The managers probably stay in a company for a couple of years and then moved to a different company, chasing some newer, cooler project. So, as these managers move from one company to another, they called me personally and said, “Hey, Mahfuz, what you did over there, can you do over here?” And I said, “Sure, I can do it.”
And, it really started, by moonlighting, because we didn’t have any employees. So, I would do my nine to five, and then after hours my partner and I, we would go to these places and fix stuff for them. And from that, it kind of evolved.
“Hey, you guys did such a great job in this particular technology. Can you find me a guy who can do Lotus Notes? We are really struggling over there.” And we’re like, “Yeah, sure, we’ll find them. We have technology people, we can screen people well.” We got a subscription on a job board, pulled a few resumes, and found the candidate, and voila! That started our company.
We started having more employees working for us, and we did that on the side, until about year 2000. So about six years the company was, a side project. And in 2000, we finally got to about 5 million in size, we won a pretty sizable contract with the Commonwealth of Virginia. And we decided that this was time to take it to the next level. I quit my job, which was a pretty high-paying job at that time, doing all kinds of network infrastructure management work, and came into this full-time and decided to take it to the next level.
The project that we won was Commonwealth of Virginia’s overall networking contract. It was worth about $200 million over five-year timeframe. And, it had hardware and it had software, and the incumbent was Verizon.
So, the Commonwealth wanted a smaller company and a local company to take this over and everybody was kind of floored thinking about it: we were at a $5 million revenue company that won a $200 million contract. So everybody was like, “No way these guys can perform on this. How’s that going to work?” So there were protests. The Commonwealth sent a team to come and verify our work. We took them to all our major clients. They got glowing reviews. Long story short, we got the award.
The excitement didn’t last too long though because, my then-partner decided all of a sudden that he didn’t want to be part of a bigger company, and he took the original people that I had and he split off to his own group, and I said, “That’s fine. I’ll manage this big contract, no harm, no foul.”
But then the dot com bubble burst, and a year later, 9/11 happened. So the $200 million contract ended up being $80 million. Most of that ended up being hardware, which, I didn’t really do much with. So, I started focusing back on what I knew how to do best, which was a technology solutions, whether that’s providing staff augmentation or services to our clients. And I started with the clients that again had done business with me before, and we grew.
The reason that we were able to grow that fast is that we attracted the top sales talent. I was paying above market. My value proposition was very simple. The reason people join me is if you work for DISYS, whatever you were making, I would give you 10% more if you produce results.
And the reason that the clients bought for me is that I was the lowest price provider. So, the value proposition really wasn’t there, and I didn’t make any qualms about it either.
We made sure that any job we took, we were able to complete it on time, under budget, and that our clients gave us references. So our expansion really happened through word of mouth. Managers moving from one company to another took us with them.
So from 2000 to 2005, we were predominantly a DC metro based company. And then, some of our larger clients like Exxon Mobil decided to consolidate their vendor list. So, they had about 200 plus suppliers for IT staffing and IT services. And they just found that to be a too large a number. So they came back and they said, “Look, we need national suppliers and you’re going to cut this down from 200 something initially to 80, then to 30, and our final number is going to be seven.”
So obviously everybody freaked out, including myself. Open offices in multiple locations, Dallas, Houston, California. And mind you, I had no idea how to expand. So, it was really me landing in Houston and trying to figure out, okay, where do I even open an office? Sitting in the hotel lobby and calling up people who would come and interview with me to start the branch offices there. So, those were, those were definitely really interesting times.
But, one of the things that really helped us is the kind of people we attracted, at that time, for lack of better word, were high-performing mercenaries. They knew what they had to do. They could bring accounts with them. They didn’t want people to tell them what to do. As long as the numbers were there, you left them alone, and they were fine. It actually works. And it attracted a lot of high performers who came and started joining our company.
So from 2000 to 2012, we went from — again because my partner had left — almost zero revenue to $250 million in revenue in a straight line. So, our compound annual growth rate was close to 38%. And this included your 2008 meltdown. We are one of the only IT services companies that actually grew double digit during that period rather than shrinking.
StaffingHub: That’s incredible.
Mahfuz: So I was going to take a break and see if you had any questions and I was going to give you some background on our client selection and why some of these things happened.
StaffingHub: Yeah, I’ve got a series of questions. That’s a pretty incredible story. And, as you’re talking about it, one thing to be like to do on this podcast is it help staffing firms that are trying to grow their business really identify key takeaways and tactics that they can use to grow their business. And you talked about having this be a six-year side project, before you got to $5 million. What do you think, during that six years, were there any specific moments or lessons that you learned that really helped you kind of break free from the side project to having this be a full time business? Or was it just time to grind?
Mahfuz: Yeah, so think about this. I was an immigrant in a country I had my H1B visa. I was getting my permanent residency, and I had just married and had a very young family. Right? My ability to take big risks was not really high. I didn’t have a bank loan, nothing. Right? So, what I needed to do was ensure that if I’m trying to grow this business, that I still had some level of income on the side. I could not rely on the choppy nature of the business that was coming in from DISYS at that time.
So, the first advice is that you need to have a backup plan that keeps you whole. The reason the business grew even as a side project is we did not take a dollar’s worth of profit from that company into our own pockets. We reinvested 100% and that’s how it grew.
You need funds to grow, whether you borrow it from a bank or from a relative or you do it organically through just taking the money from the company and reinvesting. You need money to grow. So if you don’t have that, and if you don’t have that plan, the chances are you’re going to run out of cash and you’re going to be very, very frustrated.
And, the second thing that I mentioned that the onset is that it wasn’t easy. The first two years we got nothing, $6,000 in revenue, right? So patience truly is a virtue here.
StaffingHub: It sounds like patience and a lot of grit, it sounds like the hard work and willingness to put in the time knowing that you need that just to keep the cashflow if you’re not going to take on the extra risks or take on institutional funding of some sort. So that’s fantastic.
Mahfuz: Exactly. Exactly. And I’ll give you a funny story that I had.
In 1994, I had gotten married and initially for almost like the first six months, I mainly saw my wife sleeping, and it’s because I used to go to work, at 6:00 in the morning. So I’d have to wake up at 5:00, and because I was moonlighting on projects, I would come home at like 1:00 in the morning. So while I’d come in, she’d be sleeping. I’d go out, she’d be sleeping. So yeah, grit is required. This has to be your number one priority. If it’s not, then it a lot work.
StaffingHub: I completely abide by that rule and I’ve felt it myself over the last few years. That’s a fantastic story. One of the other things that you mentioned here that I thought was pretty interesting and would love to learn more about is as you kind of broke out and had the, sounds like the early 2000s, you were paying the talent 10% more than the competition, 10% more than what they’re making, but also, charging the clients less. How did you manage to pull that off?
Mahfuz: Yeah, so, we knew what we wanted to do, which was scale up fast, right? So, again, it’s all about a business strategy, what you want to be and how you want to be it.
When we were small, nobody knew DISYS. So me trying to sell a story about how DISYS staff augmentation services or IT services is better than anybody else … I tried it a few times, in front of the mirror, and I didn’t believe it.
So I said, “Okay, what is it that is a true blue compelling reason for someone to join me?” And the short answer was the money. I could give them money.
And at that time in the industry, you could generally get about a 30% gross profit margin. So, what I decided was that I was going to take half that margin, so I was going to give 10% of the parity to the consultant so they would come and work for me, and I would give 5% break to the client so the client is getting the same resource at a cheaper price. It’s a win-win situation. I didn’t have to give any value proposition. They just came.
StaffingHub: That’s fantastic and smart. So sounds like you had the strategy laid out. One other question is, you talked about in that, I’m just curious if you were talking about building the, I guess fault tolerance at your … having the engineering background. Have you used that or implement that into the systems that you’ve built at DISYS?
Mahfuz: So, so now, fortunately, we’re about $420 million in revenue. I have an entire IT team that does it and technology has come so far.
What I took from my learning as an engineer is: we are extremely data-driven. So I have data for our company starting from 2000. We build models to see what kind of models succeed, what kind of markets these models work. So it’s not exactly one for one.
The point is that you have to really analyze the situation and try to build a system that can sustain the hits and that you can apply the lesson from the data to your business and your human management philosophies.
StaffingHub: Absolutely. Absolutely. So, switching gears a little bit, but how are you, I guess looking at what’s coming next in the staffing industry, anticipating the change and making sure that you’re ahead of the curve?
Mahfuz: It’s consolidation. Look, I mean, if you see any other industry, there is none where you have this level of fragmentation. I think the top guys in our industry only own like 8%, and if you go down, top 50 even doesn’t own more than 60% of the market. There is no other industry like that. If you look at the airline industry, you really have four majors and few minors in there. If you look at the healthcare pairs, again, same thing, four or five majors.
So, that’s exactly what is going to happen to this marketplace right now. The barrier to entry used to be very, very low and now for any of the major accounts, it’s high. They have an RFP that go out. It’s a bid out on a three-year basis plus do a one-year extension. So if you’re not in that list for the next five years, you’re probably not getting in.
There is going to be consolidation. You are seeing it already. We’re already ahead of the curve. 2012 we brought in a private equity group called Western Presidio.
We took the money to build a platform, which was very, very painful because we had to change our entire system and shed low-margin clients that I actually had built the organization around. We made sure that we put a lot of compliance and risk-mitigation methodologies in place.
I thought that we could do it in two years. It actually took us almost four years. So finally, when it got done, now we have purchased three companies in the last three years and integration has been seamless. We intend to do one or two mergers every year.
Now, the second part is that the industry is also moving into a place where value-add becomes a necessity. So, we are positioning ourselves as that talent gap solution company.
So, our clients call us because they have a talent gap. It might be that they want a singular body to come and sit your staff augmentation in their office and help with somebody.
They can also tell us that, “Look, we don’t have space in our office. We want it off-site or we want it offshore, we’ll just give you the outcome. This is the outcome we are trying to get. We don’t have the talent to develop the program to get this outcome. Can you do it?” We will do that too.
And, last but not the least, where we have really invested a lot of money, and I’m actually going to be a panelist at a Staffing Industry Analysts forum in September on this, is automation.
We are looking at the repetitive work that people normally do, and we are infusing either machine learning or robotic process automation for those to cut down on the number of people that you need.
Again, this goes back to my roots of how I even started.
StaffingHub: Absolutely.
Mahfuz: We are really focused on one, consolidation. Let’s roll up the other companies who have not made these investments. We have made millions of dollars of investment in ensuring that we have a system that can handle high volume requirement flow. We have spent the last nine years building a managed services group where if you want outcome-based systems we can actually do that rather than just providing you bodies. We have invested money into, again, machine learning and robotic process automation so that the mundane work, you don’t have to pay people to do it. We will give you the robots that will do it faster and better and without errors.
StaffingHub: Yeah. I’m a little bit of a tech nerd myself. I get excited about all of the machine learning AI, what’s next on the technology front? Are you able to share any specific examples of where you’re successful using machine learning, maybe that’s open, not a differentiator?
Mahfuz: Sure. Look, I can’t use the names of the clients, but we were working with a banking client and anti-money laundering, and we initially placed about 30 people on that group. And our goal was to go in there and reduce that number, which we did. Wasn’t a great success because there’s a little bit of a people inertia that you have to get over. But we were able to implement RPA in there to ensure that the number of people that was needed in this and the timeline that they wanted to do that we were able to beat it.
I’ll give you another example, which is probably a better one. In one of the major healthcare payers, they send out these tokens, you know the security tokens that keep on changing their numbers and you have enter it in?
These tokens, when the life runs out, they go back to get reassigned. And there were a group of 35 people who are doing that work out of Denver. And by the time we introduced RPA automation, by the time we were done, we could do the exact same work with five people.
StaffingHub: That’s fantastic. It actually sounds like you’re even going, as far as in terms of outcome-based, placing people, but then reducing the number of people that you placed, if it’s best for the client. So you’re actually taking it a step further and saying, “All right, here’s how we’re going to start, but we’re going to try to automate this and reduce your cost over time through machine learning and through automation,” which is really fantastic. Is that accurate?
Mahfuz: Absolutely.
It’s self-cannibalization. We cannibalize our own projects and make them smaller. Right? But here’s the thing. I held this true from the day I started working. If you do a great job and your client base is a good client base, ours is all Fortune 500. They recognize good suppliers and yes, in the short term, your $5 million project just became a $3 million project. But I can guarantee you they’re going to give you another $10 million project because they’ve seen the good work you have done.
So the whole strategy, rewinding, David, all the way back to the start: the reason that I initially positioned the company as a low-cost company is that I needed name recognition. I needed the size. So if you don’t have the size, you can have a great product, but if you don’t have a ready-made market for that product can, you can get lost and you have seen many of that stuff happening.
So, what I wanted to do is build a great client base, build the size, and once we did it in 2012, and we were over quarter of a billion dollars in revenue, that’s when I decided, “Okay, now we’re going to do a transformation of the company.”
Now again, like I told you, it was very, very painful to do that transformation. It took me four years and our revenue growth that we used to be so proud of, completely stagnated out, and in some cases went backward as we were making system changes and people changes that was, in some ways, the exact opposite of what we initially started off doing.
But, I can proudly report that now in 2019, this is the best year ever that we have had, whether that’s organic and inorganic growth, whether that’s client satisfaction level, whether that’s the number of employees we have and the longevity of it. All of them are pointing at the right direction.
StaffingHub: And that is fantastic. And, with that, do you have any books? I mean, I hear a lot of stabbing firms using like the Traction Entrepreneurial Operating System. Are there books or systems that you kind of leverage to help kind of grow and structure the business? Or has it been something that you’ve kind of built organically as well?
Mahfuz: Yeah, so ours is all homegrown. We do have the systems and processes and everything in place.
For example, we actually measure our projects coming on or people going off in real-time. So we have a lot of data analytics tools that are embedded in our system and, and we train them on it because a lot of companies that are not used to it that, minute by minute, we can figure out what’s happening in the organization.
What we believe in is really drawing the boundaries of these are the basic rules of the company. But we know that, again, we have 23 offices around US, but we have 600 people working in Brazil. We have 150 work working in Eastern Europe. We have 200 people working in Malaysia, Singapore, and Thailand region. We have 450 people in India.
So different states, different countries operate differently.
If you have such a rigid rule that nobody can deviate from it, you actually do all your managers a disservice You really don’t need managers and leaders at that point. So, what we do is we define the rules, but we allow our managers to customize it based on what that local market demands.
StaffingHub: And that actually leads me perfectly into the next question I had for you, which is to talk about your core values. I saw you had accountability, respect, collaboration, fairness, ingenuity. How big of an aspect do you think defining your core values and implement them into business? Maybe just talk a little bit about how this is impacting your business.
Mahfuz: No, absolutely.
Everybody has core values and the core values mean nothing if you don’t live it. I have three children and what I have realized is that my children learn a lot more watching what I do rather than hearing what I say.
So, these values we practice, on a day-to-day basis. Like the fairness core value: if we know that our client is willing to pay more because they’re not understanding their requirement correctly, we would actually go and correct it.
Again, in the RPA example, they didn’t know that there was a way that we could save them the money. They didn’t talk about it. But we, we wanted everything to be fair. So we, we made sure that we went in and we made the process improvements and we gave them the savings dollars back.
Accountability is our biggest core value. I mean we manage, monitor all the metrics in real-time, and it’s transparent. Everybody sees everybody else’s numbers and what they’re doing and what they’ve been able to achieve. Full transparency, 100%.
Right? So a lot of people get worried about that. It’s like, “Whoa. How’s this working out?” But no, I mean, that’s what it is. Accountability. If you don’t like your numbers and that’s why you want it hidden, go make your numbers better.
And respect. One of the things again that we practice throughout is, look, respect generally goes upwards very well. People kiss up to their superiors all the time.
We make sure, starting for me, that if you’re at a conference and some of the associates are helping clean up, we get involved in cleaning up. That’s showing respect, right? So we walk the talk to make sure that people understand that’s what we believe.
Now, is it perfect? The answer is no. Look, I mean as the company has grown, I’ll be the first one to tell you, when it was $100 million company I knew what was going on at any given time. And if somebody was breaking a core value, I could actually call them up and sit down with them and explain to them why it’s important. Now it happens and I find out about it a month later. So it is getting a little harder to do as we’re scaling.
And I’m hoping that our managers would step up and again live it because just saying it has no value. Living it is where it brings the value.
StaffingHub: Absolutely. Absolutely. I’m going to just jump back a little bit. I actually had one question. You mentioned that you had acquired a few companies and you plan to acquire a few more. What type of advice do you have for companies that are in a position where they’re looking to scale through acquisition and they’re looking at how to identify who to acquire and how to go through that process. What have you learned through that process?
Mahfuz: Yeah. So the first thing that you have to understand is what is your strength, right? Is your strength in cost containment? Is your strength in taking and scaling your product? What exactly is your strength? And then you need to find target companies that are going to benefit from that particular strength.
And culture is very important. Different companies have different culture. So, what my advice always is, is to be respectful often.
But there are two ways of doing it. One is a big bang approach, where you pull the bandaid off, right off the bat and everybody is part of the same group.
And the second one is that you leave the other group alone for a time period and then you do a slow merge together.
Both options work. I am actually more pull the bandaid off right now kind of a man.
So, when we bring people in, we bring them into the DISYS fold right away. What we do pay attention to is that compensation. So if for some odd reason our comp plan is different than theirs, at least for six months, we try to keep them whole because again, people can’t change their lifestyle drastically like that, and we have to be cognizant of that. But that’s the only thing that we keep whole.
But they too, after the merger has happened, we are now sending our tiger team into our acquired company to educate them in how DISYS systems work, what are our values, how do we operate, what are some of the things that you need to learn, what is learning schedule going to be like? We’re into assimilating them the next day.
StaffingHub: That’s fantastic. And, it’s interesting to hear that approach. I’ve watched both and I’ve definitely send plenty of companies not pay attention to the culture fit and run into some major issues on that front. When it comes to, I guess going through all these acquisitions, all of the steps that you’ve gone to get to where you are, what are some of the, if you’re open to sharing, some of the mistakes that you’ve come across, things you wish you would have known as you’ve grown to this point, things that you could have avoided if you had only had the right conversation with somebody like yourself or listening to a podcast?
Mahfuz: Absolutely.
StaffingHub: Hopefully like today.
Mahfuz: Absolutely.
Look, I have made plenty of mistakes. But the fortunate part is I generally try to recover from it quickly and I generally try to never to repeat my mistakes.
So I’ll give you the biggest one that I had. So I told you that we were doing a transformation of the company in 2012. So part of the transformation was let’s get rid of our low-margin business. Right? Made sense perfectly. That’s what we wanted to do. So we got a group of our low-margin business almost by $100 million.
So I mean, think about it. Our revenue at that time was 250 million. Run rate was about $300. $100 million of that was low-margin business, right?
StaffingHub: That’s like a third of it. Yup.
Mahfuz: Yup. In my brilliant assessment, I went back to the client and said, “Clients, we gave you a price break. If we can’t raise the rates by another 5%, we are not going to be able to service you.” Now, the client said, “Thank you very much. We are a Fortune 500 companies, there are many people standing in line to get this business. So if you don’t want it, we’ll give it to somebody else.” And that’s exactly what they did. And that $100 million piece of business, dwindled to almost zero in about on 19 months time.
StaffingHub: Wow.
Mahfuz: Painful. Painful. If I had a time machine, I’d go back and smack the silly me on the head and say, “Mahfuz, if you don’t want this business, carve it out and then put it up for sale, somebody will buy it. And at least it wasn’t going to be a complete loss.”
StaffingHub: I see. I see.
Mahfuz: So, I mean-
StaffingHub: Basically carve it out as a separate entity almost and-
Mahfuz: Exactly.
StaffingHub: … find a way to spin it off, but no need to sell … That’s really good advice.
Mahfuz: I got a goose egg for it. At least somebody would have paid me a few million dollars for a hundred million dollar business. Right. And so that was a really silly mistake.
The other one I’ll tell you is, I’m in the, obviously in the Washington, DC metro area and I have $0 worth of federal business. It’s all commercial. It blows everybody’s mind. And there’s a reason behind it. When I started the company, I was a lot more idealistic than I am right now. So I decided that in the federal side, if you go in there, you get business because you’re an 8(a), you’re a minority-owned company, so people are going to give you business. And I had it in me that I will not take one piece of business because of the color of my skin. I will win business because I’m better than you.
So as good as it sounds, it’s a really dumb idea because by the time I was big enough, now if I have to compete and get into the federal market, I’m competing against Leidos or CSC or the likes thereof, where they have much better quals than I do. So for me to get into the federal space right now, I actually have to go by somebody. I can’t organically build it because it’s not going to work. So, idealistic behavior is good, but it needs to be thought through.
StaffingHub: That’s a great story. I have a lot of respect for you on it and also that suits both sides of that one. Just a couple of questions around it now. What do you see as kind of the biggest challenges facing your industry? I know you mentioned consolidation, which I completely agree with. I think that it is unbelievably fragmented industry because of the low barriers to entry, but what are the additional challenges you see happening within the industry as things are moving forward?
Mahfuz: So I think the pricing pressure is going to be one. If you look at Europe market, which is probably slightly bigger than US in staff augmentation, their margins are probably three to four points lower than what we get in, in US. So there’s going to be some margin pressures coming in. The second thing is automation. It’s coming, whether you like it or you hate it, automation is coming and machine learning. And it’s here to stay. The technology is improving and it’s improving really, really fast. If you look at some of even high level jobs like data analytics, you can teach machines to do some of that stuff far better than human beings can. So if it’s not creative, if it’s really doing the grunt work, those things are going to get automated in the next three to five years.
StaffingHub: Yeah, it’s amazing what automation is doing. I think it was in the book, Safety, that I heard that the creative side, I always think of that as being protected from automation. But then I learned that in chess, when they identify if somebody is cheating in a chess championship, they look for the more creative moves. And that ends up being the person who’s using the AI to win, is that the AI is actually more creative than humans in chess moves. So, that’s almost a little scary on that front too. But, definitely see that coming as well.
To finish off, what’s next on the horizon for DISYS? Where are you guys going next? Where do you see yourself five years from now?
Mahfuz: So one of the things that we do is that we take 10% of our gross profit and we put it in innovation. So we bring in all our leaders, we sit down generally in December and we say, “Look, what can we do? What is it that new and latest and greatest? What are you hearing from the field that we need to invest in?” And then we invest in it.
We give it a three year time horizon to be self-sufficient. If it doesn’t become self-sufficient, we kill it.
So innovation is the core of us. And the reason I’m giving you a long-winded answer is besides the automation, things just change really, really fast. We are going to scale up. We are only $420 million. My goal is in the next three years to get it over a billion dollars.
But then really get into the business of solving our client’s problem in the most efficient manner. My observation, and again that bank example that I gave you for anti-money laundering and the reason that we could not do more automation there is the manager there did not want us to do it.
There’s still this old-school mindset in certain places where people feel important based on the number of individuals that are reporting to them rather than, what is the system and what the systems impact is to the business that you’re managing?
It’s going to be a journey, but we want to be partners to those companies that really want to accelerate productivity, want to get you to the next level. Our job as I see it, is partnering with our clients and things that they’re not good at, in getting it from point A to point B because of red tape or their internal issues. That’s not their core competency. We want to be their go-to partner.
StaffingHub: No, that’s awesome. It sounds like you’re really shifting towards the outcome solution-based focused on what’s right for the business regardless of the short term, but looking at the long term partnership. That’s something you’ve got the right model and clearly you’ve identified a model that works well.
It’s been really fantastic talking to you today, Mahfuz and learning from you. Are there any other comments that you’d like to make before we close out our call here today?
Mahfuz: No. I think, David, you have captured everything well. The only other comment that I would make is our specialty is in maintenance and upgrade. So we’re not your building guys. Right? So the example that I give that’s non-IT related is when you need a house built, you call a builder, you call an architect or builder. Hopefully you call a big one. They come and build it for you and they have the warranty. And then after the warranty period is over, you can either get an extended warranty from your builder, which is going to cost you a lot more money, or you can find a good third party that come and maintain all this stuff.
Now there’s a difference. You have your HVAC system and your plumbing system maintenance and your lawn maintenance. For your lawn maintenance, hire whoever the heck is giving you the cheapest price because even if they mess up your lawn, it’s not that bad. But your HVAC and your plumbing, you need to find guys who you can partner with that you know when you call them, they’re going to come. They’re going to do the job, they’re going to do it right. They’re going to give it at the right price and it allows you to live in your house. We are those guys. That’s how we partner with our clients.
StaffingHub: That’s was fantastic, and I think a great way to finish this conversation. Mahfuz, again, really, really enjoyed talking with you, enjoyed the conversation, enjoyed learning and just a happy that’d be on a Staffing podcast today. So we appreciate your time.
Mahfuz: Thank you. Take care.
Looking for more staffing insights? Check out StaffingHub Live, our exclusive staffing event designed for staffing execs who want to grow their firms faster.
