EPAM Systems: Navigating Challenges, Transformative Programs, and AI Focus
2023-08-04
EPAM Systems, a technology company, discussed its strategy for investing in transformative programs and building relationships with stronger vendors during its recent earnings call meeting. The company highlighted the potential impact of generative AI on talent demand and provided updates on its operations in Ukraine and Belarus.
One of the most important topics discussed in the meeting was the company's focus on transformative programs and building relationships with stronger vendors. This strategic approach aims to position the company for future growth and take advantage of potential competitive advantages and faster market recovery. The CEO mentioned that some clients are already investing in these programs, indicating a strong demand for such initiatives. This aligns with the expectation that there will be a significant demand for talent, particularly in technology and technical depth, when the market rebounds. The CEO also highlighted the potential impact of generative AI on talent demand, suggesting that companies like EPAM could potentially be replaced by AI in the future. This topic underscores the company's proactive approach to capitalizing on transformative programs and building strong relationships with clients and vendors to stay ahead in the market.
EPAM Systems has faced challenges in its market outlook due to a shift in demand dynamics and broader concerns over the economy and geopolitical impacts. The company's technology vertical has been particularly affected by a pullback in spending and caution from clients, leading to a shortfall in the first half of 2023. Looking ahead, the CEO expects a negative dynamic to continue into the second half of the year, although at a lower level than the first half. Despite these challenges, EPAM Systems is implementing a pragmatic action plan to navigate the current market conditions.
The key drivers of the business appear to be the market environment, demand for complex projects, and cost sensitivity of clients. To address these factors, the company plans to make real-time adjustments to its offerings, engage in go-to-market planning, implement customer engagement programs, and stabilize its global delivery platform. EPAM Systems is focused on digital products and data engineering services, digital consulting agency, design content, and digital marketing services. The company aims to align its capabilities with market demands and be at the forefront of the digitalization transformation in the IT sector. They also plan to capitalize on their core capabilities in combination with generative AI. Additionally, EPAM Systems is diversifying and stabilizing its global delivery platform and optimizing talent allocation across the world. The company is actively working on demand generation and acquiring new clients, with a focus on including a diverse stack of capabilities from consulting to implementation efforts.
EPAM Systems anticipates a continuation of negative performance in the upcoming quarter and year, although at a reduced level compared to the first half of the year. The company acknowledges the uncertainty and challenges faced by the company and the sector as a whole but is implementing strategies based on past experience to navigate through this difficult period.
During the meeting, the company highlighted its progress in diversifying its global delivery locations, particularly in India and Latin America. They have seen improvements in quality and efforts in these regions and have also started exploring opportunities in Central Western Asia. EPAM Systems aims to build a balanced global delivery platform and expects to feel comfortable to grow once the rebound in demand begins. The company is also focused on improving gross margins by reallocating resources across different sectors.
The participants of the call, including representatives from Stifel Financial Corp., William Blair and Company, Barclays, Wedbush Securities, and JPMorgan Chase and Company, actively participated in the discussion. This indicates the significance of the topics discussed and their potential impact on the financial market.
EPAM Systems' focus on artificial intelligence (AI) and its impact on their business outlook was another important topic discussed during the meeting. The company sees the production-ready AI services application landscape as an opportunity, particularly in its primary market segment. EPAM Systems is engaged in various activities to learn and experiment more with AI, from proof of concepts to scaled production initiatives. They believe that the increasing demand for AI-led requirements will drive the need for advanced data engineering, cloud computing, content creation, and artificial-intelligence-native applications. The company expects this "arms race" related to AI among its technology company clients to drive future growth.
Overall, EPAM Systems' earnings call meeting provided insights into the company's strategies for growth, challenges faced in the market, and its focus on transformative programs, strong vendor relationships, and AI. The company is taking proactive steps to navigate through the current market conditions and position itself for future success.