In 1998 he and four former colleagues raised $5 million to found MphasiS, an international IT consulting and software development company based in California. A merger with BFL Software in 2000 vastly expanded the company's line of services. A series of strategic acquisitions, including purchases of Princeton Consulting, Kshema Technologies, and Eldorado Computing, helped increase sales by 32 percent and profit by 26 percent from 2004 to 2005.
Rao, an expert in e-commerce, technology strategy, customer relationship management, and financial services, is also credited with seeing the company through the difficult economic slowdown in 2002. After a change in headquarters to Rao's native Bangalore—India's Silicon Valley—MphasiS attained a significant share of sales in India's almost $50 billion software export market. Within seven years of operations, MphasiS became the sixth-largest software company in Bangalore and ranked among the top domestic companies publicly traded on the Indian Stock Exchange. Company officials are proud that many of the employees are women.