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Last Updated : Mar 18, 2016 02:32 PM IST | Source: CNBC-TV18

IBM tie-up to contribute 15-20% to revenue in FY17: Persistent

Anand Deshpande, Founder & CEO of Persistent says the deal will also add close to 500 employees which includes experts from IBM.

IT company Persistent Systems has tied-up with IBM to jointly work on the latter’s Internet of Things (IoT) platform.

The partnership will be revenue accretive and will add about 15-20 percent to the company’s revenue in the next financial year, says Anand Deshpande, Founder & CEO of Persistent.

The partnership is two-fold where Persistent will focus on continuous engineering product, he says adding that IBM will take Persistent’s solutions and service to the industry 4.0 customers. 

The deal will also add close to 500 employees which includes experts from IBM, he says. Persistent has also set up subsidiaries in Mexico and Israel in collaboration with IBM, Deshpande adds.

Below is the verbatim transcript of Anand Deshpande’s interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.

Reema: Earlier in the week you announced your partnership with IBM to build internet of things (IoT) solutions based on IBM’s technology. What kind of a revenue opportunity does this throw up for Persistent Systems and if you could also helps us with what the details about the revenue sharing mechanism are?

A: Let me share with you a little bit about what the partnership is and the context as such. We have signed up collaboration with IBM focused around the IBM Watson Internet of Things (IoT) strategy. IoT or the internet of things is a very exciting development that has come up which is comparable in some sense to industrial revolution of 1800 where people were manufacturing mass production and all of that stuff happened.

Today with internet of things you are able to upgrade your devices and your existing equipment can get better. This whole continuous software integration and updates or what we call as software defined things is starting to be very important.

Our partnership with IBM has essentially two dimensions. One is we are investing from Persistent to focus a lot on the continuous engineering product and the second piece is we are a preferred partner with IBM to take our solutions and service to the Industry 4.0 customers where the idea of software driven things is a major driver for digital transformation.

The alliance as such has an opportunity of about 15-20 percent revenue or FY16 base and FY17. It has significant growth potentials for the future. Specific to this alliance we are adding about 500 people in the next one year which will be a mix of experts coming in from IBM and our own employees and some more talent that we will hire in the market.

This sort of sets us up for a very interesting footprint across the world. We have set up subsidiaries for Persistent in Mexico and in Israel to work with IBM along these product lines.

Nigel: Could you give us some numbers then? You said that it is revenue sharing bases. According to Mckinsey, as you said it is a very interesting segment the IoT business. USD 11 trillion is what they forecasted at. For Persistent Systems what kind of revenues are you seeing going ahead and also could you tell us the revenue sharing bases some more light on this big opportunity?

A: We expect that the revenue opportunity for Persistent to be roughly 15-20 percent of this year’s revenue will get added because of this particular partnership in the next financial year.

Reema: You are saying that the incremental revenue will be 15-20 percent more purely on account of this partnership?

A: That is correct.

Reema: So, this is going to be over and above the organic growth that you are going to enjoy plus what your acquisitions will give you. So, what will FY17 revenues look like or revenue growth will look like?

A: We don’t want to speculate a too much on the FY17 revenues but this opportunity is fairly large in the context of our current business. We are, as I said adding about 500 people globally across the world. There is an extra investment that we are going to make as part of this arrangement.

There is also an opportunity to work together as a global SI for IBM along the IoT landmark activities. So, it is quite significant from persistent point of view. We also will use this opportunity to consolidate some of other IBM businesses that we are doing and other projects to ensure that we can get to a decent year next year.

Nigel: I was just trying to work on the numbers then. In a financial year you do roughly around Rs 2,100-2,200 crore, 15-20 percent will be nearly be to Rs 300-400 crore at least. Are we on the right track?

A: Yes.

Reema: You are also saying that you will be consolidating some of the other business that you get from IBM, so is it going to cannibalise your existing business?

A: This doesn’t cannibalise our existing business. This is in addition to whatever we are doing. This is just additional business in addition to whatever we have been doing.

Nigel: Mindtree had come out with a profit warning for the quarter four numbers, your quarter three looked very good. Any hiccups we could expect in quarter four or is it going to look fantastic as we saw the last time around as well?

A: I don’t want to say specific numbers again for Q4 we are really a few weeks away. There are lots of moving parts still but hopefully we should have a decent quarter.
First Published on Mar 18, 2016 01:12 pm
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