To maintain 15% growth in FY15: Persistent Systems

Q: The company has been talking about digital transformations, the early investments that you have made in SMAC. Currently, what is the contribution that you get from digital as a percentage of your revenues?

A: Let me first state that overall because of cloud and analytics, collaboration and mobility there are a lot of changes happening in the market. So, practically every customer that we work with us is somehow affected in terms of using cloud technologies and analytics in a new way. So, roughly, if you count revenues, about half our revenues come out of newer technology related offerings while the other half is more traditional work.

We see a major transformation happening in our customer base. In the new IT scenario predominantly because of cloud and other newer technologies, it takes lot less to build new generation products. What has happened because of that is that we do see a large number of companies becoming software driven businesses and when they do that they are looking at product development and digital transformation as a way to address some of their challenges and looking at new things that they want to do. That has given us a new opportunity in terms of how our SMAC investments are playing along.

Q: One of the brokerages has pegged the opportunity from enterprise digitisation at about USD 225 billion by 2020. How much of this pie do you hope to see?

A: The numbers are really large so I would not count a percentage of the pie. We are roughly USD 300 million company right now so there is enough opportunity for us to double or triple in this market without worrying about the market size as such. I would not count as a percentage of the total but for us the next few years in terms of the runway are looking fairly good because we are in early mover in this area.

Q: You spoke about 50 percent of your revenues coming in from newer technologies. How much of that would be from the digital or your per se SMAC? Would it be possible to quantify it as well as the deal size in this particular area?

A: It is hard to break that up and that is what we want to mention as well that somehow these SMAC things are no more four different things or any of those kinds of things but they are all coming together and that is where the opportunity is. The fact that we have invested in all these four areas is helping us out. So, in terms of digital, it is getting all pervasive. A lot of companies are looking at this as a way to move forward. This is really disrupting how people are looking at their business.

Q: For the first half of FY15 your topline growth has come in at a little over 13 percent which compares with a little over 15 percent in full year FY14. How much will you have to do now in the second half of FY15? Will you be able to maintain this average of 15 percent growth?

A: That is clearly the objective and we are working on that. However, I don’t want to give any specifics for this quarter right now. However, we are aware of the calculation on what we need to do for the rest second half. We think we can make the 15 percent growth happen this year.

What is happening is that our customer base and our offering to customers is changing dramatically. Traditionally we have worked with product companies who have built products but right now what is happening is companies that are enterprises and fast moving enterprises are starting to become product companies for their portfolio and that is creating a an opportunity for us. So, we have been investing in many technology and IT solutions to make that happen.

So, we are in a phase of transition where we are looking at a new opportunity in terms of the big market that was mentioned by you earlier. This transition is going to take us through the year to make that happen. However, early signs in terms of the business that we are getting and the fact that many other people such as the analysts are saying similar things is helping us out in terms of the market opportunity that we are in.

Q: Overall, the company will clock-in revenues of 15 percent in FY15?

A: That is what we are working on. We still have half the year to go. So, I don’t want to say no right now but we know that that is what we need to do and even better it. However, overall the market trends are looking good. We are getting new customers in these new digital transformational areas and many of these customers are not traditional Independent Software Vendors (ISV) or product companies that have been Persistent’s main stake customers but these are traditional businesses who are starting to become software driven business and that is a good sign; that is where the market opportunity increases for us.

Q: In Q2, your company’s top five clients had faced some pressure. Is that pressure going to sustain even in the second half of the year or it has been ironed out and the top clients will show growth in the second half?

A: As I mentioned because of newer technologies it takes less to do the project work. So, whatever took some amount of time you can do it with lot fewer people. So, all the existing customers that we have will have this situation where despite doing everything right when you look at the next set of projects coming in they will take fewer people to do the projects.

So, there will be churn in terms of the opportunities with existing customers where the total billing size might go down for a period of time while they move on to newer work but this was something we had anticipated and we have been planning to create this new opportunity which is starting to workout. So, you will see some transition in terms of our existing customers where the business may go down for some time. In terms of our work for them, all those signs are pretty good. It is just that because of newer automation and newer techniques it just requires fewer people to do the work.