Pune-based IT firm Persistent Systems, which has been investing in non-American markets as part of a long-term strategy to insulate itself from a decline in its US business, has seen the move pay off in the September quarter. Unlike other IT giants however, digital growth has not impacted their deal sizes, the company said.
“The European market has been a long-term strategy. We started to diversify in Europe and APAC two or three years ago. We have been creating a new team in Europe the past one year. Our acquisition in Australia last year has also started taking shape,” said Mritunjay Singh, President Services and Executive Director, Persistent Systems. He added, however, that given the small base in these markets, a single major deal can make a huge difference to the numbers. Directionally, he said, they expect more growth from Europe and APAC in the coming quarters.
For a company largely dependent on US based service projects, it has seen maximum traction from European projects on the back of a large deal with Salesforce partner PARX. This deal has single-handedly tilted the scales for their enterprise, European and digital revenue share by bringing in a large number of new clients, from an average 5.7 per cent revenue share in the previous six quarters to 8.5 per cent revenue (European) share the September quarter.
IT giants like TCS have repeatedly pointed out that the focus on digital services will alter the nature of deal sizes across the board resulting in multiple smaller deals instead of large consolidated deals. This has worked out in favour of midcap companies like Persistent.
“In the enterprise segment, deal sizes are becoming smaller but from larger players. They are unbundling $100 million deals into smaller $2-3 million deals. Enterprise segment has grown a lot over the years. For us, who had deal sizes of $200,000-300,000 (earlier), we are going up in deal size while others are coming down,” he said.
The higher focus on global revenues also materialises in the revenue contribution from their global delivery centers (GDC). From around 27 per cent a year ago, the revenue contribution of GDCs has slowly inched up to 32 per cent, while Indian delivery centers’ contribution has come down by a similar margin.
“We realised that the kind of work we were doing couldn’t be done out of India alone. We needed to capture local talent. We have also added a lot of products. There is engineering talent in India while expertise in building a product expertise and ecosystem had to be acquired outside,” said Singh.
A number of large deals from IBM as well as Indian government projects are likely to be realised in the coming quarters, which will add to the company's performance, maintains Singh.
“India, we are trying to enter the government business and we are taking the IP (intellectual property) centric route here. Yes, diversification has been there. We have two large multi-million contracts and our pipeline is fairly healthy. The government sale cycle is 12-18 months long. It takes some time to realise and we expect a few of them to close in the second half of the year,” he said. Persistent has provided digitisation solutions to track legislative proceedings for Uttar Pradesh and Madhya Pradesh Vidhan Sabha and have received good responses for the same.