Europe, APAC deals to cut dependence on a single market: Persistent Systems

The higher focus on global revenues also materialises in the revenue contribution from their global delivery centers

Pune-based information technology (IT) firm Persistent Systems has seen its investments in non-US markets pay off in the September quarter, which the company says is part of its long-term strategy.

Unlike other IT giants, however, digital growth has not impacted their deal sizes, the company said.

“European market has been a long-term strategy. We started to diversify in Europe and APAC two-three years ago. We have been creating a new team in Europe since a year. Our acquisition in Australia last year has also started taking shape,” said Mritunjay Singh, president (services) and executive director, Persistent Systems. He, however, added that given their small base in these markets, a single major deal can make a huge difference to the numbers. 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 in the September quarter.

IT giants such as Tata Consultancy Services 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 mid-cap companies such as 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 centres (GDC). From about 27 per cent a year ago, the revenue contribution of GDCs has slowly inched up to 32 per cent, while Indian delivery centres’ 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.