The second quarter FY13 numbers for Pune-based Persistent Systems were significant for the company, as revenue from intellectual property drove the company's revenue by 37% yoy and 9.4% sequentially. Anand Deshpande, Chairman & President, Persistent Systems says that this quarter showcased the company's effort to grow revenue by investing in intellectual property (IP). In a chat with Shivani Shinde, he talks about the future roadmap of the company. Edited excerpts...
The company’s Q2 revenue and profit grew by over 37%. What were the key driver for this?
We have been focused on increasing our revenue by IP. Over the last few quarters we have been acquiring IP and creating as well. This is the quarter when can show some good revenue numbers. Our revenue from IP led business was $11.36 million, a growth of 48% sequentially. We have also managed to maintain our profitability, despite giving a salary hike of 9.9%. The hike were effective from July. Our EBIDTA for the quarter was at 27.3%. For this quarter we have seen IP led business grow by 4% and the rest coming from engineering and product business.
What is the idea behind focusing on IP led business?
IP will be a major differentiator for us and provide an advantage. There are two routes that we have taken to built our IP. One is by partnering with customers in white space and two acquisition. We have acquired three so far in this year. A few days back we acquired US-based Doyenz’s rcloud business. From IBM we acquired TNPM and Location business from California based Openwave Systems. All this have attributed to our IP led revenue. At present IP contributes 19% of the revenue. This year, we will close IP based revenue at 20%. Over the next three to four years our revenue from platform and IP will be between 40-50%.
How significant is acquisition in driving the IP led business?
We will continue to acquire small businesses. Our strategy on acquisition is based on two things. First, we will acquire in areas that are relevant for our customers, and two we will also acquire for skill sets that helps us to get to a better foot-print. For instance, with Doyenz we get on board 17 people, that specializes on cloud computing, we get people onsight and are closer to the market. With TNPM we picked up 75 people in Malaysia and 15 in US, Location we had a transition we got around 6-7 people on board.
Persistent unlike other IT services players is focused on product development and engineering, how is the macro environment impacting business?
We do see good growth in these markets. There is no dearth of projects. Of course execution of project is hard in the market as you need right kind of people. Especially since our competition in this segment is more from US companies than from India.
Over the last two years because of the way the market is moving and the cloud computing acceptance, clients are breaking deal into smaller size, and the duration of deals have also come down. We realise that this is a new normal, you will see volatility in deal closures. We do not see this as a one-off trend but a strategic trend and we have accepted this and moved on.