Nearly five years ago, Persistent Systems identified the potential of the emerging technology wave — Social Media, Mobile, Analytics and Cloud — now popularly known as SMAC. For the mid-tier IT company, more than half of its revenue comes from SMAC, of which, a majority is from the US.
In the last three years, the Pune-based company has acquired as many as six companies, with the latest being Cloudsquads in February this year. In an interview with Business Line , Persistent Systems’ Founder and Chairman Anand Deshpande said acquisition will be one of the company’s strategies to expand. Deshpande, who is also the company’s Chief Executive Officer and Managing Director, added that the company is also looking to expand into other geographies.
In December 2013, Persistent launched an early stage venture fund to incubate technology start-ups. Deshpande, who is a founder member of think-tank, Indian Software Product Industry Round Table (iSpirt), expects India to showcase some big innovations in the next 3-5 years. Excerpts:
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The industry has been talking about the slowdown for some time now. Do you see a slowdown on the IT side too?
On the IT side, especially in the export IT market, we don’t really see a slowdown. The market is back, most of our customers in the US are buying now. So there is no slowdown. It’s hard to hire people in the US right now.
Five years ago, Persistent suggested that SMAC would be the next wave of opportunity. Are we ready to catch that wave?
I think we are still very early in that game. I think you will see a lot more activities in the next few years. I expect all of these to become mainstream. In addition to these new technologies, I believe that ‘Internet of Things’ is going to be very important and that will be the next big thing to happen.
In February, Persistent acquired Cloudsquads, the sixth buy in the last three years. What was the importance of this buy, and will acquisition be a growth strategy going forward?
Cloudsquads is a specialised company with expertise in social enterprise consultancy and integration — an ecosystem that is fairly well-known. It also partners with Lithium, Jive and Salesforce.com, among others.
So our plan is to buy a company like this one and help it scale the business. Yes, acquisition will be one of our strategies and we are looking mostly at the US markets or closer to our customers.
In December, Persistent launched an early stage venture fund. How will you raise funds and where do you plan to invest?
The venture fund was set up to help us incubate or work with early stage companies. The corpus would be raised from internal resources. It is Persistent’s money and it’s directly from our profit and loss account. We haven’t carved it out as a fund.
We will invest in areas that are of interest to Persistent, and the second objective is that we want to make sure the customer ecosystem that the company operates in is relevant to our customers.
On your work with ispirit?
We are trying to focus on how to get product companies become more visible, how to get product companies own intellectual property rights (IP) and build new IPs. Also to help companies exit at the right time, with the the right valuations. It’s still very early and we really need to work on it. But if we do the right work, I think in the next 3-5 years, there could be some big innovations.
Is India lagging on the innovation front as the last big Indian name we heard was that of Hotmail fame Sabeer Bhatia?
No, there are a lot more, but they are all in the US. One basic reason is that we don’t understand what to build very well. Second, we don’t understand how to build scalable products and we don’t understand scale as well.
We tend to be not that good at making these simple and easy to use applications such as WhatsApp. Not that we won’t figure it out, but right now we don’t have that many in India. So that’s the basic challenge. The second reasonwhy our product companies are not successful is that enough companies are not getting sold. If companies start to get sold, more people would invest in them.
A lot of people don’t invest in Indian companies because they don’t know what the exit routes are.
At present, almost 85 per cent of Persistent’s overall business comes from the US. Are you looking at other geographies too?
We are looking at other geographies, too. We are looking for more in Asia, Europe and Australia, while we have set up branch offices in Germany and South Africa.
The US market is doing well and is growing, and since the US market is growing fast, it looks like other markets are not growing fast enough.
The US would continue to be our focus.