Persistent Push For Growth

HAVING BEEN PART of the Indian IT services growth story for over three decades, Anand Deshpande, chairman and MD of Pune-headquartered Persistent Systems, a company he founded in 1990, can’t hold back his excitement talking about the ongoing innovations in the tech sector.

It would be difficult to predict where technology would be in the next five years, but with tech moving at a rapid speed towards creating new opportunities, especially around artificial intelligence (AI), Deshpande is positioning Persistent Systems to take advantage of what’s in store. The company, which crossed the $1 billion annual revenue mark in FY23, closed the year with $1.03 billion, a 35% growth year-on-year. It recorded an EBIT (earnings before interest and taxes) margin of 14.9% during the fiscal.

It has taken Persistent Systems 33 years to get here, and while $1 billion may just be a number today given the size of the industry and the fact that many companies which started out much later have already crossed the mark, “it still felt really good,” says Anand.

Owning about 30% of Persistent, Anand has seen the company navigate through the many ‘S-curves’, (business ups and downs), as he puts it. Each of them were different, calling for bolder decision-making and realignment.

At the ‘Persistent Huddle’ earlier in January, Anand shared his vision regarding the company’s next phase of transition to beyond a billion dollars. Over the last few decades, it has consciously chosen the revenue path to tread — from focus on data and databases in the '90s, to outsourced product development and full product lifecycle and engineering on SMAC (Social, Mobile, Analytics and Cloud) in later years. Post 2016, the focus shifted to digital transformation, enterprise business and now to digital engineering and Cloud modernisation.

At the end of March 2019, with revenues at $480 million, Persistent embarked on a big change. Following market regulator, the Securities and Exchange Board of India’s (SEBI’s) then mandate to separate chairman/ managing directors/CEO roles, Persistent saw a major change in leadership. It appointed Christopher O’Conner as CEO in February 2019. While regulatory changes may have mandated such a transition, Anand is candid about what went in his mind while giving it effect to create a structure where the founder was not the centre of the organisation, but its support. “It just didn’t make sense for me to be running the company forever. It made sense to move on and be hands off and get a professional. A company has a much longer tenure than being dependent on one individual,” says Anand.

A year later, in October 2020, Persistent elevated Sandeep Kalra to the position of CEO following Chris’s departure in August that year. Over the past years, the company has registered industry leading growth: From a tad over $500 million revenue in FY20 to $1 billion in FY23, growing at a 27.3% CAGR. Persistent Systems' main revenue streams include its services business and the product/IP-led business. Growth in the past year has largely been fuelled by its services business, which added incremental revenues of over $280 million. The services business at the end of March 2023 stood at $959 million, compared with $675 million in FY22, a 42% growth year-on-year.

The company also improved its large client base (those over $5 million) from 25 at the end of FY22 to 34 in FY23. Geographically, North America, the highest contributor to its overall revenues, saw a marginal decline of 70 basis points to 77.9% in FY23, from 78.6% a year ago, but business in Europe saw an uptick in revenues of nearly 2%, from 8.4% in FY22 to 10.3% in FY23.

In its research report dated April 26, Motilal Oswal notes, “The company is actively scouting for a tuck-in acquisition in areas of cyber security, Generative AI, and consumer tech to improve its horizontal strength in BFSI and healthcare segments. The focus is on improving tech capabilities and growing wallet share from existing accounts to have a wider revenue stream.” The company also has invested in setting up new campuses in Kolkata, Cochin and Chennai, besides delivery centres in Europe.

Persistent’s ability to adapt to changes with every ‘S-curve’ and grow has helped the transition. “Every time you bring in other people, you have to allow the culture to simulate those who are coming in. The reason you are bringing in new people is because they are bringing in something new for the business,” says Anand.

For a founder like him, to aid growth with any organisational change lies in convincing people internally that change is inevitable, and not every change has to be seen as bad.

Having transitioned from an active day-to-day control of the company for nearly four years now, Anand says he operates more like a board member. While he talks to the CEO and CFO one-on-one, he stays away from telling them anything in particular about the way the business should to be run. “I also try not to meet other people in the company and talk about the organisation,” he adds. Being a founder and having run the company for a long time, it is but natural that many people in the company would want to bring to his notice things about others or put forward their takes on decisions taken by others. “I don’t forward any messages to anybody within the company,” says Anand. While finding work-life balance for business leaders may be difficult, and given that businesses can consume entire mindspaces, Anand believes in doing things that interest him.

Being hands off from Persistent’s day-to-day operations has made some of that possible, especially those that can engage him for the next 30 years. His interests span three areas — entrepreneurship, learning and healthcare. With his passion for data, Anand has been spearheading the Indian Cancer Genome Atlas and is actively involved in creating data sets specifically for Indians which could help in better understanding and treatment of the deadly disease. Along with his wife Sonali, he helps entrepreneurs set up and scale small businesses through the deAsra Foundation, set up in 2015.

“I have been reading quite a bit” on several subjects, says Anand. “I am particularly excited about what can happen in biology right now. Cellular, molecular biology is going through a huge transition and I am trying to figure that out. This is my mission for the next few years,” he adds.

The couple travels every quarter, overseas and domestic, the recent one being to the Canadian Rockies.