Spotlight

One steady ship

From a component provider to a complete product development lifecycle company, Persistent Systems has constantly focussed on enhancing its service offerings, finds Megha Banduni.

Offshore product development (OPD) wasn’t quite this lucrative till a few years back. Persistent Systems wanted to carve its own niche in this segment. True to its name, it has been one of the few companies that have won international customers and investments in this space.

The company recently secured an ‘expansion stage’ investment of $18.8 million from leading venture capital firms, Norwest Venture Partners and Gabriel Venture Partners. Intel Capital has invested twice in Persistent, first in early 2000 and again recently when the $250 million Intel Capital Indian Technology Fund was announced.

The OPD sector is experiencing a boom. According to a Nasscom-McKinsey survey, the OPD market in India is set to grow to $8-11 billion by 2008.

"Persistent is moving towards DFM in software. The manufacturing and service industry have been through this curve, and we see outsourced product development following suit" - Dr Anand Deshpande Chairman & Managing Director Persistent

Established in 1990, Persistent has 150 clients. Optimistic about OPD from day one over the past 16 years, Persistent has shipped more than 800 product releases for its global clientele.

The company’s first strategy was to build long-lasting relationships with ISVs. Persistent works on the development of software products for a number of companies across a fairly broad spectrum. When ISVs partner Persistent they need not worry about setting up and maintaining a development centre. From its inception, the company has specialised in starting off with small teams and rapidly ramping up to a team size of 100 or more.

Says Dr Anand Deshpande, Chairman and Managing Director of Persistent, “This strategy and approach has enabled us to establish internal processes and systems that help us build and release products very efficiently. With software tightly integrated with business processes, ISVs are focussing on the technologies that increase their value proposition to customers and position their products as essential to business.”

Focus on four verticals

With 15 years of experience in diverse technologies, including connectors, identity management, life sciences, radio frequency identification, security & compliance, supply chain collaboration and telecom, the company has come a long way. It also offer services such as research, training, usability engineering, sales support, prototyping, deployment, development, technical support, testing, QA, maintenance, documentation, performance engineering and porting.

To sustain its present growth run, Persistent has emphasised an increased focus on four verticals—telecom, infrastructure ISV, application ISV and tools. Reveals Deshpande, “We are working with market players like Sun and Microsoft at the back-end, and with Business Objects, BMC and RSA at the front-end. We also work with SAP and JD Edwards (Oracle).”

The company recently initiated a design for manufacturing (DFM) strategy through its new model ‘Go-to-Live’ targeted at emerging software vendors and enterprises. This model enables start-ups to speed up time-to-market and focus on innovation and business growth. Informs Deshpande, “Out of our portfolio of 70 customers, about 40 customers came under the start-up category which contributed to about 25-30 percent of the company’s total turnover last year.”

Go-to-Live includes every aspect of product development and support, including research and design, quality assurance, maintenance and support, cross platform development and porting, deployment and integration, and documentation.

Explains Deshpande: “Persistent is moving towards DFM in software. This is going to be our major initiative over the next two years—designing a new business model, scaling up, and adding value to our product development service offerings. The manufacturing and service industry have been through this curve, and we see outsourced product development following suit.”

One crucial aspect of the OPD model is protecting the client’s IPRs. States Deshpande, “To an ISV it is critical for its survival, and for an OPD service provider it is a matter of reputation and goodwill. From the beginning we have been conscious of this and have gone the extra mile to protect the customer’s IP rights. We have systems and processes in place that safeguard our customers’ interests.”

Consistent growth

The company recorded a turnover of Rs 216 crore for 2005-06, and is targeting 50 percent growth year-on-year. Persistent’s CAGR for the last three years has been 60 percent. It added 39 new customers in fiscal 2005-06, and plans to add 1,000 people to existing and upcoming facilities. Deshpande feels that the market for outsourced product development is evolving rapidly. “It has been accepted that it is a specialised activity.”

He also believes that cost is no longer the only consideration. Software companies are growing and are considering outsourcing as a strategic requirement. “Speed to market, workforce flexibility and domain expertise are the drivers for the industry.”

The company has been quick to select partners and work on innovative ideas. Among trends they see huge potential in serving online companies by managing their Web sites. One such instance is Persistent’s tie-up with Google’s enterprise professional program. This program extends Google search and helps the customer get value out of their Google enterprise search deployments.

Deshpande explains that the Google Search Appliance makes the data on your Web servers, file systems, portals, content management systems and relational databases instantly available. The appliance indexes up to 15 million documents out of the box, with customised implementations able to handle significantly more, while its security features ensure that users only see the documents to which they have proper access.

The company has also set up competency centres for Microsoft technologies, telecom, embedded systems, ASIC design, life sciences and open source. These competency centres provide clients with a balance of people, processes and technologies, bound together with infrastructure and best practices.

PDLC provider

A number of factors have driven Persistent’s growth. These can be categorised under three broad headings of enhancement in service offerings, acquisitions and strategic investments. “Enhancement in service offerings means that we have progressed from being a mere component provider to a complete product development lifecycle (PDLC) provider offering services that cover the entire range of product development and support,” informs Deshpande.

Also, as a PDLC provider, Persistent distinguishes itself by the value additions that it offers its clients. “We have added performance engineering and usability engineering to our PDLC, thereby giving it a holistic dimension. This has enabled us to scale up the value chain and be a strategic differentiator to our clients,” adds Deshpande.

In terms of acquisitions and strategic investments, in November last Persistent acquired the Indian arm of US-based ControlNet for $2 million. Through this, Persistent ventured into embedded systems and VLSI design.

Two new centres at Pune

Persistent is setting up two centres in Pune. The first, with an investment of Rs 100 crore, will accommodate 2,500 people and will be operational by December 2006.

The second centre, which is expected to be operational by July 2007, will also have a seating facility for 2,500 people, and will be located at the Hinjewadi Infotech Park, Pune. The company has recruited about 25 people during the first quarter of the current year, and is looking at total recruitment of 1,000 this year as against 600 last year.

“But,” notes Deshpande, “most importantly we are now moving into the DFM stage of OPD. Take the case of verticals like automobiles or manufacturing or electronics. Each of these witnessed the stages of cost arbitrage, process efficiency and build for manufacture before they entered the DFM stage, which is now being replicated in the case of OPD as well.”

Nevertheless, Deshpande concedes that OPD has still not matured nor has the market settled down. It will, in his opinion, take one and half year before Indian product companies start looking at OPD.