In 1990, Anand Deshpande, then a databases engineer for Hewlett-Packard in Palo Alto, California, got a fortuitous refund from the US taxman when he got married 10 months into the calendar year. The money helped him start his software engineering firm Persistent Systems in India that year.
At a time when most software companies pursued the body shopping model (recruiting skilled manpower and contracting them out to larger firms overseas), Deshpande instead sought projects that involved coding software products for global software giants.
In hindsight, Persistent’s ‘products services’ model has reaped rich dividends. A quarter of a century later, Persistent has earned an enviable clientele. It serves many of the biggest software names in the world, from pre-internet era companies like Microsoft and IBM to made-for-the-cloud tech pioneers such as the San Francisco-based Salesforce.com. The Pune-based Persistent has more than 9,000 employees and ended the first quarter of the current fiscal with an annualised revenue run-rate of over $400 million (around Rs 2,600 crore). That compares with the $351 million revenue clocked in the previous fiscal. On BSE, the company has a market capitalisation of around Rs 5,000 crore.
Now, with the software industry at an inflection point, Persistent is ready for Deshpande’s next leap of faith—taking its technological know-how and software-building prowess directly to enterprises. This means, in addition to working with independent software builders like Microsoft and IBM, who have been Persistent’s traditional customers, the Indian company will go directly to enterprises, or the end customers of software products namely banks, hospitals and other businesses that are grappling with the challenges of the digital era: Startups upending their businesses.
Persistent plans to do this by offering enterprises cloud-based solutions. “The cloud has become mainstream, and the process of building software keeps improving and changing, and more people are building software directly on the cloud,” Deshpande, 54, tells Forbes India. “You can build a lot more with a lot less people—the effort required to build a next generation software product on the cloud is far less than the way it is done by traditional technology companies,” he adds.
This means enterprises around the world are loath to burning mountains of cash on software licences for unwieldy packages that take several months to roll out—the type of software that Persistent’s traditional customers build. Banks, hospitals, retail chains and even manufacturing companies are now testing software that is built and rolled out in days and can be evolved when needed.
Deshpande, who heads Persistent as its chairman and managing director, believes he can tap into this phenomenon and lead the company he founded into its next phase of growth. Persistent wants to help its new customers, the enterprises, tap the data already at their disposal (from their everyday operations) and build digital experiences for their end customers, or the consumers. And it wants to build them rapidly, while improvising features iteratively. “We want to work with enterprises and show them these iterative developments and focus on integration and intelligence,” says Deshpande.
He is convinced there is money to be made this way, especially given Persistent’s rich legacy of partnerships, like the one it announced with IBM earlier this year, to build solutions and services around the US company’s cognitive computing platform Watson and the Internet of Things (IoT).
Persistent plans to use the learning it acquires from the IBM partnership for the benefit of its enterprise customers. “Persistent’s IoT alliance with IBM is a step in the right direction,” says DD Mishra, a research director at technology market research and consultancy Gartner. “The next few years will be dominated by IoT and smart machine capabilities. One of the things that will be immediately required is the availability of skills. Client organisations expect more agility and flexibility and I think this partnership [with IBM] has the potential to address that,” Mishra says. “The success of this partnership will revolve around how quickly Persistent can re-skill resources and IBM’s ability to leverage the capability Persistent can provide.”
I’m a techie by training,” says Deshpande, who earned a degree in computer science and engineering from the Indian Institute of Technology, Kharagpur in 1984. After his post-graduation and PhD from Indiana University in 1989, he joined Hewlett-Packard Labs in Palo Alto the following year.
“I was single, worked for the first 10 months of the calendar year and then [after getting married in India] filed for tax [refunds],” says Deshpande. (Under US law, one’s marital status at the end of the calendar year determines the tax-filing options.)
The “refund worked out to almost $5,000 or Rs 1.5 lakh at the time”. The money, along with some financial help from his family, was part of the Rs 360,000 that seeded Persistent Systems in its initial years.
“It was a crazy time,” Deshpande recalls, “[then finance minister] Manmohan Singh was taking the first steps in opening up the Indian economy.” To accommodate the new business aspirations of the post-liberalised era, the ministry of communications and information technology, in 1991, was setting up software technology parks under Software Technology Parks of India (STPI) in various parts of the country with the objective of boosting software exports.
Persistent was the first company to start operations in the Pune STP and also the first to export software from any STP in India, Deshpande says. The company was named after “systems that are persistent, or data systems,” an area in which it did a lot of work in its infant years.
Microsoft was one of the company’s earliest customers (the third to be precise) that gave Deshpande a small contract. “It was signed by the president of Microsoft at the time.” That helped Persistent dispel concerns about outsourcing and offshoring work to India. The company filed for its first H-1B visa—that allows US employers to temporarily employ foreign workers—only in 2013. “For the first 13 years, we never sent anybody to the US, which was unusual for that period when most companies were doing body shopping,” says Deshpande.
The company was pretty small at the time, with 100 people in 1999 and 250 in 2002. However, by 2003, Persistent was beginning to focus on positioning itself right, especially following the dotcom bust. “We focussed on outsourced product development and staff strength rose nearly 10-fold to about 2,500,” Deshpande recalls. Investors took note too, and in 2000, the company was the first in India to raise money from Intel Capital’s Intel 64 fund. A venture capital round followed in 2005, with US-based Norwest Venture Partners and Gabriel Venture Partners investing.
Persistent became a publicly traded company in 2010, after an IPO in Mumbai. Its early investors Norwest and Gabriel exited in 2012 and 2013 respectively.
In March this year, Persistent reorganised itself into four business units, including the dedicated unit for the Watson alliance with IBM. Persistent’s second unit, the services one, will focus on its traditional customers, or the software vendors, who still account for nearly three quarters of the company’s revenues. Accelerite—Persistent’s own software products business, built mostly by acquiring products that its customers didn’t think central to their business and continuously developing them into new solutions—is the third unit. A fourth digital unit is the one that will go directly to enterprises and build cloud-based digital solutions for them.
“We have a platform and a framework that we can deliver. We can help with data integration, ‘DevOps’, machine learning, we can build an API layer—or if the customer wants to use a different API that’s fine too—so it’s the methodology,” Deshpande says. That may be jargon, but that’s what is at the heart of the change sweeping software development today.
DevOps is short for Development and Operations and refers to marrying software development and IT operations in a way that exploits automation to build software quickly and more frequently—each iteration being a fine tuning of the existing version. APIs, or application program interfaces, are modern software miracles that provide a way for different software to talk to each other, overcoming problems of combining data from disparate sources—so a cab-hailing app can talk to a hotel chain or an airline, bringing the end user a lot more features. “This [internet-API combine] is really changing the world, and we think enterprises need to embrace this,” says Deshpande.
Persistent’s programmers dream big when it comes to solving problems and getting customers enthused about the potential applications. “The idea is, every year, we want to take on a truly global problem and attempt to come up with solutions, even if it’s only for a small part,” says Pandurang Kamat, chief architect at Persistent Systems. In a recent intra-company hackathon that saw participation from 32 teams from eight cities, Kamat and his colleague Rashmi Tambe teamed up to use a blockchain platform called Ethereum to build a ‘smart contract’ that keeps track of commitments individuals and collectives meet in an automated fashion. (Think of blockchain as a distributed, transparent and secure ledger, where everyone knows what everyone else is doing, making it somewhat tamper proof.)
One of the prize-winning entries of the hackathon, the smart contract, was at a very early proof-of-concept stage, but the idea behind it was to build a solution that could get millions of individuals on to a climate change action plan. Using it, people could make individual commitments to reductions in their electricity consumption or use of petrol or diesel. That day isn’t far, in an IoT-driven world, when such actions can be monitored unobtrusively by sensors and quantified, and therefore result in information on whether entire nations are on track in solving global problems.
In the shorter term, there are many commercial applications of such experiments such as in smart cities and smart homes—an area Kamat has been working on for some time.
“It’s all about data… and many companies are drowning in it but don’t know what to do with it,” says Siddhartha Chatterjee, chief technology officer at Persistent. With alliances such as the one with IBM, Persistent is attempting to tackle the need for more data-driven actionable information and therefore the need for solutions that can handle the complexity of dealing with data from many different sources. Persistent’s focus is on making money by helping businesses build the new-age software they need; build it to a plan (which is called the ‘rhythm’) and build it to be amenable to all sorts of integration. It must be able to work with many different sources of data.
And this isn’t easy, with businesses often running in silos, with older IT systems. “You can’t rewrite everything, so start somewhere and pull in what is needed,” explains Deshpande. The ‘rhythm’ is about building task-centric applications and experiences instead of building monolithic, huge applications. “A very simple example: Don’t give a supervisor a report on how many of his/her team members are on leave, but instead provide a look at what happens to the overall work of the team if a particular person is on leave. Follow that up with some choices the supervisor can make on the go—preferably on a smartphone,” Deshpande adds.
“Don’t do a big bang, do a ‘rhythm’, meaning every few weeks, add a few more experiences, and users understand that. As one keeps building these things, keep improving the sum of all the different features—bringing in data from multiple sources—and helping people act, rather than providing them with reports. This is the digital future that I’m betting on,” Deshpande says. “We want to be the ones who make the next generation, tech-led transformation happen for our customers.”
(This story appears in the 30 September, 2016 issue of Forbes India. To visit our Archives, click here.)