Persistent Systems Share Analysis | Persistent Systems Fundamental Analysis and Future Outlook

Persistent Systems Fundamental Analysis and Future Outlook 

Industries & Domains Served:
  Banking, Financials, Insurance, Healthcare, Lifesciences, Industrial, Hi-Tech, Telecom, Media. Banking & Financials being a steady driver, while Lifesciences has been the alpha generator.
Services: Digital -Design & Consulting Business Intelligence - AI/ML, Data Stack, Data Integration Product Engineering - Product, platform design & engineering IDA - Identity & Access services, privacy management 
CX Services - Customer Experience strategy, Implementation, Integration, analytics services IT Infra - Cloud Infra & Managed cloud
Products: Digital bank & credit union solution - a complete cloud, microservices led design enabling go to market for digital banking services. Mainly focused on credit  
LOS -Loan Origination System to automate origination & approval of loans. Patient Mobile Experience - Mainly electronics medical record system
Cloud/Digital is mainly Salesforce-focused. USP - Strong practice in AI/ML, Software Engineering, Platform Engineering
Client Profile - Client concentration of top 10 as % of total revenue has fallen from 51.1% in Q3FY20 to 45.4% Q2FY22 & at the same time large client count has gone up from 10 to 22 over the same period, indicating strong market position
Total contract value has been growing very slowly, steadily * Revenue Profile - NA 78.7%, EU 8.8%, India 10.5%, RoW 2% * Scale Profile - Healthcare & Lifesciences has witnessed exponential expansion on both Revenue & YoY growth metrics
* Partner Profile Implementation partner ecosystem is very important. Appian, AWS, Dassault, Google, IBM, Mambu, Microsoft, RedHat, Salesforce,
Recent Acquisitions: Recently acquired Fusion 360 that further cements domain consulting in the payments ecosystem. This business concentrated in NA so geographical diversification isn't improving after this acquisition
Shree Partners acquisition has brought domain consulting skills for Travel & Hospitality segment and this acquisition is geographical diversification supportive with EU/India business
Software, Hi-Tech segment has a dominant share in the revenue profile. However, the recent deal wins in this segment are very traditional services specific. Website migration, Legacy to cloud migration etc.
Persistent is still under $1bn revenue company which is not really surprising. Persistent positioned itself in a niche that did not grow as anticipated an IP monetization perspective  
Further, the frontloading of investments for developing IBM Watson platform brought a major drag on BS. Not only their investment in Watson led to nowhere, it also stopped the co from becoming a multi-billion $ org. It paid the price dearly & is now fully out of the overhang.
Key Risk: Nearly 16% of revenue comes from the top 1 client. and 36% comes from top 5. So client profile really needs to improve. Loss of just 1 account strikes a bunch of revenue off.
Persistent was known to monetize their IPs very effectively. However, IP-led initiatives have their own side effects. 1st - frontloading of the costs, 2nd - Revenue realization isn't linear.
Co has strategically reduced its dependence on IP-led initiatives which reflects in the reduction in revenue % from this segment as well as reduction of total clients in this segment.
Persistent has a lot of frameworks but fewer products of their own. Although they always took IP lead approach, I am wondering why the co hasn't managed to release at least 3-4 strong products in the market yet. Or, if you think they have one, pl let me know.
Key driver is their strong service line. The data-driven business intelligence division has some amazing offerings. Data management & governance isn't really major contributor in my view since there are many products available in market that does this with a plug-play approach.
In AI/ML segment their offerings are pretty stable - Document analytics, enterprise search, conversational platforms etc. are very commonly delivered by many other peers.
But the Explainable AI is an amazing offering that enables organizations to understand why AI systems take a certain decision & interpret that in common manner. They build & deliver AI models that help companies analyze bias, drift from the anticipated pathway, and other mismatches.
Basically, Explainable AI helps people understand how AI systems model, think, and decide in a layman's term. This, in my view, is an amazing offering. I wonder why Twitter handles never mention Persistent's AI practice enough.
The reason why I say Persistent is an extremely technologically sound company is this - there are certain programming methods, languages that form the core, a founding platform of the technology.
For e.g. C/C++ used to be one such strong programming platform that saw many companies build their strong products on top. E.g. SAP! The ABAP programming language of SAP compiles into C++.
Persistent has ensured that no matter what new technology, programming language comes, they never lose the connect with the foundational blocks. This has been their strength.
On the cloud side, I'd say Persistent is more of a salesforce expert. Although they have partnerships with almost all hyper scalers, they are nowhere close to what #LTI does for e.g. in the multi-cloud ecosystem.
To sum Persistent's journey since IPO - It is a founder-led, technically superior co that has strong leadership foundations. However, a few bumps down the line held them back but the co is not back on the growth track. Persistent is still a very strong technology-driven company
In sum, Persistent has been around for a long time but they can still do a lot better in terms of market positioning & product launch. #TCS & #LTI have been doing amazing on this front.
TCS is grooming startups on cutting-edge tech while LTI is launching a complete ecosystem through products. This makes traditional IT cos position better in the days of #SaaS. #Persistent certainly needs that change in my view.
Before we conclude, pl note there always is a possibility that someone known more in some areas. If you think I have missed covering certain aspects, pl be so kind to point them out. Let's collectively learn more about our companies together, better.