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Persistent Systems is on a ride since its deal with IBM. While the IBM deal was seen as bolstering the company’s operations, the management has cautioned on near term margin pressures over the next two years.
Speaking to Bloomberg TV India, Persistent Systems Founder-Chairman Anand Deshpande said there is a lot of activity around the internet of things (IOT), which offers $70-trillion opportunity.
We want to try and understand the deal with IBM. What does it bring for Persistent?
We have signed an alliance with IBM for this whole Watson IOT ecosystem. From the IBM point of view, Watson IOT is one of their fastest growing and most important initiatives where they are really focused on building solutions that will allow people to bring things into the Internet world and really respond to it across the network. There is a lot of activity around this and it is supposedly a $70-trillion opportunity, according to McKinsey. We have signed an alliance with IBM, which is a significant and a major player in this industry. We are contributing and investing together with IBM on building a product suit for continuous engineering. Now what this means is that if you look at large, new products such as Tesla, your phone that has the ability to upgrade itself as you get a new software update, you can imagine something like that happening for your washing machine, dishwasher, and refrigerator. And the idea would be if you were building software you would want to deploy that into existing equipment and hardware that has caught the fascination for the industry, auto market as people talk about.
Analysts say that you are expecting a dent of about 200-250 bps over the next two years as far as the margins are concerned. Why is there margin concern?
The way the deal is set up, it is a really long-term opportunity. There are multiple parts to what we are doing here. One of the more important part where we are investing in product development, we expect that we have to invest upfront over the next two years to build a product that can be than sold over a long term period. We will also work together with IBM on building solutions that we are selling in the market.
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