Digital platform engineering_new winners
Ganesh Natarajan June 21, 2017Last Updated at 22:39 IST
A $300-million information technology (IT) services company with a very substantial on-site revenue component and growing at a compounded annual growth rate (CAGR) of over 25 per cent for the past five years. Not only that, the growth is driven by revenue from the top five clients increasing nearly three-fold to over $100- million between 2014 to 2016. Million-dollar clients have increased from 42 to 67 in the same period. Ebitda margins for the company have gone up over 50 per cent in the last two years because of tremendous discipline in managing costs even as it acquires scale. Overall revenues have grown from $129 million in FY12 to $323 million in FY16. In addition to excellent organic growth, the company is acquiring at least one significant firm every year and is emerging as one of the recognised market leaders in the digital space. Listed on the New York Stock Exchange, the company trades at an enterprise value of 26 times Ebitda.
It would be wonderful for this columnist to proudly name this company as a breakaway Indian success story, but the company is actually Globant, a pure play digital transformation services provider, headquartered in Argentina, with 36 offices across North and South America, Europe and Asia and a recently acquired offshore company in Pune. The reason for the success of this firm and a few others like Luxoft and epam is the width and depth of digital work they have been able to do in the digital sphere. Globant proudly counts Walt Disney Parks, Southwest Airlines, Google and Electronic Arts among its top clients and is able to offer a combination of left and right brain solutions to create better customer experiences and deliver measurable business results through digital transformation.
Globant already offers the full range of digital
capabilities, through qualitative and quantitative research into customer issues to develop deep insights, consulting in-design thinking, ethnographic surveys, empathy and experience mapping and rapid prototyping through customer-oriented pods that quickly create experiential solutions to stated and implied needs. Digital content development, user interface Design, SMAC solution deployment and niche capabilities in Internet of Things, Artificial Intelligence, Gaming and transformation and development of large enterprise applications for enterprise operations, employee collaboration and talent management — all this and more is what makes this company an exemplar in the digital space. A key differentiator for this company in comparison to traditional Indian firms who have delivered great technology solutions in the past but failed to challenge the conventional wisdom of clients is their two-pillar approach to solution delivery — “Stay Relevant” and “Build to Discover”.
Staying relevant to existing and new customers is done through creation and dissemination of research, gatherings, conferences and webinars to keep customers abreast of the latest trends in digital. And building products and prototypes quickly in the multi-skilled “agile pods” enables feedback to be received and implemented and an iterative build-and-discover methodology in partnership with the clients. The company’s investment in multiple studios, each embedding specific domain knowledge and delivering solutions focused on specific technology challenges has been quite unique and its services model of first engineering platforms and then customising them to the need of each client has proved to be a winner in a highly contested market.
Major players in the digital platform space include clear market leaders like IBM and Accenture who have managed the transition extremely well and pure-play digital stars like Globant, Luxoft and epam and also emerging challengers like GlobalLogic and Persistent. While many of the Indian Tier One firms are also competing for their space in the digital sun, it remains to be seen if they will make the transition organically or acquire their way to success. Many niche players exist like Harman, Liquidhub, eInfochips and Born are growing well and many more have been acquired. M&A activity can be expected to be very active in the next few quarters for Indian and global firms.
A Forrester Research report published in 2016 and widely quoted today identifies Digital Platform Engineering Services as the key to successful service providers of the future, with the ability to build complex, connected systems seamlessly integrated to back-end applications and crunching large volumes of data. Indian companies seeking to get here will also need to extend the SEI CMM Level 5 standards of quality they achieved in applications development and maintenance to this new area, where digital transformation projects which are mission critical for the customer will have to be delivered within budgets at the highest quality. Multi-skilled talent with creative mindsets and the ability to work across diverse technologies and domains will truly differentiate future winners from the also-rans. The industry needs to rebuild and retrain and time is now!
Originally Published in Business Standard on June 21, 2017
The writer is founder and chairman of 5F World. Email: Ganeshn@5FWorld.com