Sonata Software Sees Silver Lining In Banking Crisis After Largest-Ever Deal

The collapse of the Silicon Valley Bank and Signature Bank in the U.S. and Credit Suisse AG in Europe is likely to take a toll on the $245-billion Indian IT industry, which derives 41% of its revenue from the banking and financial services space. Clients are likely to reduce their spending on technology, and deal closures and payments would be delayed.

The layoffs by Accenture Plc—the world's largest IT services firm—underscores the incoming pain for the wider software services industry. However, Sonata Software is unperturbed as it has limited exposure to the space of banking, financial services and insurance.

"It is very less for us, 8–10% probably, but since we do not have much of these, all these challenges are going to help us to come out stronger," Chakravarthi told BQ Prime in an interview.

"With every bout of recession (in the U.S.), there have been winners," Chakravarthi said. "We want to emerge out of this one, if it happens, as a fast-growing, fast-evolving company."

"All of these challenges are going to make us come out stronger. This—the banking crisis—is an opportunity for us," he said.

The company isn't seeing a delay in payments from the existing clients either.

"This impact may be there in the core, but given our exposure (to BFSI), we are not seeing any major impact coming in, not for us at least," Chakravarthi said. "In fact, what we see is this can lead to further opportunities for many of the companies like us."

That confidence reflects in the deal-making spree Sonata Software has been on in these uncertain times. In February, the Bengaluru-headquartered IT services firm acquired Quant Systems Inc.—a U.S.-based enterprise data analytics and cloud modernisation company—in a $160-million deal.

On Wednesday, the company said it signed its largest-ever contract—$160 million over 10 years—with a U.S.-based consumer retail company. Sonata Software will manage end-to-end IT modernisation and transformation for the client.

Chakravarthi said they have been working on the deal for the past six to seven months. "When we pitched in, we pitched in for the larger deal," he said. "We made an assessment that what we have historically done is product engineering… and that's the requirement for client success in this digital world."

The client fits in well with the Quant Systems deal as well. The CFO said Quant Systems brings in a lot of capabilities on data privacy, data engineering and analytics. "We will be able to cross-sell this to the new customer or to the other customers of Sonata."

Chakravarthi underscored that Quant Systems was not acquired just for the sake of its size, but for their capability, ability and the good customers they bring to the table, which "gives us a very solid entry into (the) BFSI as well as healthcare".

He isn't seeing a slowdown in deal-making either. "I have been mentioning that we have not seen the slowdown in reality, on the ground. It has continued to be strong for us, and the pipeline looks very strong," he said.

A slowdown will have some reflection—either on price discounting or order cancellations or time lag in closing the deal—but the firm doesn't see any of those indicators at this juncture, according to Chakravarthi.

He said the large deal gave them a big boost. "We will continue to focus on creating for the customer and ensure that we are known as a modernisation and digital engineering company."