Mid-sized IT services company Sonata Software expects growth to pick up in the second half of the current fiscal, growing at an above-industry average rate. The Bengaluru-based company's growth is expected to be driven by a strong pipeline of large deals. Jagannathan Chakravarti, CFO, Sonata Software, spoke with Ayushmann Baruah in Bengaluru about its FY25 outlook, deal pipeline and artificial intelligence (AI) strategy. Edited excerpts:
What is Sonata Software's outlook for FY25 and what are the drivers?
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The industry is expected to grow 5-6% YoY in FY25. Sonata Software is confident of significantly exceeding this guidance. The first two quarters (first half of FY25) may be soft due to macroeconomic uncertainties, delayed decision making due to cautious spending, time to ramp new deals for Quant Systems (a company we acquired last year) and seasonal effects in the Quant business. We are optimistic about our long-term growth prospects and will bounce back with robust growth and improving margins in the second half of FY25. This growth will be led by a strong pipeline and solid backlog ratios, as well as the complementary strength of Sonata Software's India business. We are committed to investing 1.5-2% of revenues per quarter in building organizational scale and skillsets in Generative AI (GenAI) and Microsoft Fabric to remain competitive and sustain industry-leading growth in the coming years.
How is the integration of Quant Systems going?
Quant is now fully integrated with Sonata Software, delivering significant benefits. The integration has expanded our presence in the BFSI (Banking, Financial Services, Insurance) and HLS (Healthcare and Life Sciences) verticals, driving revenue growth and improved profitability across Sonata.
How does your deal pipeline look?
The current pipeline remains strong with 40% consisting of larger deals (multi-year agreements over $5 million), with notable pipeline from GenAI and Microsoft Fabric contributing over $50 million each.
Which industries will drive growth in the coming quarters?
Sector-wise, Sonata Software's high-tech and healthcare life sciences segments are expected to continue witnessing robust growth in FY25. Moreover, the BFSI segment is expected to recover on the back of factors such as the expected US Federal Reserve rate cut and the presidential elections.
How are you strengthening your AI strategy? Any updates on Harmoni.ai's offerings?
As part of our AI strategy, we continue to invest 2% of our revenue in developing use case, industry and function specific solutions, which in return provide value-added services and cost savings to our customers. We have a strong pipeline of AI-driven deals worth over $50 million and are in the pipeline with select customers across retail, telecom, healthcare and high-tech industries.
Since its launch in July 2023, we have enhanced Harmoni.AI, adding capabilities that strengthen our responsible AI approach and drive GenAI adoption for sustained benefits. We have built differentiated capabilities, IP, and partnerships, assessed maturity, and introduced a 4D framework to guide clients through discovery, design, deployment, and differentiation…Harmoni.AI’s enterprise platform supports the design and deployment of responsible AI foundations, including data management, hybrid LLM deployment and tuning, and AI-first processes for finance, HR, legal, and marketing. We are committed to upskilling and reskilling our workforce on AI and GenAI. We partner with educators to create specialized courses and aim to be 100% GenAI literate by FY25. Currently, 70% of our employees are Level 1 GenAI certified.
What are your hiring plans for FY25?
Last year, we recruited 650 campus recruits and hope to recruit a similar number this year, while continuing to recruit replacements at a cross-sectional level.
