Mid-tier firms poised to win large AI market share: Sonata Software CEO Samir Dhir
There is 'fatigue' with the large-cap software services vendors and mid-tier companies are emerging as an alternative for clients to accelerate modernisation and artificial intelligence (AI) projects, said Samir Dhir, chief executive officer of Sonata Software, which focuses on modernisation engineering.
ADVERTISEMENT 'Many of these generation-1 companies have long-running annuity contracts, and AI, at the heart of it, is going to disrupt some of those manual-intensive contracts,' Dhir told ET. 'Over the next two to five years' time, we can take a large chunk of the market away from this competition.'
Several recent wins have come against the tier-1 providers, who now face the challenge of defending their legacy revenue streams, he said.
The Bengaluru-headquartered, mid-tier, $1-billion company's strategy involves revenue cannibalisation and going after low-end manual work, with a focus on automation with new-age technology like agentic AI, said Dhir.
Sonata Software on Tuesday introduced an agentic AI platform for customers to centrally design, deploy and govern intelligent and industry-specific AI agents to automate tasks in areas like healthcare, BFSI (banking, financial services and insurance), retail, and manufacturing. Further, despite macroeconomic uncertainties, clients are doubling down to 'sweat every dollar to modernise faster', Dhir said, as business imperatives haven't changed from a differentiation or customer retention perspective.
ADVERTISEMENT While the outlook from banking and healthcare clients is positive, the retail segment is still cautious and waiting for more certainty before taking big decisions, he said.In recent quarters, mid-tier companies have been bagging big deals and generally outperforming larger peers despite a bad macroeconomic environment.
ADVERTISEMENT These players benefit from greater speed and agility and are hungrier, said Dhir, who expects the existing pecking order of the IT industry to be disrupted by a few such midcap firms in the coming decade.About 45% of Sonata's active pipeline comprises large deals. In FY25, its revenue grew by about 18% to Rs 10,157.2 crore. It won two large deals in Q4, with a 2.4% increase in PAT, although revenue fell by 7.9% quarter-on-quarter.
ADVERTISEMENT Sonata's strategy for the past few years has been to dilute its Ebitda by about 2% to invest back into verticalising the business, as well as building capabilities in technologies like AI. The company expects 20% of its business to be in AI in three years, from about 4-5% now.
When it comes to enterprise adoption of AI, Dhir said the company is still seeing progress in 'bits and bytes', rather than at a large scale. A turning point can come at any time, he said, adding that the company is focusing on being ready to capitalise on it.
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