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Summary

Ukraine-based product and engineering company SoftServe held its analyst event in New York City in October 2019, and at the event the vendor presented a strategic vision that emphasized building the ability to deliver sustained innovation to its customers. We take a look at SoftServe's recipe for sustaining 30%+ organic growth rates year on year.

Leading with technology and maintaining a keen focus on people are the pillars of SoftServe's growth strategy

Behind SoftServe's unassuming name lies a company that is fully committed to delivering innovation to its customers. Established in 1993, SoftServe has extensive experience of working with independent software vendors (ISVs) and has taken the learnings from this experience to the enterprise segment. SoftServe positions itself at the intersection of business and technology, bringing value by helping customers take the guesswork out of how emerging technology can impact business value. SoftServe adds value by combining design and engineering services with a keen focus on the latest innovations in enterprise technology. The vendor is so clear about its vision for being the innovation partner for its customers that it has, thus far, been able to stay away from traditional lift-and-shift outsourcing deals and legacy modernization types of work. The major areas of focus are data, cybersecurity, and artificial intelligence/machine learning (AI/ML), and the vendor's business model aims at working with the business to understand its challenges and the technology that can help address these challenges.

SoftServe differentiates itself from competition by insisting that it positions itself as a technology specialist and has, thus far, not taken on a larger role of advising on business/strategy/change management. Customers seem to like this approach as the vendor is experiencing accelerating year-on-year growth in revenues and expects to touch the $1bn mark over the next four to five years. It remains to be seen if SoftServe will continue to maintain this stance or if it will fall prey to the lure of playing a larger role as advisor. A majority of revenues are derived from application development and testing, but most of these applications are around digital technologies – such as data, cybersecurity, digital experience platforms, and robotics. The vendor also makes significant investments back into the business to keep its focus on the cutting edge of technology.

SoftServe's technological capabilities are further augmented by an organizational culture that emphasizes client success, rewards curiosity and innovation, and enables the building of relationships that are based on mutual trust. The vendor has what is probably one of the longest training programs in the industry, which includes a year of training and another nine months or so of internship before a person is actually placed in a billable position within a client project. When we spoke with customers at the event, one aspect that was highly appreciated was the consistently high quality of the people as well as the lower attrition rates (specially in the mid level and above).

Extremely rapid growth has its own challenges and SoftServe needs to be wary of these

Currently, SoftServe derives the majority of its revenues from the ISV segment, and the company's management wants to balance the portfolio so that ISV and enterprise customers find equal representation. This will be supplemented by investing more in reusable vertical assets, grooming leadership talent as the workforce expands rapidly (the company states it is hiring 1.8 people every working hour and expects its workforce of 8,100 to grow to over 20,000 over the next few years), and making greater investments in data-driven technologies to capitalize on the opportunities in this space.

However, with faster growth come several challenges:

  • sustaining growth momentum and resisting the temptation of getting drawn into engagements with key clients that deviate from the core vision

  • greater competition, which requires SoftServe to ensure that it maintains its differentiation

  • maintaining the quality of its resource base and ensuring that it identifies leadership talent that can guide expansion

  • being privately owned, which means that SoftServe also runs the risk of being a potential acquisition target, especially because of its significant growth rates and its capabilities.

It will be interesting to watch this company as it strides forward over the coming years.

Appendix

Further reading

On the Radar: DigitMarket offers digital ecosystem enablement in one package, ENS002-000095 (October 2019)

"Enterprises and governments warm to Google Cloud in Asia-Pacific," ENS002-000104 (October 2019)

"Oracle is making the right moves, but will that be enough for it to gain market dominance?" ENS002-000098 (October 2019)

"Infosys believes that sentience is necessary to succeed in the digital era," ENS002-000100 (October 2019)

Author

Hansa Iyengar, Senior Analyst, Advanced Digital Services

hansa.iyengar@ovum.com

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