We recently spoke with Datamatics about its $17m acquisition of Dextara, which was announced on April 1st.

Datamatics is a Mumbai-headquartered IT services and BPS provider with revenues of INR 1,550 Crore ($187m) for FY24, which ended March 31. It has three lines of business:

• Digital Technologies (IT services: 39% of revenues)
• Digital Operations (primarily F&A, plus intelligent process automation: 45% of revenues)
• Digital Experiences (CX, research & analytics: 16% of revenues).

The company generates 54% of its revenues from the U.S., primarily the SMB segment, and 24% from India. It has 300 clients globally, with the top 5 accounting for 23% of total revenue, the top 10 contributing 35%, and the top 20 over 50%.

Details of the Deal

Datamatics has expanded its capabilities with a series of acquisitions, including those of TechJini (mobile and web app development, 2017) and RJ Globus Solutions (voice-based BPS, 2018). Now, with the acquisition of Dextara Digital, a Salesforce Summit (Platinum) Consulting and ISV partner, Datamatics is boosting its fledgling Digital Technologies business (0.5% growth in FY24, declining by 12.4% y/y in Q4). Key drivers for Datamatics acquiring Dextara included:

• Expanding its Salesforce capabilities and improving the Digital Technologies business performance
• Augmenting its existing leadership with Dextara’s experienced management team.

Datamatics highlights that 25% of its clients are Salesforce users, an opportunity that it could not effectively target before the Dextara acquisition. In a previous effort to address this gap in its portfolio, Datamatics formed a JV with Cloud Route in 2022 with a view to start building a Salesforce services practice. These capabilities are now consolidated with Dextara, which is now the face of Datamatics Salesforce and leads any GTM initiatives. Datamatics and Dextara combined have around 150 certified Salesforce resources (130 in India and 20 onsite in the U.S.), serving around 80 clients.

Along with the Salesforce capabilities, Dextara brings to Datamatics an experienced management team led by the founder, Sreekanth Lapala. Prior to starting Dextara in 2020, Lapala managed around 25,000 resources as the global delivery head at Virtusa. This experience in building and leading large sales and delivery organizations that Lapala and his management team bring will help Datamatics beyond Salesforce as it aims to re-energize its technologies business and compete for bigger deals.

Dextara has an existing client base of around 50 American SMBs in the manufacturing, healthcare, professional services, high-tech, and BFSI sectors. Its core capabilities include CPQ, CLM, LWC, and Integrations, along with Einstein Analytics. It has developed two AppExchange-listed applications:

• Dextara CPQ, a customizable solution that clients can tailor to specific processes and industries. Features include product-attributed-based pricing. It was launched in FY24 and has two clients

• DXHealth+, a patient management product that targets small and medium elective healthcare providers whose services, like cosmetic surgery, are typically not covered by insurance. The product has 12 clients.

A Growth Engine for Datamatics

The existing Salesforce users among Datamatics’ clients are prospects for cross- and up-sell opportunities across Salesforce services, products, and Dextara’s IP. More importantly, the improved scale now makes Datamatics eligible for larger Salesforce deals (greater than $5m) and also positions it to convert some of its existing sales pipeline.

Datamatics has been busy on this front. It claims to have already introduced most of its clients to Dextara for consideration in Salesforce engagements. NelsonHall expects more account mining and cross-selling to Datamatics clients and an evolution of Dextara’s existing client profile to the larger Datamatics client base.

The Datamatics sales engine will also leverage Sreekanth’s leadership team’s delivery and sales experience to help manage large deal pursuits.

Datamatics has guided revenue growth of 7-8% for FY25, of which around 3-4% is organic and 4% (~$7m) from Dextara. Given this is the same as Dextara’s revenues last year, this is a conservative estimate: Datamatics looks to be factoring in time for the integration and client outreach completion over the next few months.   

Expect to see some investments in both Salesforce products and services. NelsonHall anticipates a particular focus on Salesforce Einstein and copilots in line with Datamatics’ corporate positioning as an AI-first service provider.