Sonata Software: A New Era in AI and Modernization

Mid-Tier Companies Challenge Established Giants in Software Services

In an evolving landscape of software services, fatigue with large-cap vendors is becoming evident. Mid-tier companies, like Sonata Software, are emerging as strong alternatives for clients keen on accelerating their modernization and artificial intelligence (AI) projects.

According to Samir Dhir, CEO of Sonata Software, many traditional vendors have long-standing annuity contracts that could be disrupted by AI, which is inherently transforming manual-intensive tasks. He remarked, “Over the next two to five years, we can take a large chunk of the market away from this competition,” indicating strong confidence in Sonata’s strategy.

Recent successes showcase Sonata’s ability to win contracts against tier-1 providers. As these giants grapple with maintaining their legacy revenue streams, companies in the mid-tier are strategically positioned to fill the gap.

Targeting Manual Work with Advanced Technologies

Sonata Software, headquartered in Bengaluru with a valuation around $1 billion, has focused on revenue cannibalization—shifting towards low-end manual work and emphasizing automation through new technologies like agentic AI.

On Tuesday, Sonata unveiled a revolutionary agentic AI platform designed for centralized design, deployment, and governance of intelligent, industry-specific AI agents. This innovation aims to automate tasks widely across sectors such as healthcare, banking, financial services, insurance (BFSI), retail, and manufacturing.

Despite macroeconomic uncertainties, companies are increasingly committed to maximizing their investments to modernize rapidly. Dhir states that the underlying business imperatives for differentiation and customer retention remain unchanged.

Cautious Yet Hopeful: Industry Perspectives

While sentiments among banking and healthcare clients remain optimistic, the retail sector exhibits caution, awaiting more certainty before making significant decisions. This mixed climate presents opportunities for mid-tier firms to secure large deals.

Dhir noted, “In recent quarters, mid-tier companies have been bagging big deals and generally outperforming larger peers despite a bad macroeconomic environment.” This agility and hunger for growth set these mid-cap firms apart.

Strategic Growth and Investment in AI

Approximately 45% of Sonata’s active pipeline comprises large deals. In FY25, the company reported an 18% revenue growth, reaching ₹10,157.2 crore. While two major deals were won in Q4, there was a slight decline in revenue quarter-on-quarter.

Sonata’s strategy has involved intentionally reducing EBITDA by about 2% to invest in verticalizing its business and enhancing capabilities in AI technologies. Dhir anticipates that within three years, AI will constitute roughly 20% of the company’s business, up from the current 4-5%.

The Path Forward for AI Adoption

When discussing enterprise adoption of AI, Dhir pointed out that progress is still in “bits and bytes,” rather than at a large scale. However, he remains optimistic about a potential turning point that could occur at any time.

Emphasizing preparation, Dhir remarked on Sonata’s commitment to be ready to capitalize on future advancements in AI and modernization.

Conclusion

As the landscape shifts, Sonata Software is positioned to leverage its mid-tier agility, innovative technologies, and strategic focus on AI. With a strong pipeline and ambitions for growth, this company is poised to disrupt traditional players in the industry.