Item 1. Business
ITEM 1. BUSINESS
Business Overview
Grid Dynamics Holdings, Inc. (“Grid Dynamics,” “GDH,” the “Company,” “we,” “us,” or “our”) is a leading provider of technology consulting, platform and product engineering, and advanced analytics services. Fusing technical vision with business acumen, we enable positive business outcomes for enterprise companies undergoing business transformation by solving their most pressing technical challenges.
A key differentiator for Grid Dynamics is our 7+ years of experience and leadership in Enterprise artificial intelligence (“AI”), supported by profound expertise and ongoing investment in cloud, data, advanced analytics, and customer experience.
Additional market differentiators include:
• a culture of engineering excellence, R&D investment, and innovation in groundbreaking technologies before they become ubiquitous;
• a co-innovation model with continuous knowledge-sharing throughout delivery that reduces implementation risk and time-to-value, enables enterprises to build in-house capabilities, retain control of proprietary technology and data, and benefit from the adoption of new technologies; and
• a global footprint, and a “Follow-the-Sun” delivery model bolstered by engineering talent driven by innovation, and technical mastery, resulting in transformational business outcomes.
Established in 2006 and headquartered in Silicon Valley, Grid Dynamics partners with clients ranging from innovative start-ups to the largest companies in the world. Grid Dynamics believes the key to its success is a culture encouraging an unwavering “whatever it takes” dedication that puts client success over contract terms, products over projects, and real business results over pure technical innovation. With our proprietary processes optimized for innovation, emphasis on talent development, and technical expertise, Grid Dynamics is well-positioned for continued success.
Grid Dynamics has offices across the U.S., Mexico, Jamaica, the U.K., Europe, and India. During the last three years, Grid Dynamics acquired NextSphere Technologies Inc. (“NextSphere”), Mutual Mobile Inc. (“Mutual Mobile”), and Tacit Knowledge Inc. (“Tacit”). These acquisitions diversified our geographical presence, client base, and industry vertical presence.
Industry Background and Market Opportunity
Digital transformation is a rapidly expanding market that is still in its early stages. Enterprises strive to compete in the digital world, facing the need to transform to survive attacks from the nimbler and more technologically advanced newcomers. Traditional approaches to managing information technology as a mix of vendor solutions and outsourced services often break down in the face of the imperative to innovate through technology.
Increasingly, business executives are looking at the use of technology as a competitive advantage rather than a way to cut costs with software-defined capabilities becoming the essence of the business capabilities. The rise of AI signifies a shift from the automation of business processes to the automation of decision-making itself. To differentiate, corporations are directing investments toward building new digital products and experiences, instead of buying off-the-shelf software products and entire business underpinning platforms. This drives demand for highly technical software development, creating an opportunity for pure-play platform engineering and software development service providers such as Grid Dynamics.
Sophisticated and scalable software platforms developed and continuously adapted to enterprise needs propelled many of today's most successful companies. Their unique business approaches and ability to move fast in adapting to changing market conditions allowed them to develop strong market positions and maintain defense against competitiors. Grid Dynamics is well-placed as a strategic partner of choice for these opportunities. Our focus on the foundation of excellence in platform and software engineering enables the level of collaboration that only a few can offer.
Grid Dynamics has offices across Europe, India, and the Americas. As the key drivers of our “Follow-the-Sun” model of engineering excellence, these geographies enable the acceleration of valuable business outcomes for our clients. Our teams and programs are organized and orchestrated for continuous integration, self-sufficiency, and maximum business impact across regions. Another strategic advantage of our “Follow-the-Sun” approach is that these geographies grow technology markets with large talent pools of highly skilled technical talent and cost-efficient scalability due to their large and well-recognized university infrastructures — a valuable asset for fueling our internship programs and attracting top talent. As we expand our geographical
1
reach, we are also investing in developing a multi-discipline approach to address the challenges facing our clients. This involves developing hybrid team capabilities focused on end-to-end problem-solving.
Strategies and Strengths
Grid Dynamics’ objective is to become a global leader in enabling digital transformation at Fortune 1000 companies. Grid Dynamics’ strategy to achieve such an objective is based on leveraging the following core strengths.
Proprietary Processes Optimized for Innovation
Grid Dynamics recognizes the changing dynamics of the IT services space. Increasingly, corporations expect their service providers to participate and help shape innovation programs. This leads to the development of next-level capabilities that traditional service models, used by the traditional outsourcing providers, fail to address effectively. Grid Dynamics melds technical consulting, platform and product engineering, and analytics competencies into unified, cross-functional digital teams that are designed to respond and adapt to changes in a client’s business. The effectiveness of such teams is further increased by close collaboration with a client’s technology and business leadership teams and active inquiry into a client’s business priorities on all levels.
Culture-First Approach to Talent Development
The ever-increasing role of digital transformation leads to the emergence of a new kind of business leader that combines a vision of business transformation with a deep understanding of possibilities brought together by modern digital technology. Earning the trust of these leaders is one of the pillars of Grid Dynamics’ success. Grid Dynamics selects, trains, and promotes its leadership based on the following cultural principles.
• Global integration . Demands of modern businesses transcend cultural and language boundaries. Grid Dynamics builds teams that are transparently distributed across countries, time zones, and reporting lines.
• Partnership with client . Grid Dynamics demands accountability and ownership of a client’s success, whether or not such success is a contractual matter. Understanding the goals of Grid Dynamics’ clients and the ability to manage such goals across reporting lines is a must for any leadership role within Grid Dynamics.
• Technological innovation . Understanding digital transformation and successfully delivering strategic programs is impossible without a strong understanding of emerging technology. Deep knowledge of how new technology, such as cloud, big data, and AI, transforms the way corporations develop their businesses is a prerequisite for leadership roles in Grid Dynamics.
• Education . Grid Dynamics believes that technology changes rapidly, and Grid Dynamics' employees must adapt even more rapidly. Grid Dynamics offers many formal and informal training programs, such as Grid University, an online education platform with thousands of hours of training videos, to ensure that professionals can expand and enhance their capabilities.
Technical Expertise and Scalable Engineering
Grid Dynamics believes in great engineering underpinning mission-critical services. From its inception, Grid Dynamics has built its engineering DNA with a focus on emerging technologies, leading with AI and generative AI, data engineering, cloud and microservices, DevOps and AIOps, modern frontend technologies, and QA automation. By making advanced technology accessible to clients through experience and know-how, industry solutions, and accelerators, Grid Dynamics strengthens its position as a strategic technology partner with existing clients and attracts new clients.
Services
In today’s engineering and IT services market, customers are increasingly looking for service providers that can be co-innovation partners rather than an implementation agency or a cost-saving measure. Grid Dynamics addresses this need by focusing on four high-value, high-impact service areas.
Cloud Platform and Product Engineering
Our Cloud Platform and Product Engineering practice provides innovative services that enable businesses to harness the power of cloud computing and modern application development methodologies. We specialize in architecting, designing, and building scalable, secure, and resilient cloud-based platforms and business applications that power digital transformation and business
2
agility. Our expertise in platform engineering, cloud migration and modernization, DevTestSecOps, microservices, and serverless architecture helps organizations generate more revenue, reduce costs, improve time to value, and enhance performance. By leveraging our services, customers can partner with Grid Dynamics to drive focus on innovation and growth using the latest advancements in platform engineering and product development.
AI/ Machine Learning and Data Platform Engineering
In the domain of Data and Machine Learning Platform Engineering, we offer specialized services that empower businesses to unlock the full potential of their structured and unstructured data. Our team of experts builds robust, scalable platforms that facilitate batch and streaming data ingestion, quality, governance, orchestration, semantic modeling, observability, and analysis at scale. By applying advanced artificial intelligence, machine learning algorithms, and analytics, we help companies derive actionable insights, predict trends, accelerate operations, and make data-driven decisions in the areas of pricing, promotions, customer experience, risk management, and supply chain that drive competitive advantage. Our approach to data engineering and advanced analytics ensures that our customers have a solid technology foundation to support their evolving data needs and democratize it across the enterprise — enabling them to leverage their data assets for maximum impact.
Digital Engagement
Our Digital Engagement practice focuses on creating meaningful interactions between businesses and their customers through all digital channels. We design and implement digital ecosystems that enhance customer experiences, foster brand loyalty, and drive business growth. Our expertise in digital commerce, user experience design and mobile application engineering, computer vision, deep learning, neural search, generative AI, and large language models, enables organizations to engage with their audience more effectively across multiple touchpoints. We co-innovate with clients and prioritize customer-centric approaches to design, build, and deploy engaging digital presences that resonate with their target audiences — increasing satisfaction and revenue. We partner with leading vendors in MACH and Composable Commerce to drive the highest return on investment for our clients.
Supply Chain, IoT, and Advanced Manufacturing
Our Supply Chain, Internet of Things (“IoT”), and Advanced Manufacturing practice focuses on transforming traditional operations into smart, connected ecosystems. We leverage the IoT, edge computing, advanced analytics, modern artificial intelligence, and machine learning technologies to optimize supply chain demand forecasting, inventory allocation, order management, logistics, and supplier management, improve manufacturing operational efficiency, and introduce innovation in product development and production processes. Our expertise in building fit-for-purpose platforms and adopting the latest innovations in this space enable real-time monitoring, predictive maintenance, and autonomous operations, reducing costs and enhancing productivity across the enterprise. Our customers benefit from our ability to integrate innovative technologies into their operations, making their supply chains more resilient, agile, and aligned with the digital economy’s demands.
Verticals
Grid Dynamics has strong vertical-specific domain knowledge backed by extensive experience. By merging technology with business processes, Grid Dynamics delivers tailored solutions in several key industry verticals: Tech, Media, and Telecom (“TMT”); Retail; Consumer Packaged Goods (“CPG”)/Manufacturing; Finance.
Tech, Media and Telecom
Grid Dynamics has a strong presence in the digital technology sector, particularly among analytics, SaaS, and platform vendors that are driven by a constant need for innovation. Grid Dynamics’ long-lasting expertise in complex open-source technology and in building massively scalable distributed systems, the company-wide culture of agile co-creation as well as a deep understanding of digital commerce have enabled Grid Dynamics to build strong business relationships with the leading players in this sector. For example, Grid Dynamics has been providing software engineering, continuous delivery and deployment automation, machine learning, internal tool development, and quality engineering services to one of the largest cloud services providers, becoming one of their key technological services partners.
Retail
By utilizing Grid Dynamics’ deep expertise in the digital retail space and providing a mix of consulting and engineering services, Grid Dynamics enables its clients to win market share, shorten time to market, and reduce the costs of digital operations. For example, Grid Dynamics has worked closely with a large U.S. retail company over many years to develop a strategic omnichannel transformation program and became a key contributor to the development of a new omnichannel platform including consumer experience, product discovery, analytics, and inventory optimization.
3
Consumer Packaged Goods and Manufacturing
Grid Dynamics helps its manufacturing customers harness digital transformation by applying novel approaches to engage consumers directly and optimize back-end supply chains. For example, Grid Dynamics accelerated digital transformation in a global shoe manufacturing company by building composable commerce and other digital ecosystem capabilities, replacing a monolithic commerce engine, and speeding time to market with modern and flexible functionality.
Finance
In the early days of Grid Dynamics, the financial sector recognized our ability to tackle high-end technology programs, such as moving from batch to real-time fraud detection. Today, Grid Dynamics has evolved from a niche provider to a proven partner, enabling agility and time to market in the most challenging regulatory environments. For example, a major commercial bank chose Grid Dynamics to solve the challenge of evolving its security frameworks to realize benefits from cloud and DevOps. In addition, Grid Dynamics enables clients operating in the Finance vertical to maximize the value of every customer interaction. By leveraging neural search and generative AI technology, Grid Dynamics creates solutions with seamless access to financial and economic data that enable Financial advisors to make quicker, more informed decisions, and better serve their clients. Furthermore, Grid Dynamics enables Insurance clients to achieve outstanding results with advanced customer analytics and risk-scoring models using the latest advancements in deep learning and decision sciences.
The following table presents our revenues by vertical and revenues as a percentage of total revenues by vertical for the periods indicated:
For the year ended December 31,
2023 2022 2021
(in thousands, except % of revenue)
Retail $ 102,551 32.8 % $ 99,681 32.1 % $ 61,717 29.2 %
Tech, Media and Telecom 98,830 31.6 % 98,334 31.7 % 67,689 32.0 %
CPG/Manufacturing 42,861 13.7 % 61,216 19.7 % 43,461 20.6 %
Finance 28,842 9.2 % 21,893 7.1 % 17,515 8.3 %
Other 39,826 12.7 % 29,358 9.4 % 20,898 9.9 %
Total $ 312,910 100.0 % $ 310,482 100.0 % $ 211,280 100.0 %
Delivery Model and Operating Structure
Our service delivery model involves using an efficient mix of on-site, off-site and offshore staffing. We believe that the combination of our delivery model optimized for co-innovation and the placement of our technology leaders at clients’ premises creates a key competitive advantage that enables us to better understand and meet a client’s diverse needs.
Grid Dynamics has engineering personnel located within Grid Dynamics’ engineering centers across Europe, India, and the Americas. As of December 31, 2023, Grid Dynamics had 3,920 full-time and part-time personnel and delivered services from engineering centers located in the following countries: the United States, Mexico, Jamaica, United Kingdom, Netherlands, Poland, Serbia, Romania, Ukraine, Moldova, Armenia, and India.
Grid Dynamics also places its self-managed teams of IT professionals at client premises aimed at successful delivery of innovative projects and programs.
Quality and Process Management
Grid Dynamics enforces stringent security standards and has maintained a continuous ISO 27001:2013 certification since August 2014. All key company locations, departments and teams are within the scope of the deployed information security management system.
Grid Dynamics policies, standards and procedures are reviewed annually during both internal and external certification audits. Grid Dynamics has successfully passed nine ISO 27001:2013 audits, as well as over a dozen exhaustive audits from top financial services customers.
4
Sales and Marketing
Grid Dynamics’ sales and marketing strategy focuses on increasing revenues from new and existing clients through a “land and expand” strategy. Grid Dynamics’ technology leaders deployed at clients’ premises play an integral role in identifying, developing and expanding potential business opportunities. This strategy has been effective both in deepening relationships with existing clients and increasing the number of Grid Dynamics’ clients.
Grid Dynamics also maintains a dedicated sales force as well as a marketing team, which coordinates corporate-level branding efforts that range from sponsorship of programming competitions to participation in and hosting of industry conferences and events.
In addition, Grid Dynamics actively invests in partnerships with hyperscalers and leading technology providers to amplify its sales and marketing efforts, leveraging the advanced capabilities of these entities to enhance visibility and drive sustained business growth.
Customers
Grid Dynamics’ client base primarily consists of Fortune 1000 corporations based in North America. With the acquisitions of Tacit in May 2021, Mutual Mobile in December 2022, and NextSphere in April 2023, we have gained customers in the U.K., North America, as well as Continental Europe and Asia.
Grid Dynamics has a high level of revenue concentration with certain clients. In the year ended December 31, 2023 one customer accounted for 10% or more of Grid Dynamics revenue compared to two in each of the years ended December 31, 2022 and 2021.
Grid Dynamics typically enters into a master services agreement with its clients, which provides a framework for services that is then supplemented by statements of work, which specify the particulars of each individual engagement.
Competition
Grid Dynamics faces competition from both global IT services providers as well as those based in CEE. Grid Dynamics believes that the principal competitive factors in its business include technical expertise and industry knowledge, culture, reputation and track record for high-quality and on-time delivery of work, effective employee recruiting, training and retention, responsiveness to clients’ business needs and financial stability.
Grid Dynamics faces competition primarily from:
• emerging small to mid-cap digital services companies, such as Globant S.A., Endava plc, EPAM Systems, Inc., and Thoughtworks Holding Inc.;
• large global consulting and outsourcing firms, such as Accenture plc and Capgemini SE;.
• India-based technology outsourcing IT services providers, such as Cognizant Technology Solutions Corporation, Infosys Technologies, and Wipro;
• in-house IT departments of Grid Dynamics’ clients and potential clients.
Given Grid Dynamics’ focus on complex digital transformation programs, technical employee base and the development and continuous improvement in new software technology, Grid Dynamics believes that it is well positioned to compete effectively in the future.
Human Capital and Employees
People are critical to the success of Grid Dynamics. Accordingly, attracting and retaining personnel is a key factor in Grid Dynamics’ ability to grow revenues and meet its clients’ needs. As of December 31, 2023, Grid Dynamics had 3,920 personnel across 13 countries (the U.S., Mexico, Jamaica, Armenia, India, the Netherlands, the U.K., Poland, Romania, Serbia, Switzerland, Moldova, and Ukraine).
Recruitment and Retention
Grid Dynamics hires both for technical skills and cultural fit. The reality of the changing technological landscape demands that our engineering personnel can continuously acquire new proficiencies and skills.
5
Grid Dynamics’ hiring program is driven by demand within current and projected clients. Projections of client demand are constantly reviewed to ensure that we maintain a proper recruiting and training pipeline. The geographical spread helps Grid Dynamics avoid location constraints and shorten the time to identify and recruit top technical talent. Grid Dynamics targets the top technical talent from top technical universities in all its locations. The majority of Grid Dynamics’ engineering personnel have bachelor’s or advanced degrees in computer science.
To attract, retain, and motivate IT professionals, Grid Dynamics seeks to provide an environment and culture that rewards entrepreneurial initiative and performance. In addition, Grid Dynamics offers a challenging work environment, ongoing skills development initiatives, and attractive career advancement and promotion opportunities.
Grid Dynamics believes that it maintains a good working relationship with its employees and has not experienced any labor disputes. Grid Dynamics’ employees have not entered into any collective bargaining agreements.
Training and Development
Grid Dynamics dedicates significant resources to the training and development of its technical leaders. The company believes in the importance of supporting educational initiatives and sponsors employees’ participation in internal and external training and certifications.
Every year Grid Dynamics delivers hundreds of courses in emerging technologies to its engineers using the Grid University online education platform. Employees can also take advantage of educational and certification programs offered by the technology leaders both in open-source as well as in proprietary spaces.
Furthermore, through Grid Dynamics, deep relationships with top local universities, forged over years of collaboration, and specialized recruiting programs, Grid Dynamics can scale the hiring and staffing of new engineering teams to support complex technical programs.
Grid Dynamics also provides ongoing English language training at all of its delivery centers to maintain and enhance the English language skills of its IT professionals.
Management Training Programs
Grid Dynamics offers support, training, and mentoring programs to managers through the Grid Dynamics Management Training Program. Various courses in project management and leadership skills help managers build strong teams through a positive work environment, group inspiration, and individual motivation.
Internships
Grid Dynamics has a long-standing tradition of running internship programs for students and junior engineers. The company opens its doors to young, promising engineers who are ready for a life-changing career of working on complex projects in big data, machine learning, AI, and other emerging technologies.
Each intern works with a mentor who helps them adapt, shares knowledge and supports them in developing the necessary skills.
Intellectual Property
Protection of intellectual property rights is paramount to Grid Dynamics and its clients. Grid Dynamics relies on a combination of trade secret, patent, copyright, and trademark laws as well as confidentiality procedures and contractual provisions to protect its intellectual property. Grid Dynamics requires its employees, independent contractors, vendors, and clients to enter into written confidentiality agreements upon the commencement of their relationships with Grid Dynamics. These agreements generally provide that any confidential or proprietary information disclosed or otherwise made available by Grid Dynamics must be kept confidential.
Grid Dynamics customarily enters into non-disclosure agreements with its clients concerning the use of their software systems and platforms. Grid Dynamics’ clients usually own the intellectual property in the software or systems Grid Dynamics develops for them.
Grid Dynamics and its clients often use open-source software to improve quality and reduce time-to-market. Grid Dynamics works with the compliance departments of its clients to comply with the client’s open-source licensing policies.
6
Regulations
Due to the industry and geographic diversity of Grid Dynamics’ operations and services, Grid Dynamics’ operations are subject to a variety of laws and regulations in the United States and the foreign jurisdictions in which we operate. See Item 1A, “ Risk Factors—Risks Related to Government Regulations ”.
Available Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, accordingly, file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, with the Securities and Exchange Commission (the “SEC”). In addition, the SEC maintains a website (http://www.sec.gov) that contains material regarding issuers that file electronically, such as ourselves, with the SEC.
We maintain a website at www.griddynamics.com, to which we regularly post copies of our press releases as well as additional information about us. Our filings with the SEC will be available free of charge through the website as soon as reasonably practicable after being electronically filed with or furnished to the SEC. Information contained in our website is not a part of, nor incorporated by reference into, this Report or our other filings with the SEC, and should not be relied upon.