IBM hooks Daksh in biggest Indian BPO buy

By : |April 7, 2004 0

NEW DELHI: In its first acquisition in India, the US IT giant IBM has signed a definitive agreement to buy out Gurgaon-based BPO firm Daksh e-Services for an estimated $160 million. The deal, which was signed early morning on Wednesday, April 7, 2004, comes almost a week after repeated media speculations and constant denial by Daksh top brass.

According to sources close to the deal, while Daksh would become part of the IBM Corp after acquisition, its founder promoter and CEO, Sanjeev Agarwal would continue to hold the position. Giving brief details about the deal, an IBM press release said that as a result of this agreement, IBM Business Consulting Services will acquire Daksh’s key Asian business transformation practices and experienced local skill sets, already serving an existing client base.

The transaction, which is subject to Indian regulatory approvals, is expected to close in May, 2004.

Presently three private equity investors–General Atlantic Partners, Actis (previously called CDC) and Citigroup–hold two-third of the equity in Daksh. The rest is with Agarwal, promoters and other members of the senior management.

Talking about the deal, the IBM press release further said that the acquisition will enhance IBM’s business transformation capabilities in key areas including customer relationship management (CRM) and financial management services in key industries such as banking, insurance, retail, technology, telecommunications, travel and transportation.

Besides, the initiative is also expected to increase the scope of IBM’s global network of 22 business transformation delivery centers, adding capabilities in India and the Philippines. This network, which includes centers in the US and 12 other countries, already serves hundreds of clients globally. The deal also brings along Daksh’s experienced, strong management team to IBM in India.

“India is one of the fastest-growing economies in the world, and an important marketplace for IBM. This investment is indicative of our commitment to supporting our clients in this region and leveraging local capabilities to extend our leadership position in the rapidly growing business transformation services marketplace," said IBM India, General Manager, Abraham Thomas.

Set up set up four years ago Daksh is one of the fastest growing call-center operators in India with 6,000 employees. On the other hand, IBM Global Services Worldwide spearheads IBM’s BPO business. IBM, together with its software and global services arm, Global Services India employs around 6,000 professionals in India.

While the acquisition by IBM amounts to the largest investment made by a global technology group in any Indian BPO company, it also comes amidst rising political opposition to offshore outsourcing in the US, where critics fear many thousands more jobs could be lost to low-cost locations such as India. Still, the trend shows no signs of slowing down, as a report by Financial Times quotes bankers involved in the IBM deal saying two more BPO contracts involving Indian companies are set to emerge from the US shortly. The new deals could well suggest that the biggest names in corporate America are becoming more aggressive in offshoring, bankers claimed.

Ironically, the development also vindicates Wipro’s Vivek Paul’s bet to acquire Spectramind for $100 million in 2002, a decision, questioned by analysts for quite a while after that. But more so, it might as well signal a trend among global IT services providers to gain from India’s vast BPO workforce to provide cost-effective services to their own customers worldwide. And expecting exactly that, other Indian BPO providers might as well start rubbing their hands expecting similar deals for their organizations as well.

CyberMedia News

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