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Tech services M&A: Don't bet on Indian big buys

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CIOL Bureau
New Update

MUMBAI, INDIA: In an industry where size matters, India's showpiece software services firms need to be bold and acquire firms or risk playing second fiddle as bigger IT players emerge as one-stop shops for cost-conscious clients.

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Following are key facts on India's software services sector:

* Cheaper salaries, a quarter of those paid in the U.S. and Europe, and a large pool of English-speaking graduates have helped outsourcers such as Tata Consultancy Services, Infosys and Wipro ride an outsourcing boom.

* These firms offer services ranging from managing complex computer networks and call centres to software coding and maintaining IT operations. Clients include General Electric, BT, Citigroup and Boeing.

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* The export-driven sector has been badly hit by turmoil in the global financial sector -- a key client base -- and an economic downturn that forced businesses to trim technology spending and demand sharp price cuts.

Recent acquisitions by top Indian IT firms:

* HCL Technologies Ltd, one of India's top-five software exporters, bought UK firm Axon last year for about 440 million pounds ($720 million) after bigger rival Infosys refused to raise its bid. It was the biggest overseas buy by an Indian IT firm.

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* Tata Consultancy, part of Tata Group, a diversified conglomerate, acquired Citigroup Inc's back-office unit in India last year for about $505 million in cash.

* Wipro bought Citi Technology Services Ltd, which services Citi's businesses in 32 countries and provides IT infrastructure, for $127 million.

* Wipro bought U.S. technology firm Infocrossing Inc for an enterprise value of about $600 million in 2007, making it the company's largest acquisition.

* Bangalore-based Infosys paid $28 million in 2007 for the three captive back-office centres of Royal Philips Electronics to expand its presence in Europe.

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