IT outsourcing cos to make European acquisitions

by CXOtoday News Desk    Feb 18, 2013

IT Acquisitions
In an effort to proclaim themselves to be truly global, India’s top outsourcing companies namely Tata Consultancy Services (TCS), Infosys, HCL Technologies and Wipro are busy eyeing acquisitions in France and Germany, reported the Economic Times today.

According to the report, there are at least three planned acquisitions, valued at under $50 million (Rs 270 crore) each in Germany and another in France valued at a little over $100 million, are in the final stages. The sources did not name the acquirer or the target as they are advisors to the deals and are bound by non-disclosure agreements.

“None of the Indian companies is in the top 30 list from a market share perspective in the IT services market in Germany or France. An acquisition would be the quickest route for the Indian companies to get a local workforce and client relationships,” Christophe Chalons, chief analyst and member of the board at Pierre Audoin Consultants, a French consultancy and market research firm, was quoted as saying.

In the report, Chalons said Germany and France together represent nearly half of the European IT services market, which industry body European Information Technology Observatory pegs at about 155 billion Euros, or more than Rs 10 lakh crore. Currently, local service providers such as T-Systems of Germany, Atos and Capgemini of France and Tieto Oyj of Finland as well as IBM, HP and Accenture dominate this market.

The report also stated that Europe contributes a little below 30% of the $76 billion in exports that the Indian IT-BPO industry is expected to clock in the year to March 2013, with most of it coming from the UK and Nordic region. Analysts also agreed that there is greater openness to offshoring in Europe not only due to rising sourcing maturity but also because of the prevailing profitability pressures.

Acquisitions have already been ramped up in Europe with Mumbai-based IT services company Geometric acquired German company 3cap Technologies GmbH for about $15 million a month ago. Before that Cognizant Technology Solutions acquired six companies from Germany’s C1 Group, and in September, InfosysBSE -0.62 % bought Swiss consulting company Lodestone.

“This gives us not only technology, but existing client relationships in Germany, which is critical,” said Manu Parpia, MD and chief executive officer at Geometric in the report.