The two global acquisitions in the IT space over the last two weeks?Dell acquiring Perot Systems for $3.9 billion and Xerox?s buyout of Affiliated Computer Systems (ACS) for $6.4 billion?are both good and bad news for India?s $50 billion outsourcing industry. These two acquisitions, which have the same underlying motive?-reducing the dependence on hardware revenues, which have been declining due to markets becoming saturated and expanding the high-margin IT services portfolio?have made existing giants Dell and Xerox even bigger.
The change in the pecking order of the outsourcing industry means more competition for Indian IT big-wigs like TCS, Infosys, Wipro and HCL Technologies, who have been largely competing with the likes of HP, IBM and Accenture for global outsourcing contracts so far.
The recent vendor consolidation exercises points towards the world moving more towards end-to-end integrated deals. In such a scenario, players like Dell and HP have a significant edge as they can offer both hardware and software services components to their clients apart from extending software offering to their hardware clients and vice versa.
Analysts predict more of such deals as the global economic crisis has rejigged the global outsourcing model. Though it will be a year before Dell and Xerox can fully leverage capabilities of their latest acquisitions, Indian IT players will be better off bracing themselves for increased competition. Maybe it?s time for Indian vendors to find their niches, plug gaps or acquire new capabilities to compete with the giants? old, new and future ones.
The good news however, is that as Dell and Xerox fully launch themselves into the software services outsourcing space, they will need to turn to markets like India for their knowledge resource pool and acquire the same labour arbitrage as their global peers like IBM and HP have. All this means more jobs for Indian IT professionals.
These companies already have significant presence in the country through their delivery centres and it is quite likely that they will be expanded to meet the greater needs of the merged entities. ?
surabhi.a@expressindia.com