A revenue base of nearly $40 billion and an employee headcount of over 2,00,000 people with over a quarter of these already in India ? these are the numerical parameters that define the acquisition of EDS by HP creating the second largest IT firm in the world, a worthy challenge to IBM and a clear threat to other multinationals like Accenture, Computer Sciences Corporation and Cap Gemini in the battle for global outsourcing opportunity share.
The obvious questions this major occurrence in the global landscape raises are?does this imply serious erosion of opportunities for the Indian companies in the global arena? Will this hasten the process of M&A by Indian firms as they seek to scale to the levels of the global megacorps? And will the imminent acceleration of offshore work that is the predictable outcome of the consolidation and fat trimming exercises following the acquisition going to create a new war for talent in the Indian scene, which has just seen some stability following the slowdown in key markets in recent months?
There are no easy answers to all these questions but the expectation is that there are more positives than negative fallouts of the HP-EDS deal for all participants.
The reasons for this optimism start with the reality that Indian firms have made their mark primarily in the applications lifecycle management space whereas IBM, CSC and EDS have focused on IT outsourcing based on large infrastructure management capabilities. These firms have been adding applications development, migration and development credentials only recently even as Indian firms foray into the RIM (remote infrastructure management) arena. Hence while the medium term competitive battles will range from consulting to applications to infrastructure, in the short term, there is no imminent nibbling of opportunities that will result from this new competitor?s entry. It is also unlikely that panic buttons will be pressed and large amounts of money spent by Indian firms to scale up by billion dollar acquisitions because the marketing and delivery models of the medium and large firms will not be substantially embellished by adding on traditional on site consulting firms and such acquisitions would certainly not be accretive to the stock prices of the large firms.
It is also far fetched to believe that the people dynamics of the industry will be substantially altered by this acquisition, because both companies already have a significant presence in this country and will not behave like some ?Johnny come lately? making a salary based splash in the Indian industry. For all these and more reasons, it is unlikely that the industry structure will be substantially altered by the new development, exciting though it is for the firms themselves and the sensation hungry industry watchers.
To choose a cricketing metaphor, would a merger of the Indian and West Indies teams create a permanent threat to the status of Australia or South Africa? Not really because the players have to assess their own relative and combined strengths and build a new competitive stance to change the rules of the game and all that needs new initiatives, resolve and significant time which also permits the opposition to regroup and build their own strategies.
The global IT and BPO landscape is changing all the time and the HP-EDS merger will undoubtedly make some more changes happen, albeit in the middle term. There is never a shortage of surprises in this exciting industry!
The writer is chairman of Nasscom and global CEO of Zensar Technologies Ltd