One of the major Indian IT suppliers will buy a major European
competitor within two years as
consolidation gains momentum after the
recession, Gartner predicts.
"By 2011, one of the big Indian top-tier vendors will acquire a
top 20 European-headquartered supplier," Gartner analyst Ian
Marriott told the audience at the Gartner Outsourcing and IT
Services Summit 2009.
Tata Consultancy Services (TCS), Infosys Technologies,
HCL Technologies, Wipro, Cognizant and
Satyam top the list of
Indian suppliers. Each of these companies has reported
double-digit growth over the past 10 years. HCL
acquired European SAP integrator Axon for almost £500m last
year.
Mark Lewis, partner and head of outsourcing at law firm Berwin
Leighton Paisner, said that an acquisition was the only way for an
Indian company to penetrate the market and become a global tier-one
supplier.
Indian suppliers have grown as much as they can organically and
must look for an acquisition to grow more, he said. "Europe is the
biggest nut to crack in outsourcing currently, and it is hard to do
it without a major European footprint and customer base."
He said it would be difficult to look beyond Infosys, Wipro and
TCS as potential buyers.
But Robert Morgan, director at Hamilton Bailey, said it does not
make sense for Indian firms to take on the large workforce and high
cost base of a European company.
"It is possible, and I think a few might have a go at picking up
one that needs rescuing, but why would they buy a firm that has a
higher cost base and lives off much lower margins?" he
questioned.
Morgan said it would be better business for Indian suppliers to
set up a new business in Europe.
Peter Brudenall, partner at law firm Hunton & Williams, said
a major acquisition by an Indian firm is a recurring rumour, but he
said a smaller, more strategic acquisition is more likely.
"I would not rule out a major acquisition, but it is more likely
to be along the lines of HCL's strategic acquisition of Axon to
give it consultancy skills. This type of acquisition would help the
Indian suppliers provide more services to their existing
customers," he said.