November 1, 2017
India’s $150 billion legacy IT services industry is banking on a clutch of startups to give it a fresh lease of life.
The industry, whose model has increasingly been rendered obsolete over the past few years by the emergence of new technologies, is making acquisitions and investments in areas like automation, artificial intelligence, and big data.
November 1, 2017
India’s $150 billion legacy IT services industry is banking on a clutch of startups to give it a fresh lease of life.
The industry, whose model has increasingly been rendered obsolete over the past few years by the emergence of new technologies, is making acquisitions and investments in areas like automation, artificial intelligence, and big data.
Infosys and Wipro, two of India’s largest IT services companies, alone have so far invested in 28 firms and acquired eight, data from New York-based research firm CB Insights shows.
Others have also been fishing for such deals.
“India’s IT companies and consultancies were built on the global trend toward outsourcing tech and back office tasks overseas…But these companies are now being threatened by the shifts toward new technologies,” CB Insights said in a report on Oct. 27. “As India’s IT companies shift their strategies to seek new lines of business and markets, they’re upping their M&A and investment activity, in an attempt to absorb innovation and close the gap so as not to be left behind.”
The underlying rationale is investing in or acquiring a startup lets large IT companies add capabilities that may be hard to develop in-house. To streamline the process, many of them have even formed separate investment arms which operate like venture capital firms (VCs) and back startups of strategic importance.
Here’s what the sector leaders have done so far:
Wipro: India’s third-largest IT company leads the pack when it comes to backing startups. Through its venture capital arm, Wipro Ventures, the company has closed 18 deals since 2012. Startups backed by Wipro Ventures include Austria-based software testing firm Tricentis, American cloud services company Drivestream, Pune-based Internet of Things (IoT) startup Altizon Systems, and the US-based EmailAge, which runs an email-based tool to verify the validity of financial transactions. Wipro has also acquired German IT services firm Cellent and Brazil’s InfoServer Informatica.
Infosys: In 2015, India’s second-largest IT firm set up a VC-like fund called the Infosys Innovation Fund. It focuses on early-stage startups that work on machine intelligence, big data and analytics, infrastructure and cloud, and collaboration and design. The fund’s portfolio includes Israeli cloud-management firm Cloudyn and Mumbai-based drone-maker ideaForge Technology, among others.
Infosys’s interest in tech has also driven it to back VC firms. It has invested as a limited partner in four of them: Stellaris Venture Partners, Southeast Asia-focused Vertex Ventures, Israeli fund TLV Partners, and New York-based Work-Bench.
HCL: The fourth-largest company in the sector prefers acquisitions over investments. The company was most active in 2015 when it acquired three startups: US-based TrygTech, which connects IoT devices with business intelligence; Indian engineering services firm Concept to Silicon; and American customer relationship management company PowerObjects. Also, in September this year, HCL bought UK-based Datawave, a company that automates large-scale data projects.
Tata Consultancy Services (TCS): India’s largest software services company has been the most inactive player in the mergers and acquisitions space. It has focused more on building in-house capabilities. The only startup acquisition TCS has made, CB Insights’ data shows, is of French IT services firm Alti in 2013 for 75 million euros.
Courtesy/Source: Economic Times
