India’s second largest outsourcer, Infosys Technologies, is considering a bid for French IT services company Capgemini, according to a newspaper report.
The Times of India quoted an industry source on Friday as saying the move was a natural progression for a fast-growing Indian tech firm keen to make an impression on the global market.
Infosys declined to comment on the reports. “We do not comment on market rumours,” a spokeswoman for the company said. However, Infosys in Bangalore indicated at its analyst conference in April that it may consider an acquisition.
One industry analyst said the deal seems unlikely. Infosys might want to acquire Capgemini to get access to European markets, where it doesn't have a large presence, but the cultural incompatibilities between the two companies would be very high, said Siddharth Pai, a partner at consultancy firm Technology Partners International.
A number of Indian outsourcing companies, including Tata Consultancy Services (TCS) and Wipro, have acquired companies abroad to increase their geographic reach and to focus on new industry sectors.
Capgemini used acquisitions as way to win new business and add staff in India.
Last year, the company acquired a 51% stake in Unilever India Shared Services, a subsidiary of European consumer goods maker Unilever Group. That business will become a wholly owned subsidiary of Capgemini by 2008. In February, Capgemini acquired Kanbay International an US-based IT services firm to boost its services delivery from India, and its business in the financial services sector.
Infosys reported revenue of $3.1 billion (£1.7bn) for the fiscal year ended 31 March this year and has forecast revenue of about $4bn in its current fiscal year. The company had a market capitalisation of $27bn as of 31 March and floated on the Nasdaq last December. Capgemini is a larger company with revenue of $10bn for its fiscal year ended 31 December.
Graham Underwood, managing director of IT outsourcing consultancy GFT UK, said recent results from Indian outsourcing companies show they are “coming of age” and catching up with their European counterparts. “What we are now seeing is India acknowledging the importance of having the right people in place to complete a project to the desired level,” he said. “Costs and the location of a project are an output of the outsourcing decision.”