While there are expectations of consolidation of the global nine in the outsourcing industry given that projections show the traditional big six on shaky grounds in clinching new IT outsourcing deals, there comes the announcement of intent by Cap Gemini and Atos Origin of plans to acquire India based service providers.
Paul Hermelin, CG’s honcho is quoted as saying that, "India is very exciting." IT developments are a source of national pride and such a consolidation would help us; he has confirmed that he is talking to several small to medium Indian companies. Cap Gemini's smaller rival, Atos Origin is also said to be looking to make acquisitions in India and planned to increase its staff there to 2,500 by the end of 2006 from a current 1,500 employees.
For starters, Cap Gemini, which employs about 4,000 people in India, was the European company that was moving the fastest in India, recruiting 400 people a month. Cap Gemini has previously said it will need 14,000 information technology (IT) staff in low-cost countries to serve its customers by the end of 2008. Before somebody predicts that Indian HQ companies would get pulped by these bold moves of the elites, let me say, categorically, NO. To give an idea of the scaleups that are happening in Tier 1 companies, public information shows that Tier 1 companies are already recruiting at a minimum rate of 250-350 consultants every Monday morning, besides several initiatives like global facilities and recruitments by all Tier 1 players.
I am sure when the history of offshoring is written five or so years from now, when new leaders including some offshoring majors find a list in the top five of the services industry, the phenomenon called scaling up would be seen as an all-time world record beater across industries. Underpinning the bullishness of the business, it is found that even smaller players are not so desperate to offer themselves out, instead preferring to wait for the right price, giving themselves some more time to decide. The Indian ecosystem is not so full of corporate dynamism or shareholder activism including institutional activism, despite centuries-old mature financial systems in place (for many, selling out is handing over the family silver) notwithstanding the fact that many promoters hold limited personal shares.