IT service providers in India are keen on deals for acquisition of subsidiaries of international companies for a steady revenue flow. Analysts have reasoned this to the prevailing COVID-19 pandemic.
A number of big players, such as Tata Consultancy Services and Infosys, acquired assets in international companies. Tata Consultancy Services stepped into the EU market by acquiring some assets and over 1,500 employees of Ireland-based Pramerica Technology Services from Prudential Financial. Infosys, in the month of July, went into an over $1 billion collaboration with Vanguard, US investment adviser. Its also working towards acquiring assets of German automotive major Daimler. Phil Fersht, chief executive of HfS Research, explained that the deals keep the revenue machine ticking along for hungry services providers seeking to maintain their growth trajectory in a pandemic economy. He observed that doing large deals in a pandemic is just too complex. “So going back to these take the people deals makes a lot of sense for the service provider, and helps enterprises under financial duress make a rapid haircut to their bottom-line,” he said.
COVID-19 Pandemic Impact
Sharath Srinivasamurthy, Research Director Enterprise Solutions and ICT Practices at IDC India, had pointed out that COVID-19 would slowdown discretionary IT spending, contract renewals and new deals getting signed as enterprises recalibrate by cost structure in coming months. He said existing project executions have taken a hit due to travel restrictions in place. “IT vendors will be forced to relook at their growth targets for the rest of the year as the impact will become evident in the next few quarters. On the other hand, it has provided an opportunity to IT vendors to test their resilience on business continuity, remote connectivity, and security as they look at innovative ways to service their clients,” Srinivasamurthy explained.
Ray of Hope
In September, EY in its analysis had highlighted that with India’s strong macro-economic fundamentals, favorable demographic dividend, improved ease of doing business (EoDB), and availability of resources for ramping up manufacturing capacities, the country can position iitself as an attactive investment destination for investors across the globe. This would require the government, local bodies and the industry to leverage this opportunity optimally. It said the government should prepare plans to manage the current outbreaks as well as future disasters, to ensure minimum disruption to the business ecosystem. The planning may include capacity building of human resource, current adoption as well as switchover to use of technology, preparing standard operating procedures and creating reserves/funds for such situations.