Strategic CIO // IT Strategy
04:07 PM

Covansys Buy Gives CSC A Passage To India

CSC's $1.3 billion buyout of Covansys, if approved, would immediately double CSC's Indian headcount to about 14,000.

With demand for programmers and other IT professionals in India tightening, Western tech companies looking to bolster their presence in the outsourcing hotspot may have to buy their way in as an alternative to recruiting. Computer Sciences Corp. is doing just that.

On Wednesday, the U.S. defense and commercial outsourcer announced a $1.3 billion buyout of Covansys, which provides a range of technology and back-office services from locations in Chennai, Bangalore, and Mumbai.

Under terms of the deal, CSC will acquire Covansys for $34 per share in an all-cash transaction. The agreement will have a neutral impact on CSC's earnings per share during the first 12 months, the company said.

"With this action, we are significantly strengthening our capabilities and presence in India," said Van Honeycutt, CSC's chairman and CEO, in a statement. The deal, which remains subject to approval by Covansys shareholders, would immediately double CSC's Indian headcount to about 14,000.

Virtually all U.S. based outsourcers are aggressively hiring in India to meet customers' desire to tap the country's highly skilled, low-cost workforce. Despite annualized salary inflation of about 15% in recent quarters, tech workers in India still earn anywhere from 40% to 80% less than their Western counterparts.

CSC's acquisition of Covansys shows the company is "committed to growing its offshore delivery capability," said Michael Guibault, an analyst at Technology Business Research.

Despite the takeover, however, CSC's Indian operations are dwarfed by those of rivals IBM and Accenture. IBM has more than 50,000 Indian workers, while Accenture has said its headcount in the country will reach 35,000 by year's end, surpassing U.S. levels.

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
Register for InformationWeek Newsletters
White Papers
Current Issue
Top IT Trends to Watch in Financial Services
IT pros at banks, investment houses, insurance companies, and other financial services organizations are focused on a range of issues, from peer-to-peer lending to cybersecurity to performance, agility, and compliance. It all matters.
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join us for a roundup of the top stories on for the week of July 17, 2016. We'll be talking with the editors and correspondents who brought you the top stories of the week to get the "story behind the story."
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.