Indian Outsourcers Likely To Acquire More U.S. Firms, Analyst Suggests
Among the drivers for these deals is the United States' cap on H-1B visas, which isn't likely to be raised from the current ceiling of 65,000 anytime soon.
Following on the heels of Wipro's plan to buy U.S.-based IT services firm Infocrossing for $600 million, don't be too surprised to see other Indian outsourcers making megadeals for American companies in the near future. This is according to an official at Nasscom, an organization representing the Indian IT and software industry.
"Indian companies are sitting on a lot of cash, $500 million to $1 billion," said Ameet Nivsarkar, VP of research at Nasscom in an interview. Plus, "the valuation of Indian IT companies is high" compared with U.S. companies right now. "This is the right time" to do these large deals," he said.
While big, the Wipro-Infocrossing deal isn't even the largest cross-border outsourcing acquisition this year. In June, Caritor -- an application developer based in California, but whose 3,900 employees are predominately in India and whose founder is Indian -- acquired U.S. IT services provider Keane in an $854 million deal backed by Citigroup Venture Capital.
"It's definitely possible" that there will be more of these bigger deals, Nivsarkar said.
Among the drivers for these deals is the United States' cap on H-1B visas, which isn't likely to be raised from the current ceiling of 65,000 anytime soon. (An additional 20,000 visas are exempt from that cap for foreign students who receive advanced degrees from U.S. schools.)
"Without a doubt, the H-1B cap is artificially freezing the transfer of knowledge and people between companies in different countries," said Nivsarkar.
"It's definitely affecting Indian companies; they are not able to fulfill orders as much as they would like," he said. Indian companies have no problem getting American business, but the cap is "hampering the ability to deliver business," he said.
"Business is strong; it's the supply [of people who can come to the United States] that's a problem."
Still, while other Indian IT outsourcers could follow Wipro's recent example by acquiring American IT services firms in coming months or years, that strategy for U.S. expansion isn't as easy as it might seem, Nivsarkar said.
"Acquisitions in the IT services sector [between companies in India and the United States] tend to be more difficult than acquisitions in other industries, like manufacturing, because of the cultural differences," he said.
So Nivsarkar predicts that most Indian companies eyeing acquisitions in the United States are probably more likely to tip-toe into this type of strategy.
How Enterprises Are Attacking the IT Security EnterpriseTo learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
Infographic: The State of DevOps in 2017Is DevOps helping organizations reduce costs and time-to-market for software releases? What's getting in the way of DevOps adoption? Find out in this InformationWeek and Interop ITX infographic on the state of DevOps in 2017.
IT Strategies to Conquer the CloudChances are your organization is adopting cloud computing in one way or another -- or in multiple ways. Understanding the skills you need and how cloud affects IT operations and networking will help you adapt.