Strategic CIO // IT Strategy
Commentary
12/27/2007
01:07 PM
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Wipro Reportedly Trying To Acquire Capgemini

There are reports coming from India that IT outsourcing vendor Wipro is preparing a $7 billion bid for Capgemini. The companies aren't commenting directly on these reports, but a Wipro exec did say something that underscores this fact: Indian companies are under the gun to move beyond their Indian workforces.

There are reports coming from India that IT outsourcing vendor Wipro is preparing a $7 billion bid for Capgemini. The companies aren't commenting directly on these reports, but a Wipro exec did say something that underscores this fact: Indian companies are under the gun to move beyond their Indian workforces.Citing investment banking sources, The Hindustan Times reported Dec. 23 that Wipro hopes to make a bid for Capgemini by the end of January, and is working with bankers to make such a deal happen. Reuters and others followed up on the report. A Capgemini spokeswoman wouldn't comment on market speculation. Wipro chief strategy officer Sudip Nandy also declined comment on speculation, but told The Hindustan Times this: "Of course, we are interested in larger deals and aggressively looking for inorganic growth options."

Wipro, India's third-largest IT outsourcing provider after Tata Consultancy Services and Infosys Technologies, has myriad reasons to grow beyond India. For one, the U.S. government's cap on H-1B visas (65,000 for this year) makes it difficult for Indian companies to keep growing business in the United States, since they're limited by how many technologists they can send here for temporary work. Second, India's incredibly tight talent market has all of the country's IT giants looking to build staff in foreign lands. Third, some U.S. companies might be more likely to outsource with Capgemini, which has strong U.S. ties, than with an Indian-based provider.

Earlier this year, Wipro acquired U.S.-based IT services firm InfoCrossing in a $600 million deal. Not all companies in India share Wipro's acquisitive approach, instead choosing to set up new operations outside of India and hire locally. Infosys, for example, expanded in the Czech Republic earlier this year and set up its first Latin subsidiary in August. In a conversation with our editor Rob Preston in August, Infosys CEO Kris Gopalakrishnan didn't seem too keen on the idea of acquiring in the United States.

But that could change. A rep with Nasscom, an organization representing India's IT industry, notes that Indian companies are sitting on tons of cash and predicts more acquisitions of U.S. companies. Capgemini may be headquartered in France, but tens of thousands of its employees are U.S. citizens, mostly working on U.S. soil.

Expect to see more U.S.-based IT professionals and consultants working for India-based companies in the coming years. Just another sign of an increasingly global economy.

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