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India IT firms eye buys as tech spending rises

India IT firms eye buys as tech spending rises
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First Published: Tue, Feb 08 2011. 07 03 PM IST
Updated: Tue, Feb 08 2011. 07 03 PM IST
Mumbai: Indian software firms are looking for acquisitions as they build capabilities in key business segments and geographies to take advantage of the gradual recovery in technology spending globally.
India’s $60 billion software services sector had to battle demand for price cuts a few quarters ago, as clients cut back on outsourcing in a sluggish global economy, but are now seeing a rebound in demand and an improvement in the pricing environment.
India’s leading software firm Tata Consultancy Services on Tuesday said it was willing to spend as much as $500 million for acquisitions in segments such as healthcare, and in regions such as Germany.
“We are not looking at acquisitions as a means of revenue growth. Acquisitions will be for driving strategic initiatives, for any capabilities we can get,” TCS chief executive N. Chandrasekaran told reporters.
Smaller rival Cognizant is looking to buy companies with revenue of $20 million to $80 million, preferably those in the consulting space, its president R. Chandrasekaran said on Tuesday.
Cognizant, which forecast strong 2011 results on Monday, expects to maintain margins and grow organically at a pace faster than its key competitors, underlining a gradual recovery in technology spending.
Software services provider Mastek is scouting for acquisitions worth $10-$30 million in insurance segment, its chief financial officer said on Tuesday.
TCS and India’s No. 2 IT firm Infosys , along with smaller rival Wipro , are on a hiring spree and have increased pay by 20% as they forecast robust demand.
Infosys, which counts Goldman Sachs , BT and BP among its clients, plans to hire 25,000 new employees this year to cater to new mobile and cloud computing services. It currently employs 127,000.
TCS, whose clients include Citigroup and General Electric said it could hire as many or slightly less than the more than 50,000 it hired last year.
Wipro Restructuring
Wipro Ltd , India’s No. 3 software services exporter, expects to see the positive impact of its recent organisational restructuring after three quarters, the company’s newly appointed chief executive of its IT business said on Tuesday.
Wipro, majority owned by Azim Premji, the world’s 24th richest billionaire according to Forbes, also makes computer hardware, consumer care products and electric bulbs.
Wipro, also listed in New York, is seeing strong demand for outsourcing services, and is focusing to win more deals in emerging markets, T.K. Kurien told reporters in a conference call on Tuesday.
Wipro said on Monday it had reorganised its key IT outsourcing business, less than three weeks after it surprised markets by replacing the chiefs of the business and replacing them with Kurien.
“This is a longer-term play for us because what we believe is that we are, by doing this, positioning ourselves for future growth,” Kurien said, referring to the organisational changes.
“Our fundamentals are sound...the reason why we are doing this is to make ourselves future ready,” he said. “I don’t see the impact of this for at least three quarters.”
Wipro has been struggling to keep up with its local and global peers such as TCS, Infosys Technologies and Cognizant in winning big outsourcing contracts.
Wipro’s IT business, which develops software applications, integrates IT systems and manages call centres for clients such as Citi , Cisco and Credit Suisse , accounts for about three-quarters of its revenue.
Kurien said that Wipro was not seeing significant pressure on prices for its services amid a rebound in demand.
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First Published: Tue, Feb 08 2011. 07 03 PM IST
More Topics: India | Software Firms | Outsourcing | TCS | Cognizant |