Despite Rupee appreciation, inflation and fear of recession in the US, the three IT Majors of India - Infy, TCS and Wipro - have reported reasonable rise in their earnings. But, the scenario in the Indian IT Outsourcing arena does not look great at this point in time.
A thought on - what a merger between the 3 IT Majors - Infy, TCS, Wipro - can do to this grim situation…
- Increased Client base and opportunity to increase billing rates: Majority of IT outsourcing deals goes to one of these companies. A merger would increase the client base, leading to a monopoly-like situation. This will make these companies free to increase billing rates, without fear of competition
- Greater talent base: Many talented managers and engineers constitute these 3 companies. A combined talent base would mean - greater efficiency in project execution and easier interchange of resources across projects/companies
- Reduced Attrition: Employees from each of these 3 companies, often move between these companies. Making them a single entity might reduce attrition, though at a smaller rate
- Efficient Usage of Infrastructure: All these 3 companies have established offices, across the world. By appropriate planning, better utilization of infrastructure can be achieved
- Amplification of each company’s strengths: Infy has a better training team and infrastructure. TCS has a huge talented workforce and operations spanning many countries. Wipro, in the same way has its own strengths. By merging these entities, an amplification of each company’s strength, can be used towards the betterment of others
Though it is very unlikely to happen, I presume a merger would improve things on a longer run.
3 responses so far ↓
theshowstopper // April 30, 2008 at 5:27 pm
Hi Ashwin,
Just bumped into your blog. I was reading this post on Mergers and here is my two cents
1) All the three companies together has about 2.5 lakhs employee….that’s a major chunck ! ?
2) You were talking about Greater Talent Base, Even though it will bring in all the talent together….how are they going to expand that talent, think of a learning solutions for about 2.5 lks employees…
but yes, as you say it will be unlikely for a merger at such a large scale but even if they merger do you think the present outsourcing scenario will change ??
vc
ashwinc // April 30, 2008 at 6:05 pm
Hi VC,
Thanks for visiting my blog and posting your comment.
Points 1 and 2
Indeed true - that will create a huge talent base of about 2.5 lakh employees. But a company like IBM with over 3 lakh employees, is still able to manage and nurture their talent pool. I believe, though difficult, the talent base is manageable. Already the development path is well defined in each of these organizations; appropriate planning should make this extrapolation possible.
But as it is said, 1+1 is not always 2, as the corporate world is concerned. It can happen that the huge entity sinks down, merely due to size. But i could think of more positives than negatives.
I am not very sure, whether this will bring a change in the present outsourcing scenario. But it will really be a big force to deal with for other giants like - IBM, EDS, Accenture! It looks good from the business perspective, doesn’t it?
Vinod Chandramouli // April 30, 2008 at 6:40 pm
>> But it will really be a big force to deal with for other giants like - IBM, EDS, Accenture!
without being a big force(i meant the merger), it think all the three companies in question are already dealing with other giants individually.
Your perspective of merger is good and yes you are being an optimist…but does India need a merger as large as this at this time ?
vc
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