A man walks past a logo of Tata Consultancy Services (TCS)
Credit: Reuters Photo
Bengaluru: In the last few weeks alone, IT services firms have announced many acquisitions aimed at expanding their ongoing Artificial Intelligence (AI) strategy. The country’s largest IT services firm, Tata Consultancy Services (TCS) and third-largest company HCLTech have collectively spent over Rs 9,500 crore for acquisitions alone in the last two weeks.
Through these acquisitions, companies aim to broaden their product offerings, especially in specialised technologies. These firms can accelerate innovation through acquisitions and can also increase customer engagement. HCLTech has spent over Rs 3,550 crore in just one week to buy three companies. On December 18, the company announced that it will acquire Hewlett Packard Enterprise’s (HPE’s) Telco Solutions business for over Rs 1,400 crore. Again, on December 22, the company announced that its software business division will acquire Belgium-based agentic AI software Wobby (approximately Rs 47 crore) and Jaspersoft, a business unit of Cloud Software Group and provider of a leading embedded analytics and pixel-perfect reporting platform for $240 million (about Rs 2,130 crore).
On December 10, TCS announced the acquisition of a US Salesforce consulting firm, Coastal Cloud, for an all-cash consideration of $700 million (around Rs 6,300 crore). Earlier in October, the company acquired US-based ListEngage for about Rs 640 crore.
After 40 years of industry expansion, the tech services industry has now matured, Everest Group Founder and Executive Chairman Peter Bendor-Samuel told DH. For the last two years, growth has been effectively flat. On top of this, we now expect the industry to go through a period of contraction as code generation compresses the revenue in the SDLC (software development lifecycle). AI is also driving tech services firms to invest in software offerings, he said.
“Given these challenges, we expect a period of industry consolidation through acquisitions, and we also expect the large tech services firms to be looking to move into adjacent industry sectors, also through acquisitions. Hence, these moves are not surprising as HCL, Accenture and IBM have a long history of moving into adjacent sectors through acquisitions. In all the above instances, these firms’ commitment to be leaders in the new AI-based economy underpins their motivations to make these acquisitions,” Peter Bendor-Samuel added.
Apart from these two companies, in the first week of December, Wipro announced that its acquisition of the Digital Transformation Solutions (DTS) business unit of HARMAN, a Samsung company, had been completed. The company acquired it for about Rs 3,272 crore ($375 million).
In August this year, Infosys announced that it will pick up a 75 per cent stake in Versent Group, a wholly-owned unit of Australia’s Telstra Group, for over Rs 1,300 crore.
Apart from these Indian IT services firms, companies such as ServiceNow, IBM and Accenture are also on an acquisition spree. Recently, ServiceNow said it will acquire Armis for $7.75 billion in cash. Armis is in the cyber exposure management and cyber-physical security business. In the November quarter, Accenture invested $374 million primarily in six strategic acquisitions. IBM has been acquiring companies, and recently, it announced the acquisition of data streaming platform Confluent for $11 billion. Analysts observed that this will significantly boost its competitiveness in the enterprise AI ecosystem.
During the September quarter earnings conference, TCS CEO K Krithivasan said the company has stepped up its efforts in pursuing acquisitions to enhance its capabilities, including high-end services, intellectual property, and market presence. He added that they are actively looking at more opportunities for acquisitions.
Acquisitions will help companies expand their reach across geographies and help in new technology acquisitions. In the coming days, these companies will bet on acquisitions due to the rising demand for new AI tools.