Dell Perot deal, A lost opportunity for Indian firms
San Francisco: Computer maker Dell is to buy technology services company Perot Systems for $3.9 billion in a bid to gain a foothold in the lucrative sector of information technology consulting, which could be a huge threat to the IT firms in India.
The acquisition will likely affect plans of Indian IT services firms such as Tata Consultancy Services (TCS), Infosys and Wipro. These companies have suffered from a decline in business from banks and finance companies, and some of them were looking to tap emerging opportunities in the U.S. healthcare and government sectors. Perot is strong in both areas, and its acquisition by Dell gives it the kind of heft that swings such deals, say analysts.
"The top three Indian IT vendors (TCS, Wipro, Infosys) currently get very little revenue from government and healthcare, excluding pharma. So, they will have to contend with another strong player when they want to increase revenues from those verticals," said Sabyasachi Satpathy, Director, Mindplex Consulting, a consulting and outsourcing advisory firm for the IT industry. The Dell-Perot combine could also be a force to reckon with in the Indian market, especially in system integration deals, Satpathy added.
Perot provides consulting and technology services to more than 1,000 enterprises, with some 50 percent of its revenues derived from the healthcare industry and another 25 percent from the government. Of the 8,000 Perot employees in India, around 40 percent are in businesses such as consulting and application services; the rest offer back-office services.
Perot Systems employs over 23,000 people globally. In India, it has different facilities in Noida, Bangalore, Chennai, Coimbatore and Hyderabad. Perot's global consulting and application services business is headquartered in Bangalore. The company focuses on verticals like healthcare, telecom, manufacturing, government, BFSI, logistics, engineering services and business process outsourcing. Dell has 12,000 of its 78,900 employees in India, in four divisions, BPO, R&D, domestic sales and manufacturing.
Dell has been actively working to build its services capability internationally in recent years to compete with its rivals Hewlett Packard (HP)and IBM, which dominate the services space. Analysts say the deal is indicative of the changing market landscape and the way deals are happening especially in the large enterprise space. Dell, so far, has not been in the reckoning for services and has been lagging behind in the space. "We will leverage Perot's services capability across Dell's customer base," said Dell. "This acquisition makes great sense."
This buyout makes sense as huge growth is expected in services industry and even hardware deals are led by services. "It is an attempt by Dell to catch up with the services story. But the integration is going to be challenging, as Dell itself is on an internal restructuring exercise globally. If the company wants to create a real impact in the services market, it has to move quickly," says Kapil Dev Singh, Country Manager, IDC India.
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