Should Infosys buy CapGemini?
It is being rumored that Infosys may buy CapGemini. Although CapGemini has a total Sales of USD 10.35 billion and Infosys sales are USD 3.1 billion, but its profits and market value are half that of the Indian company.
Some say it is too big a fish to swallow, while the past experience of Indian acquisitions show that it may be brought about. One thing that most Indian companies are not losing sight of is that this is a time when they command fantastic Market Capitalizations, despite lower sales. These times may not last long! The sooner they acquire some big fish and become a global player, the better it will be for them!
That is the reason that most Indian companies have taken their Market Cap cheques to the bank!
It has been my considered opinion in the past few months, that Infosys NEEDS to acquire someone BIG, if it has to survive against IBM and Accenture! Not just globally but even in India itself. Both these global companies are after the Global delivery model like crazy.. and they have the wherewithal to completely mess up the plans of the Indian Big three. So, the Indian 3 need to build a comparable consulting practice FASTER than these two US giants can build their off-shoring practice. Because once IBM & Accenture have a comparable global delivery model to Infosys, they will start the squeeze. They will use their financial strength to cut costs in deals for global off-shoring.. thus forcing Infosys, TCS and WIPRO to cut costs. That is when the legendary margins of Infy and WIPRO of >25 will be in danger. And once the margins get affected the Market Cap will come down. That is the day which these 3 Indian companies have to guard against!!
I hope, therefore, that Infy is buying CapGemini, as the reports say! For, that would mean another chapter in the global productivity improvements and IT consulting wars!
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