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Gurgaon News - 2004

IBM in $170m Indian call centre deal

Financial Times : IBM in $170m Indian call centre deal to acquire Daksh e-Services, the third biggest call centre in India, for $160m-$170m, in a deal that sector analysts said could strengthen corporate America's commitment to outsourcing offshore.

The acquisition is the biggest deal of its kind in India's youthful technology services industry and comes as the controversy over outsourcing has become a key topic in the US election.

Analysts said the initiative could trigger copycat mergers as overseas technology companies seek to acquire a low-cost service base in India.

"This shows that American companies and the world at large is [still] serious about outsourcing and India," said one of the private equity funds that is quitting Daksh after IBM's 100 per cent acquisition.

India's business process outsourcing sector has been growing by 55 per cent per year or more in the past three years and revenues in the fiscal year ending last month are set to touch about $3.6bn. Zenta - which is among India's top 15 outsourcing groups - said this week it would add 1,000 staff in Mumbai to meet rising demand from US customers.

IBM's move also comes 12 days after it was awarded a $750m 10-year outsourcing contract to manage the technology needs of Bharti Tele-Ventures, the big Indian telecoms group.

"These [two deals] will frighten competitors because they show IBM's commitment to India as a market [via the Bharti deal] and a place from which to deliver services [via IBM's captive centres and Daksh]," said Supratim Basu, technology analyst at ICICI Securities in Mumbai. IBM has been a leader in outsourcing, notably to India where it employs 9,000 technology professionals on tasks such as systems integration.

The company's latest moves indicate a desire to step up its presence in a market where abundant IT skills and low costs are drawing other global technology and IT consultancy companies. Accenture employs more than 4,000 people in India on jobs such as managing procurement.

Privately-owned Daksh employs 6,000 people at call centres across India to manage services such as customer care, telemarketing and transaction processing. Daksh's revenues broke through the $60m level last year.

Analysts said the deal gave IBM the capability and local management expertise to run Business Process Outsourcing - part of Big Blue's growth strategy.

The acquisition will add India and the Philippines, where Daksh recently opened a call centre, to IBM's global services network of 22 "business transformation delivery centres".

IBM was advised by Citigroup.