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13th September 05
‘We are looking at organic growth’
INDIAN IT companies are on the threshold of becoming global giants as they are in the best position to leverage their inherent strengths of high quality intellectual horsepower and exceptionally good execution capabilities says Ashank Desai, Chairman of NASSCOM, in an interview with Arun Kumar, Desai pointed out that there was an urgent need for Indian IT companies to move up the value chain to compete with other countries Excerpts:
In the recent past, we have seen a majority of Indian IT companies looking for acquisitions, but nothing substantial seems to have happened barring a few cases of small acquisitions. Going forward do you think that these companies will manage to break the barrier?
Yes, I agree that Indian companies have not been able to make global acquisitions. But there is a reason for this and maybe the time has come for them to overcome such road blocks. Despite the availability of a good amount of cash and even other acquisition currency, the biggest hindrance for such acquisitions is the cultural marriage and acceptability of Indian companies in the global space by the workers. The comfort level of the people in the Europe and the US is not high, which in turn creates apprehension of losing people and consequently the business post acquisition.
But the situation has changed in the last couple of years. Many Indian companies have employed locals in these countries, which in turn helps in removing apprehensions. Further, Indian companies have now achieved global size in terms of number of people employed. There are more than a dozen companies in India, which employ over 2,500 people. Even in case of turnover, there are quite a good number of companies that are comparable with their global peers.
All these factors will help Indian companies to consolidate their position in the global market both through the organic and inorganic route. As acceptability of Indian companies has increased tremendously, I strongly believe that Indian companies will adopt the inorganic route to accelerate their growth.
But, In which areas?
The important thing for Indian companies is to move up in the value chain. Yes, they can continue the way they are, but then sooner than later, they will face pricing pressure from all these emerging countries such as China, CIS or Latin America. The low end of the business in areas of services is being commoditised. The biggest benefit for Indian companies is the high quality of workforce and domain knowledge.
Do you think that in the domestic market, the Indian IT sector will see a consolidation drive?
Consolidation is a part of the evolution process. Although in the past we have not witnessed such activities at a large scale in comparison to the US because of the Indian mindset.
Is Mastek also looking for acquisitions?
As a company we are always open to all opportunities. But it is not our top priority. Currently we are looking at organic growth. Secondly, we have also adopted the joint venture route for growth. We have formed two JVs. The company has formed a 50:50 JV with the Deloitte Consulting.
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