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French Connection

By buying Kanbay, Capgemini beefs up its offshore play.

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Current News

T.V. Mahalingam

It's a poster for globalistion and the growing importance of India in global outsourcing. When Paris-based it consultancy Capgemini announced that it was buying American technology services group Kanbay International for $1.25 billion, industry experts knew the driver for the deal was located in another continent, in India. In one stroke, Capgemini has become India's third largest it MNC employer (excluding BPO headcount) by taking over 5,000 Kanbay employees in India. Only IBM with 20,000 employees and Accenture with 12,500 employees are ahead of Capgemini, which will have 12,000 employees by the end of the year. The Kanbay acquisition has also helped the French major leapfrog over EDs, which after its MphasiS acquisition has 9,000 it services employees.

What's more interesting is that in terms of percentage of total employees, Capgemini will rule the pack with nearly 16 per cent of its global workforce in India, ahead of IBM (11 per cent), Accenture (11 per cent) and EDs (8 per cent). "With this acquisition, Capgemini India becomes the second largest entity within the company. Only France with 18,000 employees is ahead. By 2010, we will have a reach of 35,000 employees in India, making us the largest entity in the company," says Baru Rao, CEO, Capgemini India. However, it must be said that the us giants are much larger on a global scale, with Accenture having a total workforce of 1.4 lakh all over the world, and EDs a little over 1.17 lakh.

But the Capgemini-Kanbay deal isn't just about headcounts. "First, financial services and the us markets are two areas where Capgemini needs to develop its project services and application management. Kanbay has a presence in both these areas. Secondly, Capgemini becomes a significant player in India and pulls well ahead of its European peers in offshore provision," says Douglas Hayward, Senior Analyst at it advisory firm Ovum. In addition, Capgemini also ropes in two key clients, HSBC and Morgan Stanley, from whom Kanbay earned 34 per cent and 11.6 per cent of its revenues, respectively, in 2005.

This deal is also a landmark of sorts for the Indian outsourcing industry. "This is the first case of a European major in the it consulting and outsourcing space making a large acquisition of a firm with a significant India presence," says Ravi Shankar, Director, UBS Securities, which was the advisor to Kanbay for the deal. Industry experts contend that even though there is a lot of interest from Europe, ac...

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