Indian IT’s struggle – Acquisition overseas

Indian infotech major Infosys Technologies may be acquiring Paris-based Capgemini, one of the top five IT services and consulting companies in the world, throws up some interesting questions about why Indian software companies need to make big overseas acquisitions.

One of the reasons is that although India has a strong brand image, the individual players have not been able to differentiate themselves on the basis of their strengths.

A potential client who visits five or 10 software vendors here is very confused because they all have the same profile and the same advantages — global development centers, low cost, reliability, CMM level 5 quality, project management skills etc. So the customer doesn’t know which vendor to choose. Whether it is a TCS, Infosys or Wipro there is very little difference between them.
The acquisition of a firm such as Capgemini will correct some of this. Capgemini, because of its acquisition of Ernst & Young’s consultancy business in mid-2000, is well-known for consulting, a vertical where Infosys has been trying unsuccessfully to make a mark.

The move will also be in keeping with its intent to position itself as a premium player in the market. Its billing rates are already at a premium to its peers in the Indian market, and to maintain that Infosys needs to move up the value chain.

Today India as a brand is very well known. But Indian companies have not been able to build a brand for themselves, although some efforts are now being made in that direction. Over the last few months, there has been a flurry of brand creation and brand building activities by top five IT as well as some of the smaller firms such as Tech Mahindra and Mindtree Consulting.

In contrast to Indian firms, global giants such as IBM and Accenture have been able to position themselves as strong players in certain areas. For instance, IBM is known for outsourcing and Accenture in consulting or implementation.

However, when it comes to Indian firms they are largely positioned in the same bracket. In IT circles, the top five Indian firms and Cognizant Technology Solutions are collectively referred to as SWITCH (standing for Satyam Computer Services, Wipro, Infosys, TCS, Cognizant and HCL Technologies) or sometimes, as WITS (for the top three firms). This itself is an indicator that they have not been able to differentiate themselves — a client sees no difference between that they do.

IT services firms are poor in marketing even in the US but here, most of the branding has focused on India as a location. If I take out the logos and re-arrange the order of firms, they would all look the same. The situation is worse for tier-II vendors because they are not even known by a collective name such as SWITCH or WITS. Many firms are focused on what they do rather than what they are best at, in their brand positioning.