IBM to Buy Outsourcing Firm
IBM Corp. announced Wednesday that it was buying computer services provider Daksh in one of the biggest acquisitions of an Indian outsourcing firm by a U.S. company.
The purchase highlights India’s ascendancy in providing the types of technology services once reserved for college-educated, white-collar workers in North America and Europe.
Neither company would divulge financial details, but sources and analysts valued the deal at close to $200 million.
“India is one of the fastest-growing economies in the world and an important marketplace for IBM,” said Abraham Thomas, general manager of IBM India.
IBM, which employs 9,000 in India, said the purchase would enhance its presence in the region and provide instant ties to local vendors and businesses. Two weeks ago, IBM reached a 10-year, $700-million deal to manage the computer infrastructure of Bharti Tele-Ventures Ltd., an Indian telecommunications company.
“Sixty percent of IBM’s revenues are global,” said John B. Jones, analyst with SoundView Technology Corp. in San Francisco. “This will give them leverage in that part of the world, whether it’s a set of relationships or a skill set or a technology.”
Founded four years ago, Daksh has 6,000 workers who provide call-center and back-office support to Fortune 500 companies in the U.S. and Britain, said Vibha Dutta, a spokeswoman for the Gurgaon, India-based firm. She declined to name clients, citing “strict confidentiality.”
The privately held company posted sales of $60 million in its fiscal year ended in March, double its 2003 revenue of $29.5 million, according to its website.
“Services have become a key part of what IBM does,” said Uday Karmarkar, a professor at the UCLA Anderson School of Management. “This isn’t a commodity; it’s an important customer-facing service. So IBM has decided it wants that capacity in-house.”
With a surfeit of English-speaking computer science graduates who on average make one-sixth the wage of their Western counterparts, India has become a favorite destination for technology firms looking to send work abroad. But the move is likely to fuel further political debate on the moving of high-wage jobs from the U.S. to India and other low-cost countries.
“The business impact of this deal is minimal to IBM,” said Richard Petersen, analyst with Pacific Crest Securities in Portland, Ore. “But it’s getting a lot of play because ‘offshoring’ has become such a hot-button issue in an election year.”
IBM shares fell 62 cents to $93.08 on the New York Stock Exchange.
