More new hires and acquisitions on the horizon
Over the last month, IT Services firms have been racing each other to announce their expansion plans. Firms are ready to increase their workforces, especially in India, and have made it clear that the search is on for new acquisition targets. One of the first to announce their plans was Tata Consultancy Chief N. Chandrasekaran, who at the end of October highlighted that the firm is ready to branch out development centers in other parts of the world and generate “nonlinear” growth. Accenture soon followed with its announcement that it will add 8,000 positions in India to meet expected worldwide demand. [Update: Accenture CFO Pamela Craig most recently said the firm plans to hire 45,000 people over the current fiscal year as market conditions improve.]
Most recently, during the first three days of December, Larsen & Toubro, Infosys, Wipro, GlobalLogic and a handful of other outsourcing firms have said they are ready to bulk up and make acquisitions. Larsen’s IT unit, which lost the bid for Satyam Computer Services in April, said it is looking for an acquisition in a revenue range of $200 million to $500 million and will bring on between 800 and 1,000 new employees by March. Infosys said it plans to double its U.S. workforce and continues to eye acquisitions in Germany, France and Japan. Wipro will also increase its workforce with the addition of 5,000 new employees over the next two months, as it expects no further cuts in IT budgets by its clients. The most recent announcement came from GlobalLogic, which said it is looking to expand its sales from $100 million to $500 million by 2015, with 20% of that coming through acquisitions. It also hinted that there could be an IPO coming within the next 18 months.
Adding more fuel to the fire, one news report recently noted that although there was a steep decline in consulting spending in early 2009, the demand seems to be picking back up faster than in previous cycles. The report also said that, while Services firms should really begin to see recovery in the second half of 2010, promising signs could come as early as their upcoming quarterly results. In addition, IT Services’ equity prices ballooned throughout November, with the Updata Services Index up nearly 10 percentage points over October.
All of these expansion and acquisition plans are a good sign for the IT Services sector, which has had a slower than usual year. But these are also good signs for the IT industry as a whole, since more spending means more funds available for strategic M&A. It may still be awhile before the economy bounces back to a more normalized level, but the fact that companies are ready to for new hires and M&A are all promising steps in the right direction. [For more on IT Services, see our upcoming sector report, due out next week.]
IT Services Firms Expansion Plans