Sunday, August 21, 2005

Indian firms grow abroad

Indian IT (and other) companies are spreading their footprint all over the world. Indian IT is a major reason for India to move in the eyes of the world from a land of serpents and saints to a land of mice and techie gurus.

Indian IT first made their mark thanks to the Y2K problem. With their lean army of techies (really it is a battalion, since the biggies IBM, EDS have more people) they gained a foothold in the doors of the Fortune 500. From Y2K, they spent a longish time as bodyshoppers (sending people from India to the US to work as contractors and little else). Then someone (some of them actually) tried to take up projects, work on a 24 hour model taking advantage of the perfect 12 hour time gap of India and the US and built first a company, then an industry and then a whole strategy on it. What started off as maintenance projects slowly became small development projects which enlarged into bigger development projects and went into end to end projects.

All this helped them grow upto a certain point. As they developed a footprint, it was important to acquire local capabilities to move to the next level. Many of the biggies have offices all over the world and local people lead them in most of the overseas offices, but a quick way to jumpstart brand recall is to acquire a local company with local workforce and local knowledge.

Infosys acquired Expert systems in Australia. Expert systems is almost an "Infosys" in Australia, in terms of the work they did. Infosys created its own high profile consulting wing in the US by a slightly unconventional route.Wipro Technologies acquired Nervewire, a fairly high end consulting firm in the Financial services space. Cognizant Tech acquired Aces International, Infopulse, Fathom and Ygyan as part of their strategy. In fact i-flex a product major in India, also acquired a company known as Super Solutions until being taken over by Oracle recently.

The strategy of local presence for growth has been replicated in other, non tech, sectors too like Bharat Forge (in forgings), VSNL and Reliance Infocomm in telecom, Reliance Industries in polyester, Tata Motors in Trucks and so on. The latest being INCATs acquisition by Tata Technologies ltd. The reasons for these acquisitions are various. In the telecom sector it is for cheap bandwidth, in polyester and forgings for scale and proximity to market.Apart from a foothold in these respective markets, it also helps these firms gain a sizeable set of customers to whom they can sell their entire panoply of offering.

So, is this a better to grow or is the Chinese strategy of picking big brands a better idea?

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