Wednesday, October 19, 2005

TCS acquires Pearl

One of the big business stories of today is the TCS 12 year contract with Pearl group UK.

What exactly does Pearl do? Heres some insight from the Pearl group website.

...In the UK, there are almost 70 "closed" life funds where new customers cannot make investments. The value of these funds is more than £190 billion, which amounts to approximately one fifth of the long term insurance sector.

We have identified that the existing customers of these funds have three main concerns - financial security, long term investment returns and service standards. We intend to be closely focused on these concerns, and establish ourselves as a dedicated investor in closed funds.

Excerpts from Financial Express:

...India’s largest software exporter Tata Consultancy Services Ltd (TCS) on Tuesday bagged the country’s biggest ever outsourcing deal with the $848 million (£486 million), 12-year contract from UK’s insurance and pensions major Pearl Group Limited to provide non-voice processing of life insurance and pension policies.

TCS will also emerge as UK’s second largest BPO in the life and pensions services space after the deal.

TCS has cumulatively bagged $1.5 billion worth deals till date this year.

This is also the largest manpower transfer deal done by any Indian BPO company.

The subsidiary will be free to take on non-Pearl insurance business as well.

By 2007, Indian insurance outsourcing market was projected to grow to $790 million. But this deal changes those calculations completely. Also, according to a recent Gartner report, only six BPO players — Accenture, Fiserv, TAG, CSC, EDS and IBM — had attained the maturity to handle large deals in life insurance. No Indian company figured in the list. But this deal may force a relook at such projections....

What is the bet that TCS will convert this into a full fledged service provider of pension administration et al? Very high, if you ask me.

For TCS this is not a new thing having acquired a Swissair BPO sometime back. It looks like they have gained from this experience and decided that the way to go forward is acquisitions of these types. To me too, this looks like a good way to grow considering what Indias IT service providers are up against.

From a recent Businessworld issue:

...The biggest of the Indian majors, TCS clocked revenues of US$2.24 billion last year. No.2 Infosys had revenues of US$1.59 billion. On the other hand, Accenture had revenues of US$13.7 billion, and EDS US$20.7 billion.

If Infosys continued to grow at the 30 percent it did last year, and Accenture's revenues remained static, it would still take India's most admired company seven years to catch up. But Accenture is not standing still. It has grown at 11 percent this quarter, though the previous year's growth had been almost flat. ...

In the quest for higher revenues, Indias IT service providers have to acquire and grow if they have to reach anywhere near the size of the biggies. This deal is one of the many, I envisage in the near future. I wont be suprised if we see many more such acquisitions.

There are many service providers that do payroll administration, pension administration and the like all over world. A buy in this space gives a company (like Infosys-Progeon, Wipro-Spectramind etc) that has presence in both IT and BPO a foothold to a larger set of clients apart from arming them with some solid credentials for future bigger deals.

Its good to see Indian industry expand its footprint beyond our borders!

Similar posts tracing other acquisitions, here, here and here.

Update: TCS has acquired Sydney based FNS for USD 26 mio. According to Reuters

... The acquisition would help add 115 banks spread over 35 countries as new clients, TCS said in a statement. FNS's clients are mostly Tier I and Tier II companies in the emerging markets of Europe, Asia, Australia and Africa, it said..

TCS is a company which IMHO has been a first mover right since its early days in the Indian IT industry. They were among the first to explore the European, Japanese and Chinese markets and it looks like they are leading in the way in acquiring companies too!

1 comment:

joshua said...

Hi Nice Blog.A Document Scanning Services and Document Imaging Services provider focused on value pricing and quality deliverables with quick project turnarounds, utilizing dDSpeedScan© to provide best-practice project deliverables.document scanning