Top software services companies are acquiring smaller technology firms to expand their cloud computing business, which has emerged as one of the biggest beneficiaries of businesses having to push activities online because of Covid.
These smaller specialized firms bring in ready talent and tech capabilities that complement the existing expertise of larger companies such as Infosys Ltd, Wipro Ltd and Cognizant Technology Solutions Corp., which have seen a spike in digital revenues, especially from cloud computing.
“Acquisitions are helping IT services companies jump-start and quickly bulk up their cloud capabilities to capture market share,” said Nitin Bhatt, technology sector leader, EY India. “Building in-house capabilities would be time-consuming, and the opportunity cost would be too high. In addition, such acquisitions are helping infuse and grow the cloud DNA in areas that the legacy software companies have been lacking.”
Infosys has already made three cloud-related acquisitions this year. In March, it acquired Simplus, a leading Salesforce consulting and advisory firm in the US and Australia, for up to $250 million. Earlier this month, it acquired European cloud company GuideVision to strengthen its Cobalt portfolio, an umbrella offering for everything related to cloud, and one of its biggest organic investments in recent times. It also entered into a deal to buy digital customer experience firm Blue Acorn iCi for up to $125 million.
In August, Wipro Ltd completed the acquisition of Belgium-based 4C, one of the largest Salesforce partners in the UK, Europe, and West Asia for €68 million (₹585 crore) to strengthen its cloud business. 4C has now been consolidated as part of Wipro’s Salesforce practice, which provides solutions globally around multiple Salesforce clouds and its ecosystem of products. This month, Wipro said it will buy Eximius Design for $80 million. Eximius Design provides solutions to build connected products in cloud, internet of things, 5G and artificial intelligence (AI).
Global tech firms have also been betting on acquisitions to make their mark in the cloud space. The most significant one among them is possibly IBM Corp’s $34-billion acquisition of Red Hat last year, to further its hybrid cloud agenda.