Wednesday, September 15, 2010

Cognizant Close to Buying Genpact

According our industry sources, Cognizant Technology Solutions, the New Jersey-headquartered IT-services company, has been carrying out due diligence at the IT-services company, Genpact, for acquisition of a controlling holding. The due diligence has been going on for about a month.

In 2009, Genpact's revenue was $1.12 billion and net income $127 million. Genpact’s investors could be seeking a premium of 30% over the company’s market value of about $3.5 billion according to yesteday's market close.

Consolidation among back offfice outsourcers is inevitable as we have witnessesd it in the Human Resources Outsourcing (HRO) sector. Xerox bought ACS,HP bought EDS, Hewitt and Aon got merged....Cognizant has been transforming itself from a pure offhsore labor arbitrage player into a full service outsourcing services provider.  However, Cognizant along with all Indian offshore outsourcers will have tough days ahead trying to compete with IBM, HP, Accenture and Xerox/ACS that have substantial R&D and technology assests and IP that can be applied to digitization and automation of most customer pain points that Indian outfits have long addressed by labor arbitrage.

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