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Big Cognizant strike may spur M&A [India Business] [Times of India](Times of India Via Acquire Media NewsEdge) BANGALORE: The $2.7 billion Trizetto acquisition from Cognizant Technology Solutions has upped the ante for offshore-centric IT players in the global M&A sweepstakes. The deal would pile up pressure on rivals like Infosys Ltd and Wipro Technologies Ltd - struggling to reboot growth - to shift gears in their inorganic plans. Analysts said Cognizant's latest ammo also suggested that original outsourcers are turning the heat on MNC rivals like IBM and Accenture where it hurts them the most. Trizetto buyout is being touted as a truly transformation deal in a large IT/BPO vertical like healthcare which MNCs dominated. "Cognizant is the new Big Blue. With more than $3 billion in combined healthcare revenue post the acquisition, it positions Cognizant in a different league compared to its other Indian peers like Infosys or TCS," said Abhishek Singh, practice director-healthcare in IT and research advisory firm Everest Group. Tata Consultancy Services (TCS) Ltd, Infosys, Wipro and HCL Technologies Ltd talked up M&A plans in recent years but have shied away from striking anything big. Trizetto could change the narrative and prompt players like Infosys, sitting on over $5 billion in cash, to chase big buyout deals. "This is a push towards leveraging non-linearity and Cognizant has moved the goalposts in the pharma and healthcare space. It's a wake call for other Indian IT players and its leadership to gear up to a challenge from not only TCS, but also Cognizant," said Amit Singh, executive director (technology & outsourcing) in Avendus Capital. US-based HfS Research said big M&A deals in outsourcing industry was aimed at expanding client relationships and capabilities which has be grown and expanded. "Acquisition decisions must do more than add capability or increase economies of scale. This is the most significant and sizable acquisition yet by an Indian major service provider and paves the way for how we expect future services growth to take shape," said Phil Fersht, CEO, HfS Research. In recent months, Indian IT has looked at investment deals or early stage buyouts in niches reshaping clients' businesses such as mobility, cloud, analytics and internet of things -- the new frontiers in the digital landscape. With former SAP honcho Vishal Sikka at the helm, Infosys is scouting for acquisition opportunities that gives an edge over competitors as traditional IT services like application development and maintenance is increasingly getting commoditized. But Cognizant has put the focus back on the big M&A in large business verticals like healthcare IT and BPO, where Accenture is at the forefront. "Cognizant wants to provide complete BPaaS (business process as a service) for healthcare clients," Fersht said. The global healthcare IT services market is estimated at $28-30 billion and is expected to double to $56-60 billion by 2020. (c) 2014 Bennett, Coleman & Company Limited |