IT firms Wipro, HCL look beyond software development for outsourcing. Source-The Economic Times

When Thanga Thambi, a pastry chef, was offered a job by India’s third biggest software exporter last year, a role at the company’s cafeteria appeared likely. “What can I do for an outsourcing company- what is the connection?” Thambi wondered.

Thambi’s role involved baking cookies, but not for Wipro’s cafeteria. Wipro was looking to hire an expert chef for designing a microwave oven for a durables manufacturer in the US. “I never thought there could be any connection between what I knew and what a company like Wipro does. But I realised that my experience with ovens was what they’re looking for,” says Thambi.

As India’s growing outsourcing firms look beyond traditional software development and maintenance business, specialised projects that range from tracking heart beats of patients, to designing the next generation of consumer products, and even developing marketing campaigns and collaterals for US automakers, mark the beginning of a shift.

Last year, NS Bala, the head of Wipro’s $750-million manufacturing business unit was looking to start a new project for a customer. The customer, a consumer products firm wanted to build a high end micro wave oven that would meet the twin objectives of maintaining taste and speed of cooking. Most products baked in a microwave lose some taste, a concern the company wanted to address in its newer products. “Thambi’s job for the next few months involved monitoring the colour, texture and taste of cookies and cakes and give feedback to the company to fine tune the product,” Bala says.

At Aditya Birla Minacs, a company traditionally known as a low-cost BPO service provider, a team of 400 advertising and marketing professionals is helping carmakers like Honda and Hyundai US sell more vehicles. Over a year ago, Minacs helped Honda sell 33,000 more vehicles and generate an incremental profit of $ 295 million in a year.

The team makes creatives, strategy and promotions for the automak-ers. They even generate sales leads, run marketing campaigns and manage incentive programmes.

“About 25 % of our revenue comes from IT enabled BPO services such as the marketing project we do for automakers. There is an 8-10% difference in margins over the traditional BPO services. But here, we have to invest on the platform and talent.” “In three years, we want IT enabled BPO services to contribute to 50% of our revenues,” said Deepak Patel, chief executive officer for Aditya Birla Minacs.

In another instance, a group of nurses have been monitoring the heart beats of hundreds of American patients. The customer, a medical equipment maker, is testing a cardiac monitoring device through which a patient’s heartbeat is monitored thousands of miles away in Bangalore. The patient or a healthcare provider is alerted if an aberration is noticed. As proof of the greater role technology plays in daily life Wipro’s head of the medical devices division, Jyotirmay Datta, cites the example of how one these nurses saved the life of an old patient whose heart beat she was monitoring a year back.

“The nurse noticed that that the patient had not been moving at all for a few hours and realized that something was amiss as it would be the middle to the day in the US, a time when the patient would normally be active. The nurse alerted the local paramedic who in turn alerted the patient’s family member. On arriving home, the family found that the patient, an old lady, had fallen in the house and fainted,” Datta recalls.

Advertisements

Mid-tier Indian enterprises who have acquired companies overseas in past 2 years. Source – The Economic Times

The big guns hog the limelight. But it is the smaller ones who are going for it with a vengeance. According to accountancy firm Grant Thornton, Indian companies announced more than 80 cross-border merger and acquisition (M&A) deals in the past two years.

By volume, a majority of them are by mid-tier companies. “In the past two-three years, we have seen a jump in global M&As among companies in the `40-100 crore band,” says Srividya CG, partner, national leader (valuation), Grant Thornton India.

Their deal sizes are small, normally averaging around $5-6 million. Sometimes the target is as big as the acquirer in terms of revenues. But because they are based in India, an emerging market with a far higher revenue upside, Indian firms get better valuations than their overseas counterparts.

Three big factors are driving these deals. Most want to grow their footprint. “SMEs are at a disadvantage while selling overseas. A local presence gives them a big edge,” says Srividya. Acquisitions help smaller companies build marketing muscle and get closer to their customers. Many are looking to acquire niche or critical technology. And some are looking to expand their basket of services.

The biggest hurdle faced by them is to convince the entrepreneur at the helm of the target company to sell out. Often, he stays on with some stake. Since people and technology hold the key, staff and structural changes are kept to the minimal.

Most of these M&As are in export-oriented sectors like KPO, BPO, IT, pharma, FMCG etc. Not surprisingly, many of the targets are located in the US. Most of these companies, both acquirer and acquired, are unlisted and headed by hard-nosed entrepreneurs.

Often, the acquirer and the acquired have had some kind of a relationship, making the due diligence process easier and transparent. While some do seek help from investment bankers, most prefer to do it by themselves, selectively reaching out to specialists.

ET on Sunday speaks to the bosses of a cross section of mid-tier Indian enterprises, who have acquired companies overseas in the past two years, to understand the phenomenon.