Capgemini buys iGate for $4.04 billion

Bengaluru: India’s technology outsourcing giants such as TCS and Infosys, already facing multiple tailwinds in a time of rapid technological change, are set to face one more threat. Their French rival Capgemini, hitherto weak in the Indian companies’ biggest hunting ground, America, has made a determined push into that market by buying mid-sized player iGate Corp. for $4.04 billion.

iGate has two important attributes for traditionally Euro-centric Capgemini: it is US-headquartered and draws most of its $1.3 billion revenue from that market, and has a majority of its workforce in India. Those attributes will help Capgemini make North America its biggest market.  

With iGate in its kitty, Capgemini’s total revenues will be of the order of some $13.6 billion and over 190,000 people – with iGate bringing over 33,000 people – way ahead of Bengaluru’s outsourcing giant Infosys by the first measure ($8.71 billion in revenues), but behind India’s big daddy of outsourcing, TCS ($15.2 billion), and slightly ahead of Infosys on headcount (176,187) but way behind TCS (313,757) on that measure.

But IT outsourcing analysts seemed skeptical of the deal. “Most of the leading service providers today are looking at niche buys that specifically add software IP or a vertical capability, such as Cognizant/Trizetto, or Infosys/Panaya. However, in Capgemini's case, there are still some significant holes in its portfolio to fill out, most notably a more powerful presence in India, a stronger portfolio of US enterprise clients, and a deeper foothold in financial services. iGate brings these to the table,” Phil Fersht, CEO of HfS Research, blogged.