While the debate on the US slowdown negatively impacting the Indian outsourcing industry continues, the cash rich Indian vendors are aggressively acquiring overseas companies. This is a growing trend despite cost pressures and rising inflation on the home turf. With slowdown in the US economy bringing down the valuations of BPOs, acquisitions by the Indian outsourcing vendors are gaining traction. Some of the recent acquisitions by Indian service providers are given in the table below:

Apart from these, several other BPOs have plans to acquire companies based in US and UK. HTMT for example, has set aside a huge kitty for this purpose. Genpact is also reportedly looking at acquiring BPO, technology or even IT companies within the range $50 m to $400 m.

What is driving overseas acquisitions?

In their aspiration to build global service delivery capabilities and capture a greater share in the market, Indian vendors are left with few options. On the operational front, building capabilities in multilingual services - especially in Scandinavian and Latin American market or providing services that can be outsourced but cannot be offshored are driving these acquisitions. Boosting profitability by moving up the value chain or by building specialization are compelling tactical motives, hence strengthening onshore presence has emerged as a strategic imperative behind these acquisitions.

Owing to rising costs and competition, there is an increasing pressure on higher productivity while improving quality amongst Indian delivery centers. The BPOs are focusing on building a new paradigm that can command a premium on quality rather than providing minimal acceptable quality at cheapest price. This has led to a shift in focus from merely increasing manpower to enhancing value provided to client.

A slowdown in the US economy is enabling a 'value-for money' pricing for the acquisition deals. Among all other benefits, overseas acquisitions indirectly provide the much required productivity enhancement while increasing topline. However, just because these acquisitions are cheap does not ensure that they will work. Although they are attractive bets in the short run, its how these acquisitions are transformed to create greater value for the client that will decide their success in the long run.