TCS takes M&A route to make it to $50 bn club
IT major’s new acquisitions indicate aggressive strategic shifts for winning large deals
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Bengaluru: India’s largest IT firm, TCS’ aggressive acquisition moves slowly reveals the Tata Group company’s new playbook in the AI era.
Industry experts are of the opinion that TCS is pursuing capacity building strategies through acquisitions that can enable the Tata Group company to win large digital transformation deals.
Given the scale of TCS, the company needs to follow different approach to take it to the $50 billion club from present $30-billion. Through M&A route, TCS is slowly pursuing the approach, they said.
“TCS is changing the gear. That is the reason that a new Chief Strategy Officer was brought in for M&A and new business initiatives. For 10 years, the company didn’t do any acquisitions and in last three months, the company has done two acquisitions. Apart from it, the company has announced large data centre investment. These indicate that the company is following strategies that can take it to the next level- from $30 billion to $50 billion revenue,” Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting told the Bizz Buzz.
On Wednesday, TCS announced that it would acquire 100 per cent stake in Coastal Cloud, a leading Salesforce consulting firm, for $700 million. This was the biggest ever acquisition of the company since inception. Costal Cloud offers artificial intelligence (AI)-led advisory and business consulting services and is likely to help TCS to win more deals in mid-market space.
In October, the company announced acquisition of US-based ListEngage, which is also a leading Salesforce consulting firm. These two acquisitions in the Salesforce space shows TCS’ quest to plug in its capabilities in the Salesforce consulting domain.
“One of the reasons may be that Salesforce has a repository of customers’ data and if any company wants to win the digital transformation deals, it needs strong Salesforce capabilities. In that way, TCS may be looking at large deals wherein customer side is the priority. These acquisitions will definitely help them,” Jain added.
TCS’ move to partner with global PE firm, TPG for its data centre business ‘HyperVault’ is seen as another initiative for diversifying its revenue sources.
Last month, TCS announced that TPG would invest close to Rs 8,820 crore (around $1 billion) in company’s data centre initiative over the next three years.
“In a way, TCS is laying down a playbook for other players on how to boost revenue as AI poses risks to traditional revenue lines. If successful, many more likely to follow TCS’ path,” said another source.
