Atos is making a bid for DXC for $10 billion, according to news reports. If Atos is successful, it will become the world’s second-largest IT service provider only behind Accenture

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For Atos, it will be a jump from the 16th position a year back. See EIIRTrend World’s Top 100 service provider ranking in 2019 based on revenue (Research Link)

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Apart from overall size, additional points to note if this acquisition happens

  • Double down on Infrastructure with revenue of about $17 billion. It will make Atos clear number two after IBM Newco with $20 Billion and in catchable distance
  • Atos had $3 Billion in revenue from North America, and DXC had around $7.6 Billion. There are some divestitures even after that combined revenue will be more than $9 Billion, making Atos a significant player.
  • Number one player in Europe with revenue of about $15 Billion. In contrast, Accenture has European revenue of about $12 Billion.
  • Engineering is one growth area, and we predicted Atos, like other Global MNCs, will make a move soon in Engineering (Link). This acquisition will give Atos access to engineering capabilities that DXC gained from the Luxoft acquisition

Why Scale? Any impact on other players?

In a mature industry, only a few players survive. We have seen this in industry after industry. The IT industry is moving from a sunrise or growth industry to a mature industry. Hence, the fight for survival will happen in the IT industry, too.

Mid-tier consolidation had been going on in regional and in services.

Among Indian Mid-tiers

  • L&T Group: Can create a nearly $3.2 billion service provider combining its group IT service firms.
  • Baring Private Equity can create an IT service provider of $3 billion revenue combining its investments

In other geographies as well, mid-tier acquisitions are going on:

  • Tieto and Evry
  • AF and Poyry

Service line-specific acquisitions are also applied, especially in the BPO industry:

  • Teleperformance and Intellinet
  • Convergys and Concentrix

There are so many mid-tier service providers between $1.1- $5 Billion. In our research of top 100 service providers, we found that there are 63 service providers with revenues between 1.1 billion dollars and 5 billion dollars, who must be looking to increase their positioning by consolidation. (Research Link)

Top 100 Global Service Providers 2019

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The big question is whether there will be consolidation among bigger service providers $5 Billion+. There are 37 such firms.

In the Indian context, will there be some sort of consolidation in the medium-term between big six TCS, Cognizant, Infosys, HCL, Wipro, and Tech M so that 3-4 large players emerge with permutations and combinations?

It’s better to be a consolidator than being consolidated!

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