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
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)
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
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!
