Author: Yugal Joshi

Cloud Wars: the Demise of Simplicity and Standardization | Gaining Altitude in the Cloud

In its comparatively short yet highly significant lifetime, the cloud industry has quickly devolved into a confusing morass of technology jingoism, marketing hype, aggression, and even negative allegations. Though the SaaS world is reasonably understood, it’s the infrastructure cloud that is creating an enterprise cloud war. Just think about the flurry of announcements and assertions about the big boys of technology taking sides with various cloud platforms or hypervisors:

  • Rackspace announced that OpenStack will be its cloud platform for public infrastructure service
  • Terremark introduced its private cloud offering built on VMware’s hypervisor
  • Sungard and CSC are using the vBlock architecture (based on VMware) for their cloud offerings
  • Savvis has chosen VMware for its Symphony Dedicated cloud
  • IBM is investing in a KVM-based public cloud offering
  • Amazon Web Services are based on proprietary implementation of open source Xen
  • GoGrid prefers the Xen hypervisor
  • HP proclaimed support for KVM/OpenStack for public cloud services
  • OpenStack announced large technology providers such as IBM, Yahoo, HP, AT&T, Dell, Cisco, and Canonical becoming platinum and gold members of OpenStack Foundation. Citrix, a supporter of OpenStack until a few weeks back, bemoaned that it is “tired” of the speed of evolution of OpenStack, and thus gave its CloudStack platform to the Apache Software Foundation. Though market watchers may say that Citrix made the move because OpenStack was perceived as being inclined towards the open source KVM hypervisor rather than Citrix’s  XenServer (a commercial hypervisor by Citrix based on open source Xen)
  • Amazon partnered with Eucalyptus, another open source cloud platform, for hybrid cloud computing thus giving Eucalyptus a big boost as a cloud platform
  • VMware claims there are over 100 providers across 24 countries that offer cloud services based on its technologies. Large enterprise technology providers have partnered with VMware for various cloud offerings
  • Similar providers (e.g., Dell, Fujitsu, Hitachi, Hewlett-Packard, IBM, and NEC ) earlier also signed the Microsoft Hyper-V Cloud Fast Track Program to offer private cloud

Therefore, as happens in enterprise IT, large providers are partnering with all the known players to offer services across different markets, technologies, and customer type. It is evident that the large enterprise providers are choosing commercial platforms for private cloud and open source for public cloud offerings. Unfortunately, this whole muddle of messages have left buyers in an increasingly dense smoke cloud of confusion regarding vendor lock-in, maturity of technologies, reliable support for platforms, services around cloud, etc.

Granted, the implementation architecture of these cloud platforms/hypervisors are in some respects similar, yet the way they handle files, storage, virtual LANs, etc., have sometimes subtle and other times very evident differences.  Customers need different tools and resources to manage these myriad of platforms, hypervisors, and technologies.

However, the premise of cloud was based on standardization and simplicity, wherein customers were simply supposed to self-provision their infrastructure needs irrespective of the underlying platform, and manage it with minimal effort. But the ecosystem doesn’t seem to be evolving in that manner. Rather, it appears to be becoming more confusing and a personal dual between technologists and supremacy of technology than an attempt to improve enterprise IT delivery. Indeed, with so much variation in cloud middleware, how can we expect simplicity and standardization? Which leads to the all important question, will the cloud end up being another technology silo or will it transform the enterprise IT landscape?

To cut through this complex maze of intertwined offerings, buyers must understand the nuances of different cloud technologies, including their impact, limitations, costs, and use specific to their own ecosystem. Approaching it in this manner, the cloud can be a real game changer. Providers will keep on overselling and hyping up their offerings and the buyers require relevant skills to evaluate these offerings for their requirements.

Of course, this is easier said than done. While it’s a given that the enterprise technology world can never be imagined to have a single technology, system, or innovation, and differences will always prevail, there is a dire need to simplify the entire cloud paradigm in terms of its architecture, standards, implementation, usage, and evolution. Too many complexities may scare buyers, and the industry may miss out on exploiting a once-in-a-generation idea.

Social Network Platforms: A Missing Link in Global Delivery Models | Sherpas in Blue Shirts

Put aside for a moment the growing noise about social networking being the next bubble, as users are flooding to social networks like there’s no tomorrow, and both corporations and non-profits are jumping on the bandwagon at a dizzying rate to build brand and interact with customers and targets. What’s surprising to us is that although global service providers have invested heavily in creating well distributed global delivery models, they have largely neglected social networking’s capabilities to improve and augment this delivery model. Rather than building out valuable social network or collaboration platforms, they instead have continued to invest in knowledge repositories and Q&A forums for answering queries, mostly technical in nature.

Everest Group’s just completed research report analyzed the key challenges with today’s global delivery networks, and evaluated the role a well designed social network can play to address these challenges. Key global delivery network challenges include:

  1. Project delivery: The distributed nature of a global delivery model makes the difficult task of project delivery even more challenging (e.g., decision-making, accountability, inconsistent practices, coordination, and collaboration costs).
  2. Staffing: Service delivery managers cite staffing as their biggest challenge. They believe that the needed resources are available in the system, but identifying and on-boarding required staff members in a reliable time frame are a critical challenge in a distributed delivery model.
  3. Communication overload: Efficient global delivery requires finely-detailed process, methods, documentation, and communication. While this is of course advantageous to clients, it creates tremendous overhead for the provider.
  4. Training: As the churn rate is high, service providers keep on hiring new talent, but all new hires require basic training to become productive.
  5. Knowledge sharing: There is a plethora of knowledge available within providers’ systems across service lines. Yet, apart from the typical Q&A forums, little investment has been made to enable tapping this vast source of knowledge during a project life cycle.

To address these challenges, service providers need to revamp their existing silo based social networks and enable them for global delivery. Indeed, a social network can have positive impact on delivery management, staffing, communication, training, and knowledge sharing.

Internal social platforms of service providers

The crux of this next generation platform is its integration across different global delivery management and other systems to support staffing, skills training, unified communication, and project management. Service providers can even extend these platforms to their strategic clients, enabling improved project governance, a partnership model, reduced management overhead, and co-creation of IP.

Our research suggests use of an Integrated, Tracked, Cool, Holistic (ITCH) framework to create next generation social platforms that can seamlessly integrate with global delivery systems and enhance the delivery of services.

Bottom line is that those service providers that transform their stand-alone and silo-based social platforms to enable them for global delivery of services will be the winners in the game.

To learn more about social networking and global services delivery, download the report Social Networks for Global Delivery – Get that ITCH.

Don’t Fret the Cloud “Name Game” | Gaining Altitude in the Cloud

There’s a lot of noise in the industry today about whether or not infrastructure appliances, engineered systems, datacenter-in-a-box, and other similar solutions can be labeled “cloud.”

The basis for this debate is rooted in assertions that the public cloud model, or more aptly Amazon’s, is the only cloud model. There’s no doubt that Amazon is the poster child for the cloud industry, and was around when the cloud buzz was making inroads; and therefore subsequent “definitions” of cloud have become inspired by Amazon’s delivery model. Moreover, the idealistic pursuit of converting IT into a pure utility, as well as addressing overarching pain points of enterprise IT, are also driving some of the arguments. But does doing so restrict the benefits an enterprise can derive from cloud principles?

Private cloud providers make their business case based on security, lower total cost of ownership (TCO), manageability, tight integration, and some other “public cloud-like” benefits. But while they do not always possess the scalability, payment options, and other aspects of public cloud services, is it fair to limit the cloud ecosystem to a particular definition, and term other solutions “cloud washing”? Similarly, various SaaS providers that believe they are the “true cloud application providers” have defined the criteria for a “true SaaS application”, in turn expecting other cloud applications to satisfy their self-anointed criteria to become a SaaS provider. Does this add value to cloud discussions?

Unfortunately, the public cloud provider-driven “definition debates” – that revolve around the pay-per-use aspect of public cloud vis-à-vis a minimum capacity commitment required in a private cloud, the virtually infinite capacity of infrastructure public cloud vis-à-vis requirements to buy “infrastructure boxes” that impact the scalability and flexibility in a private cloud, the minimum capex in public infrastructure cloud vis-à-vis expensive hardware procurement in a private cloud, etc., are doing more harm than good. In retaliation, private cloud providers have also started poking holes into public cloud providers’ security, financial stability, commitment, quality of service delivery, and other seemingly relevant aspects. These assertions are also futile.

The fact is, the name or definition assigned to a given cloud-type solution is moot. The real issue is whether the customer sees value in and gains benefit from a cloud offering. Does it improve IT management? Does it save money? Does it improve IT delivery? Does it help the business become more agile?

Failing to take this client-centric view and instead utilizing the prescriptive, self-created definitions of cloud services can significantly inhibit cloud uptake and the potential benefits from its usage. Just because a cloud solution does not satisfy an “industry definition” should not prevent an enterprise buyer from evaluating it, as long as it offers cloud-related benefits and serves the intended purpose.

Our discussions with a wide range of enterprises show a growing propensity to embrace the hybrid cloud model. And our recent research, in which we analyzed the cost of operations under various infrastructure set-ups such as legacy, virtualized, private cloud, and hybrid cloud), found that the hybrid cloud model is definitely more cost effective and flexible as compared to other cloud models.

But, a word of caution: buyers must differentiate between a silo collection of different private and public cloud solutions and a hybrid cloud. A true hybrid implies the coordinated orchestration of private and public cloud to manage workloads.

So, where should buyers begin? Move beyond the futile “name game” and evaluate serious private and public cloud offerings to create a hybrid cloud environment that can transform their IT organization.

Wipro to Sell Infocrossing’s Data Centers – About Time! | Sherpas in Blue Shirts

The news media a couple of days ago reported – not entirely unexpectedly – that Wipro is in talks to sell the U.S.-based data center assets it acquired when it purchased Infocrossing for US$600 million in 2007. Interestingly, the business was referred to as “non-core.”

The message the acquisition at that time sent to the market was that buyers are more comfortable in outsourcing end-to-end infrastructure to providers with their own data centers.

But the infrastructure outsourcing (IO) market has changed quite a bit in the past four years. Indeed, our Decline of Traditional Infrastructure Outsourcing research highlights the challenges in traditional IO and discusses the fundamental shift wherein newer and nimbler models such as RIMO and other next generation infrastructure services are outpacing and outsmarting the conventional IO strategy. With this news, it appears Wipro’s management agrees that the dynamics of IO have changed and that it has become largely immaterial whether or not offshore providers own a data center. And coupled with industry developments in which Indian IT providers are partnering with local data center providers to win IO deals against MNCs, Wipro seems to understand the broader strategic fit of these assets.

Other Everest Group research (e.g., Remote Infrastructure Management – “RIMO Strategy – Stick to the Basics, but Fine-tune Too”) has emphasized that Indian providers should focus on their core competencies of simpler engagements, global sourcing, resource management, flexibility, and asset-light strategy as the core of their IO services. This is not to say they should not move up the value ladder, just that they should not fundamentally alter the DNA of their infrastructure business.

Will this change the basic nature of the outsourcing deals in which Wipro can participate? Not really. Wipro saw early gains leveraging Infocrossing and, subsequently, carved out its place among traditional IO providers. After exploiting Infocrossing’s potential in traditional IO by providing integrated infrastructure services, Wipro is divesting out of the non-core assets, and that makes real sense. It appears Wipro has realized that the value proposition of Indian infrastructure service providers is different from that of typical MNCs and, therefore, is realigning its strategy.

While it does impact its business in terms of offering large end-to-end complex IO deals, we need to be careful in generalizing this as a hindrance toward its growth. Indian providers should walk away from deals that require them to perform tasks that are not in sync with their core DNA, rather than attempt a dangerous straddling strategy. Therefore, although Wipro may no longer be willing to offer hosted IO, we believe it is better off focusing on typical offshore infrastructure offerings augmented with its integrated infrastructure services through Infocrossing.

Will this impact Wipro’s cloud play? Not really. Most of the Indian providers are targeting cloud IT service/ orchestration/platform BPO to drive their cloud revenue than offering their own, in-house hosted cloud solutions. Moreover, if Wipro plans to develop its own data centers specifically for in-house cloud solutions, nothing stops it from doing so (e.g., Infosys earlier offered its SaaS-based iEngage platform through partner data centers and is now offering the solution in its own data centers as well).

Overall, divesting Infocrossing’s non-core assets could be a great help to Wipro, as the growth of its infrastructure business has lagged its Indian peers. We can count on Wipro’s management to ensure that the strategic advantage Infocrossing brings, especially in key verticals, such as healthcare, will continue. This will make more management and operational bandwidth available to focus on the core capabilities needed in infrastructure services that are fine-tuned with the general strengths of Indian infrastructure service providers.

Wipro’s New HR Policy Changes Highlight Major Issues Indian Providers Better Tackle…Fast | Sherpas in Blue Shirts

This past weekend Wipro announced it was adding employee attrition and customer satisfaction to the criteria upon which its senior management will be evaluated, and the metrics will be linked to quarterly compensation. This move clearly exposes that the employee satisfaction (and hence retention) and client satisfaction issues arising from Indian IT providers’ tremendous growth and their offshore-based business model are increasing and becoming more visible. (See a related blog by my colleague Jimit Arora) And with so much at stake, they must address the problems, and they must do it now.

Why the urgency? Several reasons, given the inextricable connection between client and customer satisfaction. First, the Indian IT providers’ model of hiring low cost resources and continuing to expand the bottom of their resource pyramid has its own challenges. While they have developed sufficient standardized processes and have very solid training programs to keep churning out “good enough” people to perform client work requiring technology competence, they cannot satisfactorily add critical business value through IT if they stick with hiring associates freshly graduated from college.

Second, constant hiring takes a toll on the system in terms of cost, process flows, and efficient collaboration. Third, because many providers cannot create a career growth path for such a large volume of experienced resources, they actually cause attrition in order to hire the requisite “fresh hands” staff.

Obviously, Wipro’s addition of employee satisfaction (attrition) and client satisfaction being linked to senior management compensation comes with its share of challenges. An employee’s experience in an organization depends on a wide range of parameters including compensation (industry driven), work quality (varies based on the client engagement), feelings toward team members (reasonably independent of the quality of the boss), growth opportunities, work environment, etc. Additionally, how will client satisfaction be measured, e.g., through surveys, general interaction, volume growth, pricing improvement, etc.? Moreover, how much impact does a senior executive have on the kind of people assigned to a given project, and what if an employee is assigned to a project that he/she simply does not want to work on?

Despite these challenges, there is a silver lining in that although these providers have disrupted the IT service market, they now realize their limitations and the need to retool their model and perform more “business value” work. Clearly this change will not happen overnight and will take consistent effort and strategic execution. But it can and must happen. However, we should not expect offshore providers to mimic the resourcing pyramid of MNCs even (and when) they provide business driven higher IT value. They have changed the game of IT service and they will surely attempt to do it again in higher business value services. As the low hanging client fruit is more or less taken, the next phase of growth in the cut-throat IT services market will be led by innovation and client satisfaction. And happy provider employees are the best path for these outcomes.


See related article on IT Business Edge, Outsourcing’s Shift from Arbitrage to Innovation.

Independent Software Testing Services: What’s the Real Deal? | Sherpas in Blue Shirts

Hardly a day has passed in the past couple of quarters without a service provider boasting of its testing services during the spurts of organizational restructuring, analyst meetings, and earning calls. Industry news portals carry articles on software testing almost every other day, and the revenue from this service line is growing fast, very fast. At the same time, industry sources tell us of amazingly low rates quoted by providers for testing services, even those delivered onsite.

With this – coupled with multiple queries from a variety of providers, buyers, and investors in the past six months, and our own questions on the seeming price play versus potential, leverageable innovations – it was clear the time had come for us to gain deeper insights into the current and future state of the independent testing services industry.

Thus, we recently launched a research initiative to determine the real deal in testing services.

Key areas covered in the report include:

  • Innovations in the horizon (such as cloud, crowd, IP, and engagement models)
  • Drivers and inhibitors of outsourcing the testing process (from both buyer and provider perspectives)
  • Adoption trends across the buyer community (by size, geography, and industry)
  • Contribution of various industries, geographies, resourcing structure etc. for providers
  • Prevalent pricing and engagement models, typical deal size, duration, etc.
  • Growth drivers, challenges in IP monetization, and what lies ahead for testing services

It was interesting to learn some major outsourcing industries are lagging when it comes to outsourcing testing services, how manual functional testing continues to dominate testing offerings, how T&M and fixed pricing are faring, and what’s happening on testing engagement models. Further, while on the surface testing continues to be a “hire manual functional testers in India” strategy for most providers, dig deep and you can see the flux in automation, IP creation, cloud, crowd, and various other innovations.

While discussing testing with large and small service providers, we could not help but see the value of innovation –yes innovation, the great lip service that has been done to death in IT services, but in testing there is more to it. We expected the providers to discuss the new and cool things they are doing in testing services, but such a strong focus on innovation took us a little by surprise. Therefore, the fundamental premise of our report was based on innovation and the path ahead for testing services.

M&As in the Global Services Space: Why, What, Where, and Who Next? | Sherpas in Blue Shirts

M&As in the Global Services Space: Why, What, Where, and Who Next?

Drawing on the vast amount of data it maintains in its ITO and BPO provider database, Everest Group recently completed a market report entitled “Mergers and Acquisitions (M&A) in
IT Outsourcing – “Deals are Back”
” that focuses on global services M&A activity over the last five years. Granted, the global meltdown in 2008, 2009 and earlier 2010 stalled a lot of M&As, but activity rebounded later in 2010, and we expect it to continue to pick up. A brief look:

The Why

Most of the acquisitions since 2005 were driven by a need to fill gaps in the service portfolio, expand into new client bases, add captives for greater geographic delivery reach, enhance delivery capabilities, gain broader/deeper industry-specific skill sets, industry consolidation or any combination thereof.

The What

Multinational corporations (MNCs) focused significantly on acquiring core technology companies, in large part to add innovation capabilities to their delivery portfolios. And Indian players targeted the consulting space to move up the value chain of IT services due to changes in and maturation of buy-side clients’ business requirements and objectives. Heritage BPO providers seemed content to augment their BPO capabilities, yet appeared reluctant to acquire ITO competence. Large deals made a comeback given the reasonable valuations and willingness of many companies to get bought during the economic recovery.

Perhaps surprisingly to some readers, the consulting companies received the least valuation among all the target types of companies, despite an assumption that consulting is a higher value business. The issue with consultancies is their lack of scale and an impregnable expansion wall they hit after a period of time. As their assets are their people, retention becomes a major issue. And given tight budgets, clients may be reluctant to pay a significant incremental price for consulting services, thus making consultancies less valuable for the acquirer.

The Where

India was the preferred geography when it comes to adding to the delivery network, and rightly so. While the region has large Tier-1 service providers, it also boasts of a significant number of smaller IT service providers and niche IT service providers. These are attractive targets for companies seeking to expand their delivery networks into more cost-effective destinations and that are unable to find many suitable companies to acquire in other geographies. North America was the leading geography in which acquirers and a large number of acquisition targets are based. And expanding into new client bases invariably led the service providers to perform M&A activities in EMEA.

Who Next?

M&A will continue to be a strategic tool for both Indian and MNC providers. In light of i-Gate’s recent acquisition of Patni Systems, it will be interesting to see what all suitable candidates are willing to sell. For example, a large U.S. MNC has been touted as an M&A target for quite some time now; Infosys was rumored to be interested in Logica; and there has been talk of a potential acquisition of Headstrong by Capgemini. Oh yes, the M&A market seems to be buzzing again with activity, with smaller players serving as willing sellers, and larger companies seeking to acquire strategic assets at reasonable valuation.

Who is the next in line?

Wipro’s Change in Leadership – a Sign of a Larger Industry-wide Problem? | Sherpas in Blue Shirts

When Wipro Technologies announced the stepping-down of its two joint CEOs, it cited needs for growth and a simpler organizational structure as the primary reasons. Perhaps. But rather than speculate on the validity of these statements, I believe the move is a very clear sign of the inherent paradox in the offshore linear business model.

Let’s look at the facts. In the pursuit of growth, offshore providers’ headcount has skyrocketed. The bait they have frequently used to attract and retain people is an onsite trip, often for an extended time, to the client’s operations. However, given the inherent bent of these providers to offshore more services and a limited ability to send people onsite, providers now commonly lure existing staff with opportunities to progress into team lead or management roles.

However, with employee bases expanding above 100,000 for large Indian providers, and approximately 90 percent of the workforce in India at any given point of time, the opportunity to establish different management titles and growth paths is limited. Nevertheless, because Indian employees cherish management or lead positions, however immaterial they may be, they are frequently promoted into these roles after three years within the organization.

But the providers can’t play this game for long. Employees will quickly realize the great wall of inertia they are facing in terms of a career path and growth. Additionally, this strategy results in a significantly complex management structure, especially on the delivery side.

Therefore, despite having a reasonably agile business organization, the providers are finding it tough to meet the need for flexibility and agility in the new environment. They continue reorganizing their business units and changing business leaders, without acknowledging that a bloated delivery management organization and a lean business management organization cannot co-exist. To be lean and agile, service providers must be so on all fronts.

What strategy do you think Indian providers can leverage to tackle this paradox? How can they make their delivery and their business organizations more lean and agile, while also offering sufficient incentive for employees to remain?

Service Provider Cloud Strategies – Differentiated? Appropriately Focused for Success? | Sherpas in Blue Shirts

As Unique as Everyone,” the title of Everest Group’s just completed research study on service providers’ cloud computing strategies, tells a large part of the current story. Indeed, after exhaustive discussions with 14 major outsourcing service providers – a mix of multinationals and offshore providers – we found little differentiation among their cloud strategies. Most of them have broadly similar offerings that we segment as:

  • Cloud Advisor, where the provider engages with buyers to help with business case development, planning, roadmap, security, and governance
  • Cloud Enabler, where the provider typically does not offer a homegrown solution but instead sells cloud services offered by industry partners, and usually takes care of implementation and maintenance of the solution
  • Cloud Orchestrator, where the provider acts as an integrator/broker of a buyer’s hybrid infrastructure environment
  • Cloud Provider, where the provider either offers the infrastructure engine to run cloud applications, or homegrown cloud solutions in any of the cloud layers.

Against this backdrop, where are the major players seeing cloud computing potential, and where are they focusing their efforts?

While most of the known providers have entrenched partnerships with known cloud application vendors such as Google, Amazon and Microsoft, what they are doing with these partnerships, apart from implementing their cloud services, is not yet clear. Most of the multinationals are focused on leveraging their technology competence to enhance their hosting offerings. In this scenario, for example, an HP may use its infrastructure and technology power to customize the hosted Microsoft Exchange platform, or an Atos Origin may provide global agreements to buyers per its own agreement with a cloud application vendor partner.

All the providers with which we spoke for this research study have standard offerings for cloud business case development, ROI analysis, third-party cloud implementation, and some business utilities as a service. And while serving as an orchestrator is the most lucrative segment in which providers can play, the absence of comprehensive management platforms, and challenges with cloud-to-cloud integration challenges, are holding service providers back in this area. They believe orchestration eventually will be the winner, but the industry needs to develop the needed tools, processes, and standards for seamless management.

Asset heavy players are touting their infrastructure competence by building private clouds hosted on their premises, whereas asset light players are focusing on private clouds from the design and management perspectives. Most of the providers do not believe a pure infrastructure-as-a-service (IaaS) play is going to lead them ahead, and, as such, they want to provide value-added services and differentiate on provisioning, management, and governance.

Do you see any demonstration of differentiation here among these major providers? Neither do we. While there is excitement about the promise of cloud computing in both the buyer and provider communities, our research found that many (nay, most) of the service providers are unclear and unfocused – especially in that their offerings span all cloud layers, which we believe is an untenable proposition – about the path they need to take to tap the market’s potential. To truly cash in on cloud computing, providers need to significantly change their business strategy. Will be able to do it? Only the time will tell.

For more details, please see Everest Group’s research report on Service Provider Cloud Strategies – “As Unique as Everyone.”

Capgemini Buys Thesys – Why Should the Outsourcing Industry Care? | Sherpas in Blue Shirts

Capgemini on November 24, 2010 announced it had acquired Thesys Technologies, a small, India-based IT services company. While little known, Thesys is a Temonos Certified Services Partner that provides banking implementation solutions to the global financial services industry. Temonos is a leading provider of banking software, serving over 1,000 financial institutions in more than 125 countries around the world. In May 2010, Capgemini and Temenos formed a strategic relationship to expand global delivery and sales capabilities.

With that background . . . why should the outsourcing industry care about Capgemini’s acquisition of Thesys? Actually, there’s ample reason for providers, buyers, analysts and market watchers alike to take note of this acquisition.

Capgemini didn’t buy Thesys to build its revenue base but rather to gain access to Thesys’ market base and its delivery of the Temenos banking solution, which is primarily in the relatively untapped IT markets of West Asia, Asia Pacific and Latin America. Further, in Capgemini’s and Temenos’ strategic alliance announcement mid 2010, they stated they were aiming to have more than 300 Temenos subject matter experts. Tidily, Thesys employs more than 300 people, so that component of the partnership goal has already been achieved. All this, coupled with Capgemini’s acquisition of Kanbay in early 2007 makes Capgemini a highly formidable competitor in the financial services outsourcing space.

Buyers stand to gain from this acquisition as it couples Thesys’ Temenos service delivery expertise and its specialized service delivery infrastructure for Temenos’ T24 system with Capgemini’s capabilities as a leading core banking and wealth management service provider.,This should accelerate clients’ speed to market, assisting in risk mitigation, and enhancing operational efficiency.

However, the most interesting aspect of this acquisition is the willingness of a major MNC with ~25,000 employee base in India to buy out a company operating in a smaller niche segment, especially given that Thesys is a service focused firm rather than a software developer. This deal helps Capgemini to be perceived as a leader in banking solutions, filling in service and footprint gaps. But even more so, it could signal a trend wherein more MNCs  end up adopting similar strategies to expand their businesses in less penetrated regions and fill the competence gap in their service portfolio. Should this ring some warning bells for Indian service providers, who normally have championed the cause of small acquisitions? I think it should !

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