Since Wipro’s March 4, 2021, announcement to acquire Capco, the London-based global management and technology consultancy that provides digital, consulting, and technology services to financial institutions, for US$1.45 billion, reaction has been mixed as to whether it will deliver the synergies and earnings growth Wipro expects. However, Wipro’s consulting-led offerings matched with Capco’s digital capabilities appear to be poised to deliver a powerful, end-to-end service for clients.
Here’s our take.
Wipro, a leading, India-based global IT, consulting, and business process services company, has acquired numerous companies in the last few years, such as Appirio for cloud services, Opus CMC for the mortgage industry, Designit, Syfte, and Cooper for design thinking and strategy, and International TechneGroup (ITI) for its industrial and engineering services. The Capco deal, which is expected to close at the end of June, stands apart from the other acquisitions not only because it’s Wipro’s largest to date but because it will greatly improve Wipro’s digital offerings in the BFS space, Wipro’s largest business unit. This will narrow the gap between Cognizant, Infosys, and TCS, Wipro’s three biggest competitors in the BFS arena.
Also, in 2020, digital contributed to nearly 40 percent of Wipro’s total revenue, making Capco’s digital capabilities integral in positioning Wipro as one of the market leaders.
The Wipro/Capco acquisition will deliver improved benefits to clients, including:
Large-scale acquisitions are not new to Wipro or the BFS industry; however, success from such high-value acquisitions are not always guaranteed. It is, therefore, no surprise that this announcement was received with mixed reactions and speculation from the market as to whether it will deliver the synergies and earnings growth that Wipro has promised.
Overall, we remain optimistic about the deal and believe this acquisition will equip Wipro to better solve BFS clients’ challenges through Capco’s future-ready digital capabilities. Most importantly, the acquisition is complementary in nature and will help Wipro gain scale, speed, and stature.
Wipro’s consulting-led services, together with Capco’s digital capabilities, will provide more meaningful end-to-end long-term support to clients. It would not be surprising to see similar deals coming up across various segments of BFS with the aim of providing bundled offerings, as products lose their charm when offered on a standalone basis. Complementing service offerings with consulting-led delivery capabilities is being seen across various BFS industries, including mortgage and FCC. These capabilities are being acquired not just through acquisitions but also through partnerships, such as the recent one between Genpact and Deloitte in the financial risk and compliance domain.
Though this trend witnessed a slow start, especially for the Indian IT firms, it looks promising and rewarding in the long run and is only expected to gain momentum. Through end-to-end consulting and digital service offerings, enterprises get access to a compelling combination of digital talent at scale with a consulting-led delivery approach, which helps achieve greater business value and gains.
Generally, the value addition to enterprises entirely depends on the speed at which service providers can utilize the enhanced breadth and depth of their offerings post-acquisition. Having said this, the key to achieving significant value addition for both Wipro and Capco’s clients would eventually lie on smooth integration and flawless execution.
For the returns to outweigh the risks, a superior execution policy needs to be in place. The key to inspiring its BFS clients will be to align consulting, design, build and operate capabilities around solving some of the industry’s biggest challenges. For BFS clients, this is namely modernizing legacy systems, providing innovative product and service offerings, ensuring a delightful customer experience, and effectively managing the ever-evolving regulatory landscape. For Wipro’s enhanced capabilities to be successful, it should help reinvent the client’s journey through a rare combination of consulting-led digital transformation.
We would love to hear your thoughts on this acquisition and or others that are following the same trend, reach out to [email protected].
Risk evaluation and digital intervention
VIEW THE REPORT PAGE
I previously blogged about the need for a new third-party services operating model that would be more productive and agile and focus far more on results. Though the industry was on the verge of moving to a new model, adoption was slow at first. Now, attraction for the move to a new model is picking up in the marketplace, but enterprise customers and service providers define expectations differently.
Security Operations Center