 "Salil Parekh")
In his first interaction since Capgemini bought the Nasdaq-listed iGate in a $4-billion deal, Salil Parekh, director-general adjoint, member of the group management board, Capgemini, says the deal seems to be a positive. In an interview with Shivani Shinde Nadhe, he talks about the integration process and future acquisitions. Edited excerpts:
How has the iGate acquisition panned out for the group and how is the integration process coming along?
It’s been about six months since we acquired iGate. Our CEO has always been talking about increasing the work outside Europe. With the acquisition of iGate, our presence outside Europe or US is 30 per cent and overall Europe, including the UK, is 60 per cent. That is a big positive for us. The US market is much more dynamic; has a lot of growth in it; and Capgemini was under-represented. Globally most players have 40-45 per cent in the US market.
The second rationale was to expand our footprint. Today we have 85,000 people in India. It has become a huge source within the company and we are referring to India as the backbone of what we do.
The integration process started within a month of the acquisition, we hired external professionals who are still involved in the process. The first phase was about creating a joint structure, which is complete. Now we are in the process of executing, which will take 6-12 months.
There are some elements of the business we will integrate much more quickly because we did not have a large presence, like products and engineering services. For instance, we do high-tech engineering, but mainly in Europe and have clients in Germany and France, whereas iGate gets 90 per cent of this business from the US and a bit from Japan, so this is relatively easy to integrate. The other part is where the client overlap is minimum. We have 8-9 clients out of 150 clients that iGate had. So it is relatively easy in those markets.
From a people’s point, in India the team will have to come together. Internally we have set targets on revenue, delivery and cost. The real test will be the end of this year when systems will come together.
What has been the impact of the acquisition on business?
We are in a silent period as we announce our results soon. All I can say is there is a good pipeline. Our CEO will talk about it in detail later in the month.
If you look at Capgemini’s legacy client base, we can bring in the iGate kind of proposition in sectors like banking, manufacturing, and retail. iGate has clients like GE, which is a 20-year relationship. There is lot of discussion on what Capgemini has to offer in consulting and digital. We can see the benefits coming.
Does it mean Capgemini will look at more such acquisitions?
In terms of acquisitions, we have to get this executed, after this we will see.
For us there are two broad themes for acquisition. One is big innovation, such as digital or cloud, and the other is industrialised competitive assets that have very efficient delivery models. If this year goes well, we will start to look at other acquisitions. But this has to be executed well.
Offshoring, according to a Nasscom study, is tapering. Do you think acquiring traditional IT firms still makes sense?
What we see in the market today is that our offshore capability is still growing. Clients in core sectors like BFSI, retail, and manufacturing are still leveraging this model. Even in our European markets we see this trend, especially in Germany and in the Scandinavian region. The model is extremely strong and viable.
The more the European market opens up and the more offshore capability we have, we will be able to leverage more.
Capgemini acquired Kanbay which was a BFSI-focused company and iGate too gives you that capability. Does the company plan to acquire a product firm?
There has been a lot of internal talk on whether to acquire a product company. A few years ago we acquired a company called Prosodie, which is not a product but a platform company, which is now called software-as-a-service and it has done very well. It was only French when we brought it but now it has expanded. I do not know if we will buy a product firm and I am not sure if we are the best to run a product firm, but we have invested a lot in platforms. One of the things we have done with iGate is focus on its iTOPS offering. They have two platforms that are doing very well, iBaas and retail-in-a-box. Our approach is to take Prosodie and iTops and work and then start investing in others.
How significant is the growth in the digital segment for Capgemini and how crucial is India in this play?
For the first half of 2015 the growth was 20 per cent. It is a very material growth. Of course, we have invested also in this. We have put a lot of focus in two domains--digital and cloud.
We have set up an Applied Innovation Centre Lab in Mumbai recently and both digital and cloud are central to the lab. All of our Java development skill is eventually moving to DevOps and the bulk of this is in India. We also want to make India the centre of decision-making, like which tools do we need to pick and where is the market moving, that connection has to be made.
