1. Technology Acquisition
An analysis from Indian perspective
Naveen Kumar (2008040)
Satyajit Paul (2008046)
Presented at
India Product Managers Conclave @ IIM, Bangalore

2. Overview
• Problem Statement
• Global & Indian Tech Acquisitions
• Strategic Objectives for Acquisitions
• Nature of new start-ups (IT Companies Taxonomy)
• Product & People
• Comparison with Israel
• Evolution of Tech start ups in India
• Country Positioning
• What goes for Product Development
• Challenges faced by IT Product Companies
• Challenges faced by IT Services Companies
• How M&A is viewed by Mgmt and by Investors
• Conclusion
• Recommendations
• Concluding Thought

3. Strategic Leadership & next phase of
Indian IT Industry
• Why Big Indian
Firm(s) are not
doing enough
Acquisitions?
• Why some of the
Indian Tech start
ups are not getting
acquired?

4. Indian Tech M&A
Compared to Global IT M&A
Acquisitions of Indian Tech Cos
Global Indian
Total Deal Amount (Million $) # Deals
Company Acquisitions Company Acquisitions
Google 76 Infosys 3
$3,069.00
HP 56 Wipro 9
$2,146.00
$2,370.00 Cisco 91 TCS 6
$1,542.00 $1,562.00
IBM 93 HCL 7
$1,167.00 Microsoft 95 Mindtree 1
Oracle 51
$347.00
24 12 26 29 26 17 13
2004 2005 2006 2007 2008 2009 2010-Q2 Year Acquisition Details Amount (million $)
Jan-05 Oracle acquires i-flex(I) $2,000.00
May-07 CSC acquires Covansys(i) $1,300.00
Nov-06 Capgemini acquires Kanbay(I) $1,250.00
•Total Tech M&A(04) [of Indian Co] – $ 12.6 b Dec-10 Aricent by PE Firms $1,050.00
•Total No of Tech Acquisitions [of Indian Co] -147 Feb-07 Keane(I) by Caritor $854.00
Dec-08 Axon by HCL (I) $682.00
•Only 26 acquisitions till date by Big 6 companies Apr-09 Satyam C S (I) by Tech Mahindra $605.00
•More than 95% are IT services/ITES companies Aug-07 Infocrossing by Wipro(I) $600.00
Oct-08 TCS(I) acquires Citigroup G S $505.00
Nov-04 GENPACT by PEF firms $500.00
Note: Above data is based on the published data for the period of 2004 till 2010
Source: VentureIntelligence - http://www.ventureintelligence.in/deals/meracqview.php

5. Taxonomy of IT Companies
Business/IT Consulting Accenture
Infosys,
Software Project/ IBM Global Services,
IT Services IT Implementation Wipro,
CTS,
Genpact, IBM-Daksh
BPO/ITES
Enterprise S/W
Microsoft, Oracle, SAP, IBM, HP
& Applications
amazon.com
Traditional
Shrink-Wrap Microsoft, McAfee eBay.com, IndiaMart.com
Products
Physical Goods
Media, Entertain Microsoft, Sony Goods
ment, (eCommerce) Capitaline.com
Games Information Goods makemytrip.com,
Irctc.com
IT Product
naukri.com
Companies
bharatmatrimony.co
Web-based Salesforce.com redbus.in
Products/ Enterprise Apps Successfactors.com Makemytrip.com
S-A-S Ec2 (Amazon)
Yahoo.com
Rediff.com
Service/Utilities Ndtv.com
Consumer Centric
Web-Portals
Social/Professional Bigadda.com
Networking Facebook.com
Apnacircle.com
Linkedin.com

6. Comparison between two Emerging
Economics – India vs. Israel
Israel India
Microsoft 4 0
Google 1 0
IBM 4 2
Oracle 3 1
Cisco 3 0
Figures indicate the number of product companies acquired
in the last decade. Israel companies have evolved with
abstract technology idea with good support from product
management policies – Unlike India.

7. Determinants of Advantage - Israel
Demand Conditions
Factor Conditions 1) Government Subsidy
1) High Skilled Labor for R&D projects
2) Low cost 2) Programs to encourage
technological incubators.
Related & Supporting Industries Firm Strategy & Rivalry
1) Government encouraged 1) Local competition among
bilateral and multilateral various IT firms in Israel to bring
international R&D collaboration about IP protected software
Reference: R&D Policy in Israel-An Overview and Reassessment – Manuel Trajtenberg
(Competitive Advantage of Nations by Michael E. Porter)

8. Simple tasks such as programming, design engineering and system
integration, they are going to be cost based competition, does not require
ideology creation or effective client communication – Outsourced to India

9. Challenges for IT Products from India
Lack of VC
Investments in
Software Product
Lack of Business Lack of
Experienced Distribution
Management Network and
Talent Global Access
Challenges
for Indian Higher Entry
Smaller Base of
Barrier due to
Domestic Market Software MNC presence
Industry

10. Liabilities of Origin - India
Customer • Good Service Quality. Poor Product Quality.
Perception • Low Brand Value
• Risk averse culture. Lack of technological
Quality of incubators.
Ecosystem • Poor Access to Financial Capital. Lack of VC
funding.
Market • Lack of Management Talent with Global
Familiarity & Experience
• Lack of Networking within the Industries.
Access

11. Why Indian Firms Shy from Large
Overseas M&A?
M & A leads to
• High costs of synergy between both companies.
• High Risk for Large Investments.
• Post acquisition integration issues.
• Cultural differences.
Agency problem where the Indian IT firms focus on
quarterly profits instead of future potential profits to
keep the investors (shareholders) happy. Investments
will dent their earnings and affect stock prices.
Reference: Dubious Value of International Acquisitions by Emerging Economy Firms: The Case of Indian Firms
– Aneel Karnani

12. Conclusion – M&A for Big Indian IT firms
Currently, Indian IT services businesses are able to grow since
there is local talent pool available (Organic Growth) at a much
lesser cost compared to acquiring another company along
with all its integration challenges.
However, considering global firms like IBM, Accenture are
moving down the value chain by leveraging the cost arbitrage
in India, we see small but focused Acquisitions of would be the
way to leap into the big league and gain more competitive
advantage.

13. Conclusion - Product Companies M&A
• Currently, the Indian Product Companies are far from being successful as
compared to Silicon Valley companies.
– The products have less IP generation.
– Do not have solid customer base.
– No immediate ROI in sight.
Hence, top global IT majors will continue to overlook the Indian Product
companies till our Product Industry makes progress.
Suggestions:
• An Entrepreneurial culture backed by industry insights needs to be cultivated.
• The Ecosystem should be in place where there is continuous encouragement for
people to innovate.
• Watch out for emerging technologies.
• Look for missing pieces in the Big company’s product portfolio.
• Take the advantage of growing domestic market , build competence/capabilities
and leverage it to rest of the world.
• Last but not the least its innovation, innovation and innovation.
• It’s a win-win game for Indian IT Product as well as IT Services firms if proper
synergy can be brought into.

14. Proposed Solutions – Product Companies
• Increase industry-led software product focused trade
development and branding activities in key overseas markets.
• Leverage user-industry associations to help potential customers
appreciate the value of their technology investments.
• Facilitate greater industry participation in sectors/projects of
national importance.
• Attract experienced MNC (captive) staff and global professionals
seeking to establish software product ventures , to set-up a base in
India.
• Encourage the setting-up of alternate, hybrid (public-private)
investment vehicles to channel funding towards software product
technology startups; streamline access to available public funds.
• Bellwethers (Infosys, TCS, Wipro, HCL) of Indian IT Industry need to
become the change agent and start focusing at the product
companies out of India.

15. Ideal Ecosystem for Entrepreneurs
1
Idea/ Concept
5 2
Partners Workforce
Ideal
Ecosystem
4 3
Customer/
Capital
Market