The world's third-largest computer maker wants to buy a mid-sized Indian tech firm with "several thousands of staff" and revenues of $500 million to $1 billion or even more, Suresh Vaswani, chairman of the company's Indian operations and executive vicepresident of the Dell's global application and BPO business, told ET.
He declined to say which companies Dell, which has cash of about $16 billion, is interested in, but bankers identified Hexaware Technologies and NIIT Technologies, each with revenues of around $300 million, as potential targets. Both companies have been denying plans to sell. Vaswani, a Wipro veteran who joined Dell last year to help the company grow its services business, said mid-sized firms with a majority of staff in
"The services acquisition can be Perot Systems-like but with more
Dell acquired Perot Systems for $3.9 billion in 2009, marking its entry into the services space. The acquisitions also gave it significant offshore delivery capabilities and strength in the healthcare services business.
Experts familiar with Dell's strategy said the company plans to leverage acquisitions to more than double, or even treble, its current IT services revenues of $8 billion in 3-4 years. Dell has said it wants to increase revenues from IT services to $11 billion in three years, but this does not account for business from any potential acquisitions. IT services contribute less than 15% to Dell's total income.
From around 28,000 staff in India, Dell plans to ramp up to a level where it can compete more effectively against IBM, which has over 1,00,000 employees in the country. This can only be achieved through an acquisition; competing with traditional campus recruiters such as TCS, Infosys and Wipro to hire hundreds of software engineers will be difficult.
Once the world's largest PC maker, Dell has lost more than a quarter of its share in the commoditised computer market to aggressive Asian rivals such as Lenovo. Now, the company wants a bigger share of the high-margin IT services pie to improve profitability by bundling computer hardware with outsourcing contracts.
IBM had a head start in IT services when in 2005 it sold its PC business to Lenovo to focus on the rapidly-growing areas of software and services. IBM now gets over half of its $100 billion revenues from services.
"These companies are looking at a trillion-dollar market which is only growing. Dell has been an acquisitive company especially in the services space. A mid-sized acquisition will definitely add value for them and help them respond to clients faster," said Viral Thakker, a partner at KPMG.