Digital M&As – Driving the Next Phase of IT Industry Growth

The Indian IT-BPM industry has witnessed significant developments in the last few years, thus expanding its footprints on the world map. In the past few years, Indian IT companies have mainly worked on prioritizing their business process efficiencies. But the future will largely be influenced by how they embrace digital transformation and their strategies to deal with higher expenditure on digital technologies.


Role Of M&A in Digital Transformation

The Indian IT industry has been actively involved in M&A activities driven by the need to rapidly scale their digital transformation. Digital M&A’s play a key role in:

  • Providing enterprises access to new customers by helping them to easily expand to new geographies

  • They provide enterprises access to niche technology solution and platforms, which help to easily expand to new verticals based on changing market demands

  • The major area of focus has been digital marketing, SMAC and payments sectors driven by some prominent deals like Wipro’s acquisition of public cloud applications firm Appirio and Apple acquisition of machine learning start-up Tuplejump


There has not been much change in domestic digital M&A activity during 2016-2017. But the number of inbound deals went up by 20% during 2016-2017 indicating an increasing trend to acquire Indian companies.


Digital forces driving M&A convergence in technological sector


During Jan 2017 to May 2018, there have been 316 technology related M&A activities with Internet & E-Commerce aggregating to 80% of the domestic M&A activities with prime focus on classifieds, retail and logistics industries.

  • Among the inbound M&A activities most of the digital deals are focused on SaaS-based products, payments. Majority of the deals have come from US firms with APAC gaining good traction with 16% market share

  • Most of the outbound M&A digital deals have come from digital marketing and analytics sector with HCL’s Actian Corporation acquisition being one of the biggest deals

Digital Services dominate M&A activities in IT–BPM segment

Digital services are in the prime focus among IT–BPM companies with 40% of the M&A activities focused around mobility, digital marketing, analytics, cloud, payments, IoT and AI/ML.

Companies are using M&A’s to help enhance their sales activities by using Omni channel strategy for order & warehouse management. Majority of the M&A activities among start-ups are driven to increase their bandwidth around digital marketing and customer experience capabilities.

Some of the key focus areas include:

  • IT Services: App. development, consulting, software implementation, data centres and database management

  • Software Products: Security, Blockchain, logistics, payments and health-tech

  • Cloud-based Systems: Penetration of applications using SaaS models

  • Big data Analytics: Growth expected from huge untapped public data market which is projected to grow rapidly in the next five years

  • Automation: Banking industry to focus on utilizing automation to shorten process cycles to save cost and to improve customer experience

The future of digital M&As in Indian IT sector

The increasing focus on enhancing design and user experience capabilities has lead companies to get to M&A activities. The coming times will see IT companies working on developing dedicated innovation M&A strategies which will help to acquire new capabilities. Companies will leverage M&A activities to launch new products and technologies that can unlock new sources of growth and revenue.

You can download the report at: Technology M&As in India – A Digital Revolution.pdf 

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