Debasis Mohapatra
Bengaluru, 27 May
Indian IT services companies are increasingly rebadging employees of clients and acquired firms as they aggressively chase revenue growth amid slowing demand.
Rebadging is the transfer of employees from clients to IT firms as part of the deals that IT firms win from clients. It also happens in the case of M&A deals.
Experts in the know said that rebadging of people is not a new trend. Currently, IT firms are keen to win outsourcing contracts that pushes up their top line, which is prompting them to absorb client’s employees. Similarly, IT companies are also adding employees through the M&A route, they said.
“For many large cost takeout contracts and M&A deals, IT firms have to take the product risk and absorb the employees of the client along with payment of money upfront. Moreover, Indian IT firms usually get most of the project work done from offshore locations (like from India) but in these deals, they have to absorb employees in onshore locations. However, Indian IT firms have done many such deals over the years and know how to execute them, mitigating the risks,” Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting told the Data Biz Times.
In the last financial year, Indian IT firms added more than 10,000 employees inorganically through acquisitions and large deals. In the current financial year, such addition through the inorganic route is likely to increase as companies become active in the M&A space.
Last week, HCL Tech said it will acquire Communications Technology Group (CTG) assets from Hewlett Packard Enterprise (HPE) for $225 million to strengthen its engineering services offerings. As part of the deal, around 2,200 employees of CTG will be rebadged. While around 1,500 employees of CTG with telecom industry experience will be absorbed by HCL Tech, about 700 contractors will also transfer to HCLTech in various countries — including Spain, Italy, India, Japan, and China — to service clients globally.
Similarly, L&T Technology Services (LTTS) has won a deal from France-based automotive supplier FORVIA worth €45 million in the clean mobility space. As part of this five-year partnership, around 300 engineers from FORVIA’s Germany and Bangalore sites, have been transferred to LTTS, the company has said.
Last year, Infosys acquired the IT centre of Danske Bank. Under the deal, Infosys acquired around 1,400 employees of the bank’s IT centre in India. Similarly, the company absorbed another 400 employees from its deal with Liberty Global last year.
Experts said that the current financial year will see many more employees coming on board through the inorganic route.
