TCS announces first acquisition since 2013
Acquires digital design firm W12 Studios
Tata Consultancy Services (TCS) has announced the acquisition of W12 Studios, a London-based digital design entity, its first since 2013.
The financial details were not disclosed. W12 will now be part of TCS Interactive, the digital design division within TCS’ Business & Technology Services organisation.
TCS’ previous acquisition was in 2013, of French SAP service provider ALTI. Since then, it has stayed on a staunchly organic growth path, even as global and domestic rivals went on an acquisition spree, especially to acquire digital design firms.
The management had hinted at a possible change while announcing the June quarter results.
In the past three years, global rival Accenture has spent a little over $3.4 billion on mergers and acquisitions, of which $1.7 billion was spent in 2017. A majority of the 70-odd acquisitions the NYSE-listed company made were focused on digital and cloud-related businesses. The investor community had long accepted TCS’ conservative approach on the acquisition front.
Analysts note that acquisitions are not entirely about gaining new customers but about buying new capabilities and technology offerings, which TCS was building internally and through its nine innovation laboratories across the globe. They see the W12 acquisition as a move by TCS to climb the project/service offerings portfolio from their largely back-end solutions offerings, to more upstream clients with large margins like Accenture.
“W12 seems to have an impressive list of clients in media and communications. TCS can potentially use the skills to offer similar offerings to its clients in other industries. Often it is the upstream customer-facing systems transformation which leads to downstream back-office transformation (which TCS already offers) and is hardly ever other way around. This acquisition will help TCS plug a gap in its services portfolio,” said Ashutosh Sharma, vice-president, research director, Forrester Research India.
With digital spending rising across sectors, there is increasing interest by top information technology service companies to acquire and build internal advertising technology and marketing analytic capabilities. Infosys had in April announced the acquisition of consumer insights agency WongDoody, for $75 million. Last year, Cognizant acquired UK-based digital agency Netcentric and Zurich-headquarterd digital marketing and experience firm Zone.
In May, the Nasdaq-listed firm acquired data analytics firm Hedera, for an undisclosed sum. Wipro has an entire marketing and e-commerce portfolio within their digital services division. It has been building the capability with acquisitions of design and user experience firms such as Designit (in 2015) and Cooper (in 2017).
Infosys’ acquisition of Londonbased design firms Brilliant Basics and Tech Mahindra’s acquisition of UKbased BIO Agency in 2016 were also steps in this direction.