In a landmark takeover in the offshore software services sector, Wipro Technologies Ltd has agreed to buy the global energy practice of American Management Systems Inc for $26m in cash.
The deal marks the first time that one of India’s three largest offshore IT contractors has made a major acquisition the US. Bangalore-based Wipro ranks as the second largest player, sandwiched between sector leader Tata Consultancy Services and third-placed Infosys Technologies Ltd.
Wipro said that the AMS business has 90 employees in the US and Europe who are focused on providing consulting and applications management services to more than 50 clients including Investor Owned Utilities, Public Power Utilities and Regional Transmission Companies. It said the operation will fit well with Wipro’s focus on billing and settlement systems in energy markets.
Fairfax, Virginia-based AMS’s decision to sell the unit comes as part of its strategy to focus on four key markets – telecoms, financial services, central and local government. Chairman and chief executive Alfred Mockett has overseen several quarters of declining profit and revenue since joining the company from BT Group Plc in January 2002.
Despite strong cash positions, Indian firms have been cautious about building up their customer facing organizations in the US and Europe through acquisitions. Wipro told ComputerWire in December 2001 that it was in talks with potential targets on both continents, with a view to buying businesses with annual sales of between $50m and $200m.
Infosys and Tata will follow Wipro’s deal with interest, to see whether the two differing business cultures of the Indian and US firms blend successfully. Infosys tested the water with the $3.9m takeover of the banking software business of US-based IQ Financial Systems Inc in June 2002, and Tata Consultancy Services is preparing to raise a war chest for aggressive expansion on the Indian Stock Exchange during 2003.