Tuesday, September 19, 2006

Infosys not likely to buy large U.S. consulting firm

An interesting presentation this morning at the Forrester Technology Leadership Forum 2006. Nandan Nilekani, head of Infosys, spoke about competing and winning in the global IT marketplace. His prepared remarks were quite "big picture," but during the Q&A session afterwards, he gave some interesting insights into his view of his competitors.

An audience member asked Nilekani about the ability of the large international consulting firms to compete with Infosys. Nilekani said he believes that Infosys is not just competing on the basis of lower labor rates. Labor rates help, but more of his competitive advantage comes in how Infosys manages the work itself. In other words, Infosys doesn't just work cheaper, but better (my words).

Nilekani did acknowledge that, among the large international consulting firms, IBM and Accenture are his strongest competitors. He said that most of the other large consulting firms are have difficulty integrating their onshore and offshore service organizations, so when they provide offshore services it appears that the customer is dealing with a separate organization.

George Colony, Forrester's CEO, who was facilitating the Q&A session, then noted that Infosys is sitting on approximately $1 billion cash on its balance sheet. Couldn't that be put to use to acquire a U.S. consulting firm?

Nilekani said it was unlikely that Infosys would acquire a large traditional U.S. consulting organization, because he would view such an acquisition as (his words, not mine) "contaminating" the Infosys business model. If Infosys is doing things in a new way, why would he want to acquire a "legacy" consulting firm, he asked. He said that if Infosys were to make an acquisition in the U.S., it would more likely be to fill some niche in its capabilities or to provide a better "front end" for its business in the U.S.

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