IBM acquires Indian BPO company Daksh

IBM Wednesday announced it plans to acquire Daksh eServices Pvt. Ltd., a business process outsourcing company in Gurgaon, near Delhi.

IBM hopes to enhance its ability to deliver CRM and back-office services to its clients in various industries by this acquisition, according to an IBM statement. It will also increase the scope of IBM's global network of 22 business transformation delivery centers, adding capabilities in India and the Philippines, IBM said.

The company is not new to using India to deliver low cost services to its customers. The 9,000 employees at its Bangalore subsidiary handle software development for IBM and its clients.

The proposed acquisition of Daksh by IBM is a continuation of the consolidation in the Indian BPO industry, according to Ravindra Datar, principal analyst for IT services and BPO at Gartner India Research and Advisory Services Pvt. Ltd. in Mumbai.

"Successful businesses in the BPO space in India that want to expand further abroad, need the brand, marketing muscle and financial support from a large multinational company or a large Indian corporate house," Datar said. "The acquisition of Daksh by IBM will fit into this category."

Daksh eServices is one of India's largest independent BPO companies. It offers customer care, technical support and back-office transaction processing services to companies worldwide, including Amazon.com Inc. in Seattle, Washington. In addition to its BPO facilities in India, Daksh set up a BPO facility in Manila in the Philippines in January that is expected to employ 1000 people by year end. The company's investors included Citigroup Venture Capital Fund, CDC Capital Partners in London and General Atlantic Partners LLC in Greenwich, Connecticut.

"Daksh eServices has made its mark rapidly in the global business services market by providing clients not just with cost efficiencies, but also with significant improvements in the way they run their business," said Sanjeev Aggarwal, chief executive officer of Daksh. "This vision of strategic skills applied to high value business transformation is one we share with IBM."

The proposed acquisition of Daksh is the first that IBM has announced in India in the BPO space. The transaction, which is subject to Indian regulatory approvals, is expected to close in May. The financial details of the acquisition were not disclosed.

After the acquisition, Daksh will become a part of IBM Business Consulting Services, according to a spokeswoman for IBM India, who added that all the staff at Daksh's operations would be absorbed by IBM after the acquisition. Daksh currently has about 6000 staff spread over four facilities in Gurgaon and a fifth in Mumbai.

Rather than set up BPO operations from scratch in India, with all the hurdles involved, IBM has instead acquired a company with existing clients, revenues, BPO service capacity and a successful management team, according to Gartner's Datar, who described the deal as a win for both companies. While IBM is likely to continue to service Daksh's current clients both for contractual and other reasons, over the long term IBM is likely to align Daksh's business to its own strategic objectives and priorities, Datar added.

The IDG News Service is a Network World affiliate.