IBM to Buy Indian Outsourcer Daksh

IBM has unveiled its plan to acquire Daksh e-Services, India's third-largest business process outsourcing (BPO) services firm. Although both companies are tight-lipped about the terms of the deal, published reports estimate the acquisition of the Delhi, India-based outsourcing company to be approximately $160 million, making it one of the largest Indian acquisitions in years. The transaction, which is subject to Indian regulatory approval, is slated to close in May 2004. IBM Business Consulting Services will absorb the four-year-old Daksh and its 6,000 employees. The acquisition expands IBM's BPO business to call center services, pitting the company against U.S. outsourcing companies such as Convergys, West, and TeleTech Holdings, as well as Indian outsourcing companies such as Infosys Technologies and Wipro Spectramind. More specifically, Daksh will provide IBM expertise in CRM and financial management services in industries like banking, insurance, retail, technology, telecommunications, and travel and transportation. "[The acquisition] is a lot more aggressive than IBM's competitors in terms of going out and buying a sizeable Indian outsourcer," says Daniel Hong, analyst at research firm Datamonitor. "It's one of IBM's plans to increase its viability in the Asia/Pac market. The customer service segment of CRM is the preferred entry point for larger opportunities in business contracts and Datamonitor believes IBM is infusing this component into [its] overall strategy to win large multinational contracts. For the IBM customer, the addition of call center services will provide better financial resource allocation in creating more fluid CRM strategies." The acquisition comes at a time when many companies are looking to India and the Philippines for "low-cost and high-talent labor pools," Hong says. Daksh maintains it can provide Fortune 500 companies similar or better customer support than U.S. call centers for a fraction of the cost. "Employee productivity [in India] is at least 25 percent better than in the U.S.," says Venkat Tadanki, founder and vice president of sales and marketing at Daksh. Employee productivity in call centers in India is superior to that of U.S. call centers, Tadanki explains, because the caliber of the employees who apply for call center jobs in India is better than those who apply in the United States. In the U.S. a call center job is viewed as a job to hold you over, whereas in India it is considered a career, he says. According to Abraham Thomas, general manager, IBM India, India is an important market for IBM and the acquisition demonstrates IBM's commitment to its clients in this region. The announcement comes a couple of months after Daksh made public the launch of its Philippines facility in Manila, which is expected to employ 1,000 people by the end of the year, increasing Daksh's total headcount to 10,000 by 2005, Daksh says.