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Issue Date: June 2007

Wipro plans major German acquisition

June 2007
Ed Thomas

Indian outsourcing giant, Wipro Technologies, is planning a major acquisition in Germany, according to the company's senior vice president for Europe, Kees Ten Nijenhuis.

Indian outsourcing giant Wipro Technologies is planning a major acquisition in Germany, according to the company's senior vice president for Europe, Kees Ten Nijenhuis.
"Germany is too big a market to be left alone," Ten Nijenhuis told ComputerWire. "However, you cannot just walk in there; you have to do it the German way. You need a strong presence, but not too strong."
Ten Nijenhuis declined to name potential targets, but he did reveal the key areas Wipro was looking to bolster through the takeover.
"90% of the listed companies in Germany use SAP and 60% of the country's outsourcing market is in infrastructure," he said. "Therefore, to succeed in Germany you need data centre capability, SAP skills and a captive customer base that you can reorganise to your own specifications."
There were further hints that Wipro might be looking at taking on the IT arm of a large German company. "Every major German organisation has a captive IT organisation - look at BMW, Lufthansa, and Siemens, for example," he said.
Our view
The last few years have seen a number of 'carve-out' deals in Germany, whereby a major IT services vendor has swallowed up a captive unit, including the takeover of Volkswagen's IT arm Gedas by T-Systems and the purchase of Triaton, the engineering operation of Thyssen-Krupp, by HP Services.
This has reduced the number of potential targets for Wipro, but some names immediately spring to mind. Softlab, which is owned by BMW, currently ranks as the sixth largest player in the German IT services market, with annual revenue of approximately $350m.
The company would fit the bill for Wipro on a number of levels.
It has an SAP consultancy operation (known as Axentiv), experience in multiple vertical markets including manufacturing, banking, insurance, and telecoms, and it has good presence outside of Germany, most notably in the UK, but also in Austria and Switzerland.
Another possibility for Wipro would be Lufthansa Systems, the third biggest vendor in Germany. LHS has been building up its business outside its parent company over the last few years, with the company now deriving less than 60% of total revenue from within the Lufthansa Group.
A less well-known but still viable option for Wipro would be BASF IT Services. The company has revenue of close to $500m, and in 2006 reported its first annual increase in sales since its formation in 2001. BIS, like Lufthansa Systems, has been looking to grow its external business for some time and has had a measure of success.
In 2006, external sales accounted for 17% of BIS's total revenue, up from 10% the previous year.
BIS's operations are focused around its SAP consultancy and software development segments, making it a good fit for Wipro's ambitions in Germany. The company also has offices in Belgium, Denmark, France, Italy, the Netherlands, Spain, Sweden, and the UK.
Source: Computergram

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