With the competition heating up in the global IT space, Indian IT firms are using acquisitions to fuel their growth. Given, HCL Technologies’, India’s fourth largest software services provider, move to acquire external IT business of Swedish auto major Volvo comes as a shot in the arm for it. With this engagement, HCL will become the largest IT services provider of Indian origin in the Nordics, says the home-grown IT major.
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HCL
Technologies, India’s fourth largest software services provider, has entered
into a final agreement with Sweden’s Volvo Group to acquire latter’s external
IT operation and the operation of its IT infrastructure in an all-cash deal
valued at $138mn or about Rs.895 crore. The Volvo Group is one of the world’s
leading manufacturers of trucks, buses, construction equipment and marine and
industrial engines.
Volvo IT is part of Volvo Group delivering IT services to
the Volvo Group as well as non-Volvo Group customers in Europe. Volvo IT has
been engaged since 1970 as an internal provider to Volvo cars and Volvo trucks
and since 1999 to external customers in the business that is being acquired, HCL
Tech said in a communication, on Feb.16, 2016, to the BSE. About
2500 highly skilled people are engaged in serving both the internal IT needs
and the external customers. The Revenue pertaining to the external IT business being
acquired has been SEK 1,537 M in FY13, SEK 1,558 M in FY14 and SEK 1,687 M in
FY15 (FY ending December).
The transaction is expected to be completed by the
end of March 2016, following the fulfillment of certain conditions, says the
official website of Volvo. The move is said to increase HCL Tech’s presence in
the European markets, according to Nikkei Asia Review.
According to HCL Tech, this transaction enables
the Company to create a market leading position in the Nordics and France,
gives it a differentiated offering in Mainframe services and provides it with
significant domain capabilities to serve the Company's global automotive and manufacturing
customers.
As
a part of the deal, HCL Tech will add 40 new customers from the Nordics and
France to its portfolio, further enhancing its market leading position in these
regions. Approximately 2,500 highly skilled people working for the Volvo Group will
transfer to HCL across 11 countries. The deal is one of the largest IT deals
signed by any Indian IT company, and a first in the industry to use principles
of Vested Sourcing as the basis of the relationship for an IT outsourcing
engagement of this size and magnitude. According to the agreement, which
follows a Letter Of Intent to this effect announced by Volvo Group in October
2015, HCL will use its 21st Century Enterprise Framework to deliver on a technology
transformation roadmap for optimising Volvo Group’s infrastructure and
application operations; making it ready for the rapid advancements in business
enabling technologies such as cloud, automation, business intelligence and big
data.
HCL
will deliver on a technology transformation roadmap that spans over 3,500
applications, 20 +data centres, over 11,000 servers, 12 PB of storage, 20,000+
MIPS of mainframe capacity and over 15,000 network devices. As part of this
roadmap, HCL will also provide over 65,000 Volvo end users with access to
productivity and user enablement solutions, such as Microsoft Office 365.
The
relationship is significant and enables HCL to:
1.
Create a market leading mainframe and iSeries capability; while Volvo is
already delivering excellent services to IT customers in the Nordics based on
these capabilities, HCL will now make further investments in these offerings
and take them to its global client base.
2.
Create an Automotive Centre of Excellence in Gothenburg based on the domain
expertise of the Volvo team, to serve HCL’s global automotive and manufacturing
customers. Volvo
IT customers will now have the advantage of access to a broad range of
differentiated global capabilities, tools and processes that integrate with
technology environments at a global level. At the same time, they will
experience the benefits of HCL’s unique Employees First culture and its philosophy
of Relationship Beyond the Contract.
“Combining the strengths of HCL with those
of the transferred parts of Volvo IT will result in an organisation with
formidable capabilities and an intimate understanding of Volvo Group needs and opportunities.
This, and the cultural fit between our two organisations, is the foundation for
a partnership that will provide long term and strategic benefits for the Volvo
Group,” said Olle Högblom, CIO of the Volvo Group and President of Volvo IT. “I
am convinced that HCL will prove to be an outstanding partner also for the
other customers of Volvo IT and that our former employees of Volvo now joining
HCL will find themselves becoming an important part of a leading global IT
services provider, with a very exciting and modern business philosophy.” “We
are excited to drive business transformation through IT for one of the world’s
leading companies,” observed Anant Gupta, President & CEO, HCL
Technologies. “We welcome over 40 new Volvo IT customers to the HCL client
base. This addition enables HCL to achieve an even stronger presence in the
Nordics and the wider European region, and accelerates our journey in these markets.
We are also pleased to have significantly enhanced our diverse workforce, with
highly skilled industry professionals joining us from Volvo’s IT business. The
Volvo Group employees and consultants will add great value for our customers
with the skills and expertise that they bring. We are delighted to welcome them
to our team. The deal perfectly embodies HCL’s ongoing mission to develop its
business with an innovation-led mind set.”
With
this engagement, HCL will become the largest IT services provider of Indian
origin in the Nordics. It will build on this exceptional position and
accelerate through cutting edge initiatives, such as the Centre of Excellence
in Gothenburg, to deepen its relationships and further integrate with clients,
helping them to achieve their IT transformation ambitions and vision in the
region.
Source: Volvogroup.com; HCL
Technologies; BSE
