IT services firm CSC has announced the acquisition of application development and maintenance company Covansys in a $1.3bn (£650m) deal that will double its offshore workforce in India.
The acquisition will give CSC a major boost to its offshore workforce in India. Covansys has 9,000 employees worldwide, of whom 6,400 are in India. The firm recorded revenues of $455m (£228m) last year, 21% up on 2005.
CSC has a big presence in the UK public sector and is lead contractor for the NHS’s £12.4bn National Programme for IT in three of its five regions.
Last month, the company extended an IT outsourcing contract covering the Department of Health’s headquarters for two additional years, in a £20m deal. It also secured a £140m business process outsourcing contract with joint Home Office and Foreign Office body UKvisas.
CSC also revealed last month that it had picked up previously undisclosed UK contracts worth £193m in the first quarter of 2007. months.
Ovum analyst Phil Codling said the acquisition of Covansys was part of a process of job cuts in more expensive locations, particularly the UK and Europe, and rapid growth elsewhere.
“In the past year, CSC has grown its own Indian headcount by 75% to 8,000. The addition of Covansys will thus almost double Indian capability for the company overnight,” he said.
The addition of thousands more staff in India would step up CSC’s competition with rival IT services firms, he said. “That's a significant and beneficial jump, given the unrelenting demand among customers for 'more for less', the competitive threat posed by the Indian firms and the 20,000-plus Indian headcounts now boasted by key (and larger overall) competitors IBM Global Services, Accenture and EDS.”
The acquisition would also bring CSC “relevant applications skills which can be put to work in its own - typically much larger - outsourcing contracts”, he added.
CSC chief executive Van Honeycutt said: "With this action, we are significantly strengthening our capabilities and presence in India as well as creating an additional market channel for our industry, consulting and outsourcing solutions."
Raj Vattikuti, chief executive of Covansys., said: "CSC is at the forefront of the global IT services industry, making it an ideal partner for Covansys. It also creates exciting opportunities for Covansys employees while increasing our capacity to penetrate new industry verticals and deliver superior service to our existing clients.”