Capgemini, which has software development centres in more than 10locations outside France, including smaller ones in Poland, Morocco and Vietnam, wants to make India the default offshore location, said Aruna Jayanthi, chief executive of Capgemini India Pvt. Ltd, in an interview last week.
Most of Capgemini’s key clients, who operate out of France, Germany, New Zealand and the Nordic regions, have begun offshoring more work to low-cost countries as technology budgets remain little changed and companies seek to cut costs, adding pressure on the French company to accelerate its plans to boost its operation in India.
Capgemini’s bigger rivals International Business Machines Corp. (IBM) and Accenture Plc. already have a massive presence in India. Capgemini has “a very low-margin business compared to its global peers like IBM and Accenture” which could be the reason for increasing its India offshoring, coupled with the fact that most of Capgemini’s clients are also going in for more offshoring today, said Sudin Apte, founder and research director with tech research firm, Offshore Insights.
In the last six-seven years, Capgemini’s offshore presence in India has grown from 10-12% to 45% today, and it has a very strong consulting practice, which is what will help it compete with peers such as Cognizant Technology Solutions Corp. and Infosys Ltd for the India business.
Capgemini, however, cannot be compared with IBM or Accenture, according to Apte. “Firstly, Accenture, which is considerably smaller than IBM, is still three times larger in terms of revenue compared to Capgemini. Secondly, both IBM and Accenture have 72-75% of their total resources in global delivery markets, while for Capgemini this number is about 54-55%.”
The 139,000 strong Capgemini had more than 50,000 employees in India. In comparison, IBM is estimated to employ about 150,000 people in India and Accenture, 100,000. Accenture entered India in 1987, IBM re-entered the country in 1992 while Capgemini started operations here in 2000.
By 2016, Capgemini, however, expects the number to account for half of its global workforce. Moreover, the company that has traditionally hired experienced professionals will also add freshers, said Jayanthi.
The company posted an 18% revenue growth in India on a total revenue of €5.1 billion in the June quarter, said Jayanthi.
About 85% of the work done out of India is divided between infrastructure management, application development and management, and consulting services while the remaining 15% comes from business process outsourcing (BPO).
“Our engineering services delivery that is being driven out of India will offer ‘digital engineering’ solutions to clients globally, with two-thirds of the business opportunity expected to come from the US in the next 12-18 months,” said Girish Wardadkar, global leader-engineering services, Capgemini.
Investing in the engineering space also allows Capgemini to offer a suite of services in addition to its traditional IT services, infrastructure managed services, BPO and consulting.
Capgemini, she added, with its six innovation labs in India will help drive 50% of the digital transformation required by clients out of India in areas like the Internet of Things, cloud, virtualization of the traditional application, development and management services.
Sanchit Vir Gogia, chief analyst and chief executive of Greyhound Research, acknowledged that Capgemini is building its capability in the engineering vertical but added that the company may face “tough competition from established Indian software services companies such as HCL Technologies Ltd, Infosys and Tech Mahindra Ltd, that already have a strong engineering practice”. “The company may also need to reduce its pricing by 25-30% to compete with Indian peers going forward,” said Gogia.