As IT services increasingly become commoditized and with rising price pressure, technology service providers have long realized the potential growth in the consulting segment, driving efforts to expand their consulting businesses.
Wipro, in particular, has been on an acquisition spree, relying on inorganic routes to regain its position among the top three Indian IT services providers. Its biggest acquisition ever, Wipro’s purchase of Capco is a turning point, leading the company in delivering high-end consulting.
Through Capco, Wipro aims to revive its banking, financial services, and insurance (BFSI) business, establishing itself as one of the largest, end-to-end global consulting, technology, and transformation service providers in the BFSI industry. With over 5,000 employees, Capco brings digital, consulting, and technology services capabilities in the financial services space, covering banking, capital markets, wealth, asset management, and insurance sectors. It serves some well-known customers in the Americas, Europe, and Asia Pacific and adds 30 new, large banking and financial clients to Wipro’s portfolio. Capco’s revenue of around $700 million will help Wipro increase its BFSI revenue to $3.2 billion from the current $2.5 billion.
Apart from strengthening its BFSI portfolio, the Capco acquisition is another attempt by an IT giant to diversify its services through expanding into consulting. Though IT service providers have been organically building their consulting businesses, they also have made a series of acquisitions in the past to strengthen their consulting capabilities. The drive to scale their consulting businesses becomes even more relevant amid the pandemic.
However, this transition comes with its own set of challenges, demanding a shift from an implementation-centric model to an integrated service model that calls for a consultative approach to sales and solutions delivery. This requires firms to bring in consulting professionals, those with a specific domain or industry background, to work with sales and delivery executives to manage key accounts.
The deal could possibly benefit Wipro’s customers in sectors such as banking, payments, capital markets, wealth, asset management, insurance, energy, and commodities trading. Customers can look forward to integrated and bespoke solutions that come with a consulting layer. Also, renewed risk, regulatory, and compliance capabilities help customers keep up with the ever-evolving regulatory landscape.
Even though there is a positive sentiment around the new CEO and the reorganized operating model, there is a market expectation that it will take 18–24 months for things to stabilize at Wipro.
Analysis by Gaurav Dewan, Assoicate Research Director at Avasant.