New Delhi: Tata Consultancy Services Ltd (TCS) on Thursday said it has acquired London-based design firm, W12 Studios, the first acquisition of India’s largest information technology (IT) services company in about four years. The deal underscores TCS’s growing confidence in its newest offering, the TCS Interactive digital design arm, to scale up revenue from this fast-growing business.
TCS acquires London-based design company W12 Studios
The move by TCS mirrors the approach of Accenture Plc, which in less than a decade has built the digital design business into more than $7.8 billion in revenue, according to Mint estimates.
The acquisition also signifies that TCS is open to acquisitions instead of only building technologies and talent in-house. The company last invested $50 million in a joint venture with Mitsubishi Corp. in Japan in 2014.
TCS said on Thursday that W12 Studios was founded in 2012 and has about 50 people. The company did not disclose the financial details of the acquisition.
“W12 Studios will be part of TCS Interactive, further strengthening that already impressive array of creative and experience services it offers,” the Mumbai-based company said in a statement.
TCS is also India’s first IT firm to establish a dedicated marketing services arm, under TCS Interactive.
“We acquired a small company in Santa Clara some years back, which had a studio and core digital skills. Having acquired that company, we started building capabilities around it, and now have digital interactive, which is helping us offer solutions to clients which look at what is called as ‘re-imaging the future,” TCS’s chief operating officer N. Ganapathy Subramaniam said in an interview last month, when asked on the rationale behind setting up TCS Interactive.
TCS acquired Brightfon Inc., a Santa Clara-based firm in 2010.
Subramaniam declined to share details, including revenue of TCS Interactive.
He however said it is a relatively new entrant compared with Accenture, which started this business in 2009.
“Accenture has built a very huge business (around Accenture Interactive). We are a new entrant, if I can say. Now, very soon, we will share the service line breakup also. So, how much we are making in cloud, artificial intelligence, analytics, interactive. Hopefully, from the next quarter onwards, we will start publishing it,” said Subramaniam.
The rationale behind Accenture, Nasdaq-listed Cognizant Technology Solutions and now TCS setting up TCS Interactive or marketing services arms underscores how these IT firms are looking to grab a bigger slice of marketers’ advertising budgets away from traditional advertising firms.
Interactive is coming to play an important part of digital strategy of large IT outsourcing firms, which still continue to generate much of their revenue from managing IT infrastructure or from software engineers writing code for applications that help their clients run their business. Many of the world’s largest companies are moving their ad dollars from traditional media, such as print, to the web, pushing more IT firms to chase the opportunity in the digital world.
Digital accounted for 28% or $1.46 billion of TCS’s $5.2 billion revenue in the July-September period.
“TCS Interactive is a direct competitive play to offer large enterprises an alternative to Accenture,” said Phil Fersht, chief executive of US-based HfS Research, an outsourcing-research firm.
“In my view, TCS will be one of the three most aggressive competitors to Accenture in the digital space over the next three years.”
Earlier this year, Accenture, which follows the September-August financial year, told investors that Accenture Interactive generated $6.5 billion in revenue for the year ended August 2017.
Last month, the management said revenue at Accenture Interactive, which employed 25,000 people, grew more than 20%.