UBS-Credit Suisse merger: Some Indian IT vendors may gain, others lose

UBS-Credit Suisse merger

BENGALURU: According to reports, Indian IT companies have contracts worth about $600 million with Credit Suisse. The latter’s acquisition by UBS is anticipated to cause some consolidation in these IT contracts. While some merchants might profit, others would lose.
According to sources who spoke to TOI, Cognizant, TCS, and Wipro have contracts with Credit Suisse worth up to $350-400 million annually combined. Infosys, Tech Mahindra, and HCL Tech each receive a portion of the remaining outsourcing pie.
It’s too soon to tell how much Indian IT would suffer, according to Phil Fersht, CEO of the US-based IT firm HfS Research. “I predict a merger between two major companies, and several other providers will suffer financial losses. The primary two incumbents, Cognizant and TCS, may benefit from the outcome since they may gain market share at the expense of rival suppliers. After a significant merger like this, the consolidation frequently shifts to the suppliers with the deepest institutional knowledge of the client, he added.
IT consolidation is anticipated, according to Pranati Dave and Kriti Gupta, practise directors at outsourcing research firm Everest Group. “The new business will need to rationalise vendor portfolios and IT estates to realise considerable cost synergies because there are duplicate technology platforms and applications. More short-term investment on integration will be necessary if the two banks merge, they noted.

According to the two, UBS and Credit Suisse have historically been enormous outsourcing businesses, with two or three key service providers controlling the majority of the work. However, they pointed out that over the past few years, both institutions have actively reduced their outsourcing staff and increased their in-house capabilities. The entire service provider portfolio for both banks will be rebalanced as a result of this strategy and the dynamics of the acquisition, they claimed.
Cognizant stated that service connections with clients constitute confidential information and the company does not divulge details. Wipro did not respond to the TOI enquiry. Credit Suisse declined to comment on Indian IT’s $600 million exposure to it.

As of December of last year, UBS had 22% of its 74,000 employees in Asia Pacific, and India is a big part of its tech operations. Cognizant has also been a key partner to UBS, but the latter’s insourcing actions have significantly reduced its exposure to Cognizant. Both Credit Suisse and UBS have a significant presence in India through their tech centres.

According to Mrinal Rai, principal analyst at technology research firm ISG, large mergers and acquisitions frequently result in a reduction in the service scope for service providers as well as an expansion of that scope. Rai anticipates that captive centres operating in India will undergo some rationalisation, which could present some opportunities for service providers.

The UBS-CS merger, according to the Swiss newspaper Tages-Anzeiger, might result in the loss of 36,000 employment; Credit Suisse has already cut 4,000 staff this year.