IT's new wannabe

You are a conglomerate and you run disparate IT departments that employ about 1,500 people and offer services worth (at least notionally) Rs 2,000 crore a year. What do you do with it? Options are you a) keep it, b) outsource it, c) spin it off and hope that it becomes a TCS if not an IBM. If you picked options a or b, then you’d never make it to Anil Ambani’s strategy team. The Chairman of Reliance-Anil Dhirubhai Ambani Group (R-ADAG), it appears, is drawing up plans of a serious foray into IT services. The group won’t comment, but it appears Ambani is willing to set up a war chest of $2 billion (Rs 8,000 crore) to exponentially grow Tech Reliance’s small headcount by either building four or five development centers across the country or buying his way into them.

For now, Ambani is said to be appointing a 15-person team to drive his latest foray. The good news for this team is that it won’t have to start from scratch. Apparently, the group already spends Rs 1,500-2000 crore on its in-house tech requirements, which range from telecom to financial services to media and entertainment, and has a team of 1,500 techies. These resources, currently scattered across group companies, are to be pooled under Tech Reliance. According to realtors, Ambani is close to opening development centres in the IT capital, Bangalore, and will obviously tap Mumbai and Delhi for his largescale infrastructure.

However, it is likely that Ambani may choose acquisitions over organic expansion. The former would not just help Tech Reliance scale up quickly, but also bring in critical customer relationships. While there’s no dearth of IT services companies in India—at last count there were 1,200 NASSCOM members—the industry is pretty top heavy. The Top 20, for instance, account for 80 per cent of the total revenues. The Big Three alone—Tata Consultancy Services, Infosys, and Wipro—employ 250,000 people together and boast of combined revenues of over Rs 50,000 crore. “These companies already have large headcounts, secured large and long-term contracts and are even evolving into global technology players,” says Sid Pai of TPI, a global sourcing advisory.

So what kind of companies Tech Reliance acquires will be inbtapart, Ambani’s IT venture will have to contend with the global IT giants such as IBM and Accenture, which are not just using India as a low-cost development base, but also aggressively targeting the local market. IBM has already signed deals with the likes of Bharti and Idea, Accenture and Capgemini have also been winning deals in the domestic market.

Of course, Ambani and his team know all that as well. What is it that they know that others don’t is something we’ll find out in some time.

— Rahul Sachitanand