Tech Mahindra To Acquire FixStream for $10 mn; Why Others Must Take Note

Tech Mahindra– India’s fifth largest software service provider is set to acquire 75% stake in FixStream, a technology startup for $10 mn.
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FixstreamFinally, some interesting news from India’s $88 bn IT services industry. Indian software companies, that are traditionally known to work on legacy technologies, are making a grab for a share of businesses that come from newer technologies.

The latest, to announce an acquisition in the data analytics and visualization space, is Tech Mahindra– India’s fifth largest software service provider. The company on Monday said that for $10 mn it will acquire 75% stake in FixStream, a startup that claims to make sense of massive amounts of disparate data.

For Tech Mahindra, which is sitting on a cash pile of over half a billion dollars, $10 mn is literally small change. Top tier companies like Infosys have larger cash reserves. At the end of the September quarter of 2013, Infosys, Wipro, HCL Technologies and and TCS had a total cash and cash equivalents of over $9 bn.

Recently, Indian services companies have been talking about their focus on newer technologies and shifting revenues to products and platforms. However, not many have made any substantial moves in that direction, except for the likes of Persistent Systems, which has been a product focused company from the start.  Persistent recently launched an early state venture fund to invest in startups. It funded Ustyme and Hyginex.

For mid tier IT services companies in India, the battle is equally steep. With no clear differentiation from the top tier players (except for lower margins), mid-tier companies have been struggling to sustain growth. Wouldn’t it make sense for them to make smaller technology focused acquisitions? What do you think?

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