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From Infosys to Wipro, IT firms Eye Acquisitions to Add to Adtech Skills

With digital spending rising across sectors, there is increasing interest by top information technology (IT) services companies to acquire and build internal advertising technology and marketing analytic capabilities.

Infosys, the country’s second largest IT services company, announced in April the acquisition of WongDoody, a US-based, full-service creative and consumer insights agency, for around $75 million. WongDoody, an award-winning entity with studios in Seattle (its headquarters) and Los Angeles, brings Infosys globally recognised creative talent, and deep marketing and brand engagement expertise.

Last year, Cognizant acquired UK-based digital agency Netcentric and Zurich-headquarterd digital marketing and experience firm Zone. Last month, the Nasdaq-listed firm acquired data analytics firm Hedera, for an undisclosed sum.

Wipro has an entire marketing and e-commerce portfolio within their digital services division. It has been steadily building the capability with acquisitions of design and user experience and design firms such as Designit (in 2015) and Cooper (in 2017).

Infosys’ acquisition of London-based design firms Brilliant Basics and Tech Mahindra’s acquisition of UK-based BIO Agency in 2016 were also steps in this direction.

Accenture Interactive, digital and marketing arm of Accenture, has been on an acquisition spree since it first acquired UK-based Karmarama in 2016. The global IT major has since added more than 10 companies to the Interactive portfolio. Recently, Accenture announced plans to acquire Meredith Xcelerated Marketing, a cross-channel and content-focused marketing entity. Accenture Interactive’s annual revenue is estimated to be around $6 billion, a third of their total digital business in the past financial year.

Analysts view this movement to acquire businesses in the digital marketing space as a strong need for these companies for creative talent to supplement their technology resource pool.

“If a large business is using services of an IT company for procurement and analytics, it also spends on the likes of Google/Facebook, as well as creative agencies for marketing and branding purposes. This is why technology service players are increasingly investing in creative design and analytic skills. And, therefore, are looking at acquisition opportunities to acquire these type of niche skills,” said Raja Lahiri, partner, Grant Thornton India.

Added Tom Reuner, managing partner at HfS Research: “Indian providers have been historically coy over investing in inorganic growth. Thus, unsurprisingly, they trail peers like Accenture which have structured and expansive investment functions to build out broader digital strategies.”

Moving up the value chain and becoming the transformation partner is a prudent strategic approach, ultimately being able to cross-sell and up-sell, he added.

The investment in design and digital marketing capabilities by Indian IT firms also seem to have started paying dividends. Last month, Tata Consultancy Services (TCS) was named a Leader in Nelson Hall’s Digital Marketing Services for 2017. It is offering design and digital marketing transformation services, from ideation to execution, spanning the entire marketing value chain. TCS Interactive, which proves design thinking and digital experience, has successfully executed around 1,500 projects for a little over 300 customers so far.

“Today’s clients face challenges of speed and agility. And, are looking for agencies built from the ground-up for the digital world, providing the right brains and skills,” says Amy Fuller, chief marketing & communications officer at Accenture. “CMOs are looking for equal parts strategic and creative partner, with a mix of multi-disciplinary skills such as design, deep technology and marketing analytics, to help solve their toughest business and brand challenges.”

IT service companies apart, even technology giants such as Facebook, Google, Amazon and Oracle are increasing their footprint in marketing technology.

According to eMarketer, the US advertising market grew by nearly $12 billion in 2016. And, for each new dollar spent, Facebook and Alphabet, the parent company of Google and YouTube, took a combined 77 cents. – Business Standard

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