Capgemini boosts presence in India

Capgemini is buying IT services company Kanbay International, boosting its Indian presence.

The deal values Kanbay at $1.25bn, and the addition of Kanbay's India-based staff will bring Capgemini's total headcount to 12,000 in the sub-continent by the end of 2006 - an 89 per cent increase on the last quarter.

The total staff employed by the expanded company will be around 72,000.

Kanbay shows that Cap understands that with Indian labour costs rising, as talented staff become harder to find, offshore is no magic bullet.

Capgemini CEO Paul Hermelin said the acquisition supports the company's growth strategy and "significantly enhances" its banking, financial services and insurance practice particularly in India and North America.

In a research note, Ovum analysts Douglas Hayward and Dominique Raviart said the deal is a "clever move".

The note said: "Capgemini becomes a significant player in India and pulls well ahead of its European peers in offshore provision."

It added: "Kanbay shows that Cap understands that with Indian labour costs rising, as talented staff become harder to find, offshore is no magic bullet, and that suppliers combining onshore/offshore models need client-focused vertical specialism offshore as much as onshore."