April 18, 2007
Hitachi woos European IT consultants
Life is tough for the medium-sized UK IT consultancy. Last week another one of them – Impact Plus – sought shelter in the arms of a bigger Japanese suitor, Hitachi of Japan.
Impact is one of a long line of independent consultancies that have been acquired by foreign companies. The Indian IT consultancies Tata, Wipro and Infosys have been making small deals to consolidate their foothold in the market.
David Bailey, the co-founder of Impact Plus, who now becomes head of Hitachi’s UK operations, told the FT that before the deal, he had struggled for four years to move the consultancy beyond the £10m turnover bracket.
The company lacked the brand power and financial clout to go after really big deals, found it too expensive to make its own acquisitions, and failed to find attractive-enough offers from venture capital backers. It was either stagnation or a deal with the Japanese.
There is already a big line-up of foreigners in European IT consulting. The Indians are the newer arrivals, while the Americans such as EDS, CSC, Accenture and IBM have been in the market for years. Hitachi’s compatriot Fujitsu has been active in Europe since 1990, when it took majority control of UK’s ICL.
Europe is an attractive market for foreign IT consultancies as there is still a lot of scope for businesses to improve IT efficiency. Using IT to increase competitiveness is a key theme for the European Commission. The UK in particular has seen huge public sector IT projects such as the £12bn NHS IT revamp. Local government is also generating a huge amount of work as local councils try to meet government savings targets by combining their back office systems.
Mr Bailey said there would be several more acquisitions, with an aim to making Hitachi’s European operations a 500 person, $100m turnover business in the next two and a half years. That is going to mean a lot of growth from 120 employees today.
The next deals are likely to be in France and Germany where there is little or no business yet. The small toe-hold the company has in Spain and Portugal will also be expanded.
