Atos lays out $3.4 billion to beef up digital cred via Syntel acquisition

Stuart Lauchlan Profile picture for user slauchlan July 23, 2018
French firm Atos is paying out to acquire digital credentials in the shape of Indian supplier Syntel.

Thierry Breton

In another confirmation that the big ticket Systems Integrators (SI) need to up their digital credentials, French-based Atos is splashing out $3.4 billion to snap up Indian firm Syntel and its proprietary tech.

Founded in 19890, Syntel employees around  23,000 people globally, of which around 18,000 are based in India, with centers in Mumbai, Pune, Chennai and Tirunelveli.

The acquisition will beef up Atos’ Business & Platform Solutions (B&PS) division,  expands Atos’s presence in North America and puts added weight behind its Banking, Finance & Insurance verticals. There should also be cross-selling opportunities across both the US and European customer bases of the firms.

This isn’t the first time a French firm has bought up an Indian counterpart - Capgemini acquired iGATE in 2015 - but it is a significant move on the part of Atos. CEO Thierry Breton argues that it’s a logical next step to shore up the firm’s digital credentials:

This transaction is the ideal step of Atos digital repositioning to address a broader market covering the whole potential needs of our clients, CMOs, CTOs and CIOs. It will help us accelerating our digital transformation capabilities building, taking advantage of Syntel strong capabilities and exposure to digital, which already represents over 40% of Syntel's revenue 

In IoT [and] social, they're extremely strong, have developed proprietary solutions, which will be extremely helpful for us in automation also. And then, of course, in cloud, robotization and all these kind of things also, so that things that are very important. But they have developed also specific verticals in finance, in health care, in logistics, in insurance, in retail, and all this is extremely important to us more because we need this for our customers and serve their request.

Syntel is one of the best-in-class delivery platforms with one of the highest B&PS margins of the industry. We intend to roll-out their tool and processes to improve the competitiveness of our own B&PS business. Syntel comes with a very agile criterion and an academy to train future managers to this criterion. It also brings one of the most advanced resource planning tools to allow very fast assignment of staff to new project ramp up.

Syntel's digital services include cloud, Big Data, analytics and IoT-focused services, which account for 21% of its revenue. Specific offerings include Digital One,  a suite of services designed to enable customers to drive strong business growth and enhance profitability by integrating mobility, user experience, social media, Big Data, artificial intelligence, micro services and IoT connected devices. It also provides a digital accelerator platform, ATOM, to help clients fast track the development of ‘smart’ applications by employing native cloud architecture container technology to seamlessly work across clouds in an open platform.

There is, inevitably, an AI spin here, in the shape of SyntBots, Syntel’s intelligent automation platform, for which the pitch is the provision of a holistic IT automation approach, leveraging cognitive tech and AI. It’s estimated that SyntBots are present in  over 30% of Syntel customers today.

Long time coming

The deal has been a long time in the making, explains Breton:

We first approached Syntel 4 years ago in October 2014. Since then, we have had lengthy discussion about combining Syntel and Atos. We had many meetings to understand each other, to convince each other that this transaction will create strong value for our clients, our shareholders, but also to provide a very interesting future for our staff. Progressively, the founder, Bharat Desai, and myself established a good relationship. Finally, we agreed it was now time to materialize and reap the benefits of the sum entrepreneurial and efficiency-driven criterion. This long-term relationship is for us an additional credential for our ability to make this acquisition a success.

Syntel also comes with some juicy logos as customers as Breton notes:

Syntel has a strong capability and a strategy to form its long-term clients base with more than 1,000 customer-focused leaders, providing them with vertically dedicated high-value services. Three largest clients are State Street FedEx, Amex. Syntel has developed a suite of digital solutions, such as SyntBots, their automation tool. They are deployed within most of their clients.

The two firms do appear to complement one another in terms of client base. Atos has a bigger footprint in manufacturing, retail, transport and public sector, whereas Syntel is stronger in  banking and financial service sectors - including insurance, with 12 of the top 30 insurers among its customers - making up 43 % of current revenues. Meanwhile in retail, Syntel has 3,000 specialist staff on board.

Breton says that Syntel customers also sign up for multiple offerings:

Syntel has developed over the years a specific know-how and also very strong relationship with all their customers, including, of course, their three major customers. And what is important to understand is that they don't have one contract with these customers. They have many, many, many contract with their customers and especially with the three of them.

In fact, it's not 10, it's not 20, it's not 30, it's a huge number of contracts because they are present everywhere.That's why they're extremely good in helping their customers to move and to compensate all the transition, but on very long term [basis]. So this [customer] loyalty is something extremely important and specific.

My take

This looks on paper to be a very good fit - and with 4 years in the making, not a deal that’s been rushed into, which bodes well.

A grey colored placeholder image