India-based L&T Infotech has acquired Citigroup Canada

Global IT outsourcer enters Canada, targets enterprises

Global IT services provider L&T Infotech Ltd. is set to broaden its presence in the Canadian outsourcing market following what the India-based company’s CEO called a “good” acquisition of Citigroup Canada’s IT outsourcing arm.

“We were really looking to a much stronger foothold in the Canadian marketplace,” said Sudip Banerjee, CEO of L&T Infotech. “And one quick way to do that is to get a good acquisition which gives you access to a new set of customers.”

L&T InfoTech already did have a very small operation in Toronto, but the Citigroup acquisition now gives it an additional 215-person team, 95 per cent of whom are IT professionals.

While Citigroup focused on servicing the financial sector, L&T Infotech plans to offer a greater portfolio of IT services to this newly acquired customer set as well as focus on additional sectors such as insurance.

Some of Citigroup’s customer base may already have established relationships with outsourcing vendors but others may not yet have, said Banerjee. “We try to sell deep rather than acquire more customers, so we will continue to pursue the same strategy,” he said.

L&T Infotech’s IT service portfolio aims for end-to-end coverage, said Banerjee, which includes general software development, maintenance, remote infrastructure, business intelligence, data warehousing, independent testing services.

The company’s focus will remain the large enterprise market given these customers understand how outsourcing fits in their often-global operations, said Banerjee. “They are amenable because they themselves have global operations, they’ve seen the benefits of scale, they’ve seen the benefits of engaging in global vendors,” said Banerjee.

But that doesn’t mean the company has no aspirations toward the small-to-medium sized market. It’s just a matter of ensuring there is enough volume and size so that L&T Infotech can “maintain the continuity” of business, said Banerjee.

L&T Infotech faces some stiff competition from incumbents in the Canadian outsourcing market, including CGI Group Inc. But while CGI has the advantages of being local and a long track record with its customer base, Banerjee said L&T Infotech has global strength on its side. “What we bring is global knowledge, global capabilities, lower cost of ownership,” he said.

Mark Schrutt, director of services and enterprise applications with Toronto-based IDC Canada Ltd., said with existing IT service providers in the Canadian market, L&T Infotech has its work cut out for it. “In this particular area, they’re going to have to compete with those firms for this particular service,” said Schrutt.

But while L&T Infotech may be lesser known in the Canadian market, acquiring Citigroup’s resources will prove to be an advantage. “If they’re going to be successful in Canada, they’ll probably want to take the same route by focusing on manufacturing, utilities, and energy,” said Schrutt. “That would be a natural because that’s what they are doing in the U.S.”

Schrutt said partnering with other IT service providers will be an important strategy for L&T Infotech, considering customers’ tendency to multi-source rather than rely on a single end-to-end provider. “The vendors have to play together. Partnerships will be critical to win business,” said Schrutt.

Banerjee said L&T Infotech will invest in its IT services platform by maintaining and enhancing it to keep up with the changing IT services landscape, and using it as the foundation to broaden its global foothold. He expects that in the course of the next 12 months, L&T Infotech will need a larger office space than what Citigroup’s IT outsourcing arm currently has.

IDC Canada issued its technology predictions for 2011 this week, one of which was that Tata Consultancy Services Ltd., a global IT outsourcer, will join the ranks of the Top 10 service providers in Canada.
 

Referring to global IT outsourcers in general, Banerjee said the Canadian market is attractive for such vendors who have yet to build a strong presence here. “There’s no question that global firms who have commanding presence and have a large number of resources in low-cost countries are going to lead the charge as far as entering new markets are concerned,” said Banerjee.

Follow Kathleen Lau on Twitter: @KathleenLau

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