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With Cognizant acquiring SaaSfocus, subscription-based software companies are increasingly coming under the buyout radar, as software exporters reinvent themselves.
On Thursday, Cognizant announced its intent to acquire SaaSfocus, a privately-held consulting firm that specialises in developing software based on Salesforce technologies, and strengthen its business proposition in Asia-Pacific.
The New Jersey-based software company did not disclose the size of the deal but said that all 350 SaasFocus employees will be absorbed by Cognizant. Selling software and earning subscription revenues is called software-as-a-service in industry parlance.
SaaSfocus is one of the largest independent Salesforce Platinum consulting partners in the Asia-Pacific (APAC) region with operations across Australia and India. “Both these markets are fast growing and with this acquisition we get scale too,” said Jayajyoti Sengupta, Head of APAC at Cognizant. The company, however, did not mention from when the acquisition will reflect in their bottomline.
Other Indian software services majors such as Infosys and Wipro too have embarked on the acquisition route as they seek newer technology capabilities.
“Software service majors are reinventing themselves and if they don’t, they will be irrelevant. Acquisitions help them plug those holes faster,” said Vivek Mansingh, an IT veteran who is now General Partner, YourNest, a VC fund.
Wipro has made similar bets and even forked out $500 million to acquire Appirio, which works on cloud applications of software majors such as Saleforce and Workday. Infosys acquired Noah Consulting for $70 million, which develops software tools for the oil and gas industry.
Digital drive
By acquiring SaaSfocus, which itself is a Salesforce partner, Cognizant is hoping to cash in on the digital-led transformation initiatives that its clients in manufacturing, automotive, insurance and financial services have undertaken or are looking to undertake.
Sengupta added that Australia and India are still nascent markets when compared to the US but with this acquisition it is looking to cater to upcoming needs from companies in this region.
“It strengthens our existing as well as new software offerings,” he added. In 2016, Cognizant acquired privately-held KBACE Technologies, a company specialising in cloud strategy, implementation and integration of Oracle software. Currently, digital contributes close to 30 per cent of Cognizant’s revenues, largely in line with others such as TCS, Infosys and Wipro.
While Indian software service companies make these shifts, industry watchers point out that they should watch out and not have a herd mentality in making acquisitions that just add incremental value.
Peter Schumacher, CEO, Value Leadership Group said, “Clients seek solutions that are applicable now and can future-proof their business but they themselves don’t know how to go about it. It is here that the consulting approach will be tested.” .
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