Wipro acquires cloud services provider Appirio for $500 million

Image: Punit Paranjpe / Reuters

Wipro, India’s third-biggest software services provider, has acquired US-based Appirio, a large cloud services provider in the area of workforce and customer management, as CEO Abidali Neemuchwala attempts to accelerate the shift towards cloud computing and digital services.

The deal — valued at $500 million — will bring Bengaluru’s Wipro the ability to provide a formidable portfolio of services on the internet to clients, including Johnson Controls, Coca-Cola and Facebook, Wipro said in a press release on Thursday. That value is about 2.5-times Appirio’s 2015 revenues of $200 million based on an April report in Indianapolis, where Appirio is based.

While Wipro is well-known for its ‘string-of-pearls’ acquisition strategy, not all of the purchases in the past have panned out. “This transaction will catapult Wipro into one of the largest cloud services providers among the Indian peers,” Sandeep Gogia, associate director at Equirus Capital in Mumbai, said in an email to Forbes India. “Appirio’s revenue per employee is about 3.5-times that of Wipro’s currently. This will strengthen Wipro’s offerings around newer technologies and could create cross-selling opportunities,” he said.

India’s $110 billion IT sector is desperately struggling to keep its core IT services business going, which accounts for the bulk of the sector’s revenues, but is more or less stagnating, even as new opportunities arise in cloud computing and digital services. Global uncertainty around multiple factors, including Brexit, the US elections, slowing growth in China and no real economic growth in the world’s biggest economies has prompted the Indian IT companies’ biggest customers to cut back on IT spending.

That resulted in one of the worst fiscal second-quarter results for top-ranked Tata Consultancy Services, while No 2 Infosys cut its full-year revenue forecast by more than a third. Wipro is expected to report its September-quarter numbers after markets today.

Wipro may say its fiscal second-quarter revenues grew by a mere 0.5 percent from the previous quarter, analysts at ICICI Securities estimate, although they expect the company to forecast current quarter revenues to increase by as much as 3 percent. That would put Wipro in a position to report a better second half of the year that ends on March 2017. Appirio’s acquisition will help.

Established in 2006, Appirio is headquartered in Indianapolis with offices in San Francisco, Dublin, London, Jaipur, and Tokyo, with 1,250 employees worldwide, according to the press release by Wipro. Its customers include Stryker, Robert Half, Johnson Controls, Cardinal Health, Coca-Cola, eBay, Facebook, Home Depot, and Sony PlayStation.

Its customers use Appirio’s cloud-based software platform to manage their own workforce as well as customers relationships using applications from Salesforce.com and Workday. Appirio also brings to Wipro, Topcoder, a leading crowdsourcing marketplace connecting over a million designers, developers and data scientists around the world with customers.

"In an increasingly digital world, as consumer behaviours and expectations continue to be reshaped by experiences, companies are recognising that they need to transform how they engage with customers and employees by leveraging the power of cloud. Appirio and Wipro are coming together to unlock transformational synergies in the applications space and help enterprises create new business models," Wipro’s CEO Neemuchwala said.

Wipro will consolidate its existing cloud applications practices of Salesforce and Workday under the Appirio brand and structure. Chris Barbin, CEO of Appirio, will lead the expanded business. The acquisition is subject to regulatory approvals, and is expected to close by December.