umlaut is one of the largest acquisitions in this space for Accenture
The US-based IT firm Accenture acquired German firm umlaut to bolster its engineering and services play on June 14. According to analysts, while this move will scale Accenture’s capability in the engineering services space, it will impact top Indian IT services firms, who have increased their focus in the sector in recent times.
umlaut has 4,200 employees, including engineers and consultants, who will now be integrated with Accenture’s Industry X services, which focuses on Industry 4.0 including IoT and smart manufacturing across industries like aerospace, automotive, telecom, energy and utilities.
“We predicted that digital would ultimately be applied at scale to the core of a company’s business – the design, engineering and manufacturing of their products. And, for nearly a decade Accenture has been building the unique capabilities and ecosystem partnerships to combine the power of digital with traditional engineering services,” said Julie Sweet, chief executive officer, Accenture in a statement.
“COVID-19 has accelerated the need for companies to transform these core operations, and umlaut’s leading and highly-specialized engineering services will enhance our ability to meet the accelerating demand and also continue innovating for our clients,” Sweet added.
Engineering services market
Unlike the Indian players, Accenture did not have a big focus in this sector. However over the last few years, the company has been making acquisitions to build its engineering capability. Since 2017, the company has made 22 acquisitions to build its Industry X capability.
umlaut is one of the largest acquisitions in this space for the company, according to analysts. The company’s revenue in FY19 was $402.6 million.
Pareekh Jain, founder, Pareekh Consulting, which is into engineering and services consulting, said, “This is a big move and is a clear shift in the company’s acquisition strategy of buying many smaller firms and integrating with the firm. They have shifted gears now to strengthen their engineering and services play.”
Engineering and R&D service is one of the fastest growing sectors compared to IT services and BPO. The sector was growing in double digits before the onset of the pandemic. The sector is set to regain its double digit growth this year, with digital transformation gaining momentum at the back of the pandemic.
Jain explained that the companies have realised that without the digital engineering capabilities, companies might not be able to offer end-to-end solutions, making investment in the sector important.
Apart from Accenture, other global companies like Capgemini that now have a huge focus in the space. Capgemini acquired Altran, an engineering services firm for $4.1 billion.
Impact on Indian IT
However this might impact Indian IT firms. Analysts pointed out that competition will be high for the top Indian IT with the entry of Accenture for large deals in the engineering services space. While the impact might not be immediate for the pure play engineering service players, analysts said the companies should build scale or focus on niche capabilities to compete with larger players in the long run.