The fierce competition between Indian and multinational software companies has entered an exciting phase as both are chasing each other's markets.

While supporting their offshore requirements, these companies are also targeting the domestic markets in India and China aggressively. The low-cost advantage of offering IT services is gradually negated by the MNCs, increasing their offshore facilities. Similarly, most of the leading Indian companies have started focusing on building non-cost differentiators to succeed in the global market. To corner the markets and niche skills Indian companies have been acquiring the foreign software companies. As outbound deals are more than inbound deals in India, it seems MNCs are more aggressively looking to tap Indian talent.

The Indian IT sector is riding high with a substantial increase in M&As and Private Equity (PE) deals. The value of both inbound and outbound M&A deals has risen from $1.3 bn in 2005 to $2 bn in the first 10 months of 2006. And 51 PE deals worth $1.5 bn happened in 2006 compared with 22 PE deals of $250 mn in 2005. One of the key aspects emerging from the recent deals is the average deal size has almost doubled since 2005. Moreover, the average revenue multiple has increased from 1.12 to 1.84. Some of the major M&A deals that happened this year include the Capgemini-Kanbay deal for $1.25 bn, the $380 mn acquisition by EDS of MphasiS and the acquisition of Office Tiger by RR Donnelley for $250 mn. In the area of PE space, the major deals include the KKR deal of picking up 85% stake in Flextronics for $900 mn, $100 mn investment by Olympus Capital in Quatrro BPO solutions and the $68 mn that General Atlantic Partners invested in Hexaware Technologies.

The Analyst Magazine, Software M&As, Private Equity, PE, Indian IT Sector, IT Services, Indian Companies, BPO Solutions, Indian Companies, National Association of Software and Services Companies, NASSCOM, Corporate Technology, Capgemini, International Business, Indian Software Companies, IT Outsourcing Services, Communication Technologies.