Indian IT services giant Infosys is considering acquiring Europe’s leading IT and consulting services provider Capgemini, according to BBC reports.   

The share price of both companies jumped on Friday amid market speculation that the Indian offshore giant was considering making a move for the French organisation. The acquisition would be long overdue, according to Mark Kobayashi-Hillary, offshoring director, National Outsourcing Association.

Capgemini has enjoyed record profits during past quarters and would prove an attractive target for the major Indian providers. The French organisation recently made two acquisitions of its own, including snapping up Kanbay International, a North American financial services specialist with a strong Indian presence, in February 2007.

The addition of Capgemini – which now has operations in a range of locations including India, China, Australia and Poland – would enable Infosys to spread its outsourcing cost-base globally by offering a ‘blended’ services delivery model from multiple locations. The French company’s strong consulting arm would also prove attractive to the Indian offshore giant, as demand for consulting services in Europe continues to grow rapidly.  

Both Infosys and Capgemini refused to comment on the speculation.

Wage inflation in India has started to undermine the cost advantage that initially jump-started the offshore outsourcing boom. In order to complete against the big US outsourcing providers such as IBM the Indian giants will be forced to adopt a more global outlook and to diversify their portfolios. Indian rival Tata Consultancy Services has already moved into the UK insurance business.

Market watchers widely predict a period of consolidation in the outsourcing and IT services sector during the next 18 months.

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