Merger signals outsourcing business changing
American consultancy Darwin Partners is merging with the Chinese high-tech company Suzoft to give it vertical expertise
The merger of American consultancy Darwin Partners with an offshore Chinese high-tech company, Suzoft, announced today, is one more proof point that the outsourcing business model is changing.
On the front end, Darwin Partners offers subject matter and domain expertise to the financial service, high-tech, and health care industries.
On the back end, Suzoft does software design and development, engineering, localization, and quality assurance work.
The two companies have agreed to a share swap, with no group of owners cashing out or one acquiring the other, said Frank Robinson, CFO at Darwin. "Both parties have agreed to put their companies together to create something unique."
What Robinson calls unique is actually a fairly new trend in the outsourcing business model, with offshore companies trying to move higher up the value chain, according to Barry Rubenstein, senior analyst for application outsourcing at IDC.
The offshore companies need up-front business and IT consultants with vertical expertise in order to get beyond application maintenance and development. "They want to get into system architecture services that are geared to increased revenue," said Rubenstein.
Darwin Partners and Suzoft will operate as separate legal entities, with Suzoft being a subsidiary of Darwin Partners. Both companies employ about 400 people each.
Since there will no longer be two separate companies trying to take profit, there will be a cost savings to Darwin customers, according to Robinson: "It will be a "great cost saving."
Wipro Technologies and Infosys, two Indian outsourcing companies, have been building their consultancy businesses in the U.S. for at least two years.
"All the outsourcing companies are now hiring high-end consultants, ex-partners from the Big Six," said Rubenstein.
In addition, major U.S.-based services companies already have a large base of employees, especially in India, with IBM leading the pack with 40,000 employees, and Accenture with 20,000, said Rubenstein.
Outsourcing providers hope to reduce customer concerns over late projects and poor quality by putting their reputation behind the finished product.
