ER&D Acquisitions – Capgemini, Accenture, and Now IBM!

/ October 2, 2022/ AI, Cloud computing, M&As (small under $50m in revenues), UX

Will IBM Follow Capgemini and Accenture in ER&D Acquisitions?

IBM Consulting, formerly IBM Global Business Services, will make a product engineering services (PES) acquisition with Dialexa. Dialexa was founded in 2010, is headquartered in Dallas, TX with an office in Chicago, and has 300 employees. The company provides traditional PES services such as mechanical and electrical engineering and embedded systems development and digital services, e.g., UX design, cloud, agile development, and AI.

IBM Consulting joins Capgemini and Accenture in their expansions to ER&D services and acquisitions. IBM’s consulting and IT services arm has been on a roll since Q2 2021, achieving a cc revenue growth of 17.8% in Q2 2022 with M&As contributing 1.0-1.5 pts. After years of low growth, Consulting has emerged from the pandemic as much strengthened, with revnue growth close to that of Indian peers. The Global Technology Services (Kyndryl) spin-off seems to have clarified IBM’s service priorities. IBM is back to investment in its service activities and has pursued an active M&A strategy, acquiring in cloud migration, and digital overall.

Dialexa is IBM Consulting’s first acquisition in PES. IBM Consulting is not considered a PES vendor. We suspect that the company already provides such services, possibly embedded in its software development capabilities, given its size (USD 4.8bn in Q2 2022). Give IBM some time to go through its portfolio and we will find IBM already active in the PES space. Meanwhile, IBM Consulting is already present in the digital manufacturing, thanks to its IoT service activities. NelsonHall has conducted an analysis of these capabilities here.

IBM Consulting may be beefing up its presence in ER&D services. Still, this is the beginning of the journey. There remains ample room for growth and we expect IBM to acquire competitors with an Indian delivery network. Given the lack of engineering talent in the US and the rising labor inflation, India seems the logical sourcing option.

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