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HCL Tech-CSC tie-up triggers merger buzz

The two companies are yet to appoint any new head for this partnership

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Software services provider HCL Technologies and its US competitor, (CSC), said on Wednesday they were tying up to explore opportunities in cloud and mobility. Though the two have not worked out a legal structure for the partnership, calling it only an "alliance", experts say "repurposing of the existing facilities" could possibly result in a merged company.

The talk has also gained because of rumours that HCL is talking to a global company for a merger. The company has denied it is hunting for any such opportunity.

The managements of the companies refused to comment on the talk of a merger. Mike Lawrie, global chief executive and president of CSC, met Shiv Nadar, HCL founder and chairman, before the announcement and said the shift to cloud is one of the most important shifts in the technology business and "when you go through a shift like that, competitors become partners". Lawrie was accompanied by a few other members of the company's global leadership team.

Anant Gupta, HCL president and chief executive, said special purpose centres would be carved out of delivery units of the two companies and they would share resources, splitting the costs as well as profits equally. "We have joined hands with on three core pillars - application modernisation, enablement of cloud platform and other technologies," he added.

The two are yet to appoint any new head for this partnership.

The has already bagged its first client in the US telecom giant AT&T, where a few of its legacy applications will be shifted to a cloud-enabled platform. The first delivery centres will come up in Bangalore and Chennai.

Information technology (IT) analyst Shashi Bhusan of Prabhudas Lilladher said in a note the relationship between the two seemed far deeper than what they were presenting. "We believe that the success of this partnership could possibly result in one integrated company." Bhusan added HCL might have to forgo CSC's old clients from rebid opportunities due to this partnership.

Milan Sheth, partner at consultancy EY, differed saying the tie-up didn't seem anything out of the ordinary and looked like an attempt to increase market access.

According to the companies, the partnership process was initiated in October last year. Lawrie, who has worked with HCL for around 15 years, said it did not consider any other IT company for this partnership as he was "pretty familiar with its capabilities".

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