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Old-economy companies are buying or investing in tech firms, as their definition of ‘core’ changes
Ask Pirojshaw Sarkari why a traditional business such as Mahindra Logistics, of which he is the CEO, picked up stake this year in ShipX, a provider of transport management solutions and he tells you, “Because data and technology are critical to our business. ShipX will help us increase digitisation and bring in operational efficiencies.” India seems to be slowly catching on to a global trend that began in 2017, when the acquisition of technology firms by non-digital companies crossed 51% of total deals in the U.S., according to research firm CB Insights. Earlier this year, FedEx bought digital logistics company P2P for £92 million. Retailer Nordstrom bought BevyUp and MessageYes, both in the messaging space, to help connect better with its consumers. Aerospace and defence firm General Dynamics acquired IT services firm CSRA for $10 billion. The first quarter of 2018 saw a record number of deals in which non-digital buyers scooped up tech firms in the U.S., according to PwC. This is a marked change from having trusted partners execute implementation.
In India, such activity has risen over the last two years, with the growth of e-commerce. Retail chains facing an e-commerce threat, or logistics firms facing stiff competition due to opportunities offered by online purchase trends, are investing in or acquiring technology firms. “Indian buyers have been hard-nosed when it came to a choice between buying and building,” says Arun Natarajan, CEO, Venture Intelligence. “Five years ago, they had to be brought kicking and screaming to the acquisition table. Not any more.” He cites Kishore Biyani’s Future Group buying Fabfurnish.com as also the logistics arm of e-commerce player Snapdeal. This year, TVS Logistics picked up majority stake in freight data solutions provider White Data Systems that belonged to the Murugappa Group. From technology services, the IT industry has gone on to offer BPO and network management and now offers data science services too. “User firms cannot ignore the economies of scale that the IT industry offers. It is only a matter of time before outsourcing for data analytics and related technologies becomes the norm.”
Source : https://www.thehindu.com/todays-paper/tp-business/when-technology-bolsters-identity/article25355680.ece
