IBM's recent acquisitions of two design firms – US-based Resource/Ammirati and Germany-based Aperto – are the latest in a slew of similar acquisitions by IT services providers as they seek to deepen their design and user experience skills, addressing the growing demand for these skills from clients in various vertical industries.
Design skills have become "must have" capability for IT services vendors
Through these acquisitions, the terms of which were not disclosed, IBM is following the recent trend of IT services players acquiring design firms, or firms with a combination of digital design and advertising skills. Rival Accenture snapped up Boomerang Pharmaceutical Communications, PacificLink, Reactive Media, and Brightstep in recent months to add niche, vertical industry-based design capabilities to its portfolio of digital offerings. This trend is not limited to the global SIs, as offshore vendors such as Infosys (which acquired Kallidus), Wipro (acquired Designit), and Tech Mahindra (acquired Pininfarina Designs) also are snapping up companies that bring additional design and/or user experience skills into their portfolio. In truth, IT services providers and traditional outsourcers started making such deals several years ago (IBM was among the earliest to do so), as providers needed to have skills that can help their clients manage the customer lifecycle.
Given the rise in digital and transformative engagements during the past year or so, it comes as no surprise that leading vendors are making investments to position themselves as end-to-end providers of services across the digital and customer engagement spectrum. The need of the hour in the IT services space is the ability to offer a highly consulting-led portfolio that spans digital and business strategy, is tied to user experience design, and can be combined with traditional SI and outsourcing offerings. This is also an avenue where vendors are eager to build differentiation and competitive advantage as they seek to diversify outside of the cutthroat world of labor arbitrage-based services delivery. The success of these acquisitions will ultimately depend on how well the vendor(s) are able to amalgamate these entities and their distinct "personalities" into their wider portfolio, and more importantly, how they articulate the value-add these additions bring around the digital enterprise proposition that everyone is peddling. We anticipate a much faster pace of growth in the demand for such digital- and customer-focused services as enterprises across verticals (particularly media, telco, retail, and financial services) attempt to provide the elusive "ultimate experience" to their customers and employees – as well as further investments from services providers and SIs to match demand.
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Hansa Iyengar, Analyst, IT Services