Atos acquires Syntel (

Yesterday, Paris-based Atos announced its intent to acquire Michigan-based Syntel for $3.4 billion. The deal is the latest in a series of recent acquisitions for Atos and is expected to generate approximately $250 million in revenue and $120 million in cost synergies by 2021.

Atos had two strong needs that Syntel can fulfill: improved growth in North America, especially in banking and financial services, and a way to improve the company’s margins and global delivery capability. 89 percent of Syntel’s business is from North America, and its operating margins are among the highest in the industry at 24 percent, enabled by its 18,000 employees in India. For Syntel, the timing was right. While margins were good, growth had stalled of late, and traction in important areas like infrastructure services was not comparable to its peers.

Continuing a M&A Growth Strategy 

The deal represents a continuation of Atos’ M&A-based growth strategy. With the acquisition of Siemens IT in 2011, Bull SA and Xerox’s ITO business in 2014 (and the near acquisition of European digital security provider Gemalto in 2017), Atos has established a clear precedent that non-organic activity is going to be key to its future growth.

The acquisition meets three criteria for Atos:

  • It expands their North America and BFSI footprints: While the Xerox deal helped Atos expand in North America, it has not significantly moved the needle in terms of growth – in fact the company reported a 3.4 percent decrease in North America revenue from 1H 2017 to 1H 2018. The majority of Syntel’s revenue comes from North America and is weighted to BFSI. We analyzed the more than 85,000 commercial contracts in the ISG contracts database and 60 percent of the Syntel deals we identified were in BFSI and healthcare – two industry verticals that Atos appears to be interested in growing. Of these deals, only one was based in EMEA. The rest are in North America.
  • It creates an offshore presence to compete with archrival Capgemini: Atos will be adding approximately 18,000 India-based engineers to the approximately 16,000 it has today, which will help boost its global delivery capability and margin profile. Atos’ chief competitor, Paris-based Capgemini, has nearly 90,000 engineers in India thanks to its iGate acquisition in 2015. This is a fierce rivalry, and Atos needed to narrow this gap in order to better compete on both price and engineering capability.
  • It adds an industry-leading automation platform to the portfolio: Over the past few years, Syntel has been laser focused on its automation strategy. Syntel’s automation platform, dubbed “Syntbots,” has delivered some impressive savings for both IT operations and business process clients. The addition of this platform-plus-modernization approach will help Atos do what many of its competitors have been doing for the past 24 months via a combination of automation and vertical expertise – take out upwards of 50 percent of “run” costs to fund new digital transformation initiatives (see the Q2 ISG Index presentation for more on this topic).

Culture Eats Strategy for Lunch 

All of Syntel’s management team is expected to join Atos, and Syntel CEO Rakesh Khanna will join Atos’ Executive Committee. This is good news for ISG clients, as it will help ensure that there is as little disruption as possible for buyers of both Atos and Syntel services. As we’ve written in the past when large deals happen – one of the most important factors for clients during this kind of change is management continuity.

However, the two firms could fail to sync up when it comes to their cultures. European firms don’t often connect with Indian firms, but the iGate-Capgemini deal shows that it’s possible for two different cultures and operating styles to survive and even thrive in the long run.

We’re bullish on both firms’ ability to make the deal succeed in the long run. Atos is building a strong competency in M&A, and its Total Operational Performance (TOP) program will help ensure that this acquisition meets financial goals and help the combined company’s clients better achieve their own business objectives.


About the authors

Stanton Jones

Stanton Jones

Stanton leads ISG’s Index research, helping providers, investors and ISG clients make sense of the global IT services sector. Stanton’s weekly newsletter, the Index Insider, is read by thousands of market stakeholders each week. An ISG Digital Fellow, Stanton has been quoted in Fast Company, Forbes and, and has appeared on national cable news.

Julien Escribe

Julien Escribe

What he does at ISG

Julien oversees ISG’s IT and technology consulting and advisory teams across South Europe, Middle East and Africa with a strong focus on Italy. He works to make sure that clients are using the right technology to optimize your internal IT operations, including workflow, efficiency, and that they’re getting the most from every interaction with their technology service providers.