Once a year, in July-August, India’s top IT magazine, Dataquest (not related to Gartner Dataquest), for which I work, conducts an in-depth study of the Indian IT industry, capturing the growth of the overall domestic IT market, its various segments, and ranking companies doing business in/out of India in terms of revenue. That is what I am working on right now — collating numbers, estimating market sizes, identifying trends and so on. 

One trend this year is overwhelming. Every Indian company worth its name has either acquired a company overseas in the last few months or has a few million reserved to do that.

To many Global Services readers, the names of many of these may not even be familiar. Honestly, some of them are not even familiar to me. Many of them have revenues in the range of $10–$25 million. Yet, they are willing to try global acquisition, most of the times paying hard dollars.

This is in complete contrast to what the thinking was just half a decade back. Indian companies were known for their classic aversion to acquisition.

So what has changed?

A variety of environmental factors have contributed to this. First and foremost, the confidence levels have increased manifold. India has fast globalized in the last few years. Being the most preferred offshoring destination of the world, it has got access to the best of business practices and processes. This is when coupled with its technology and knowledge-driven economy means it has become an innovation center of the world. Innovation leads to risk-taking. The desire to go global by acquiring is a manifestation of that. What has also helped is the success of a few pioneers who have tried this route.

However, there is a clear method to this madness. Most Indian companies — and I am talking of technology companies only — are not acquiring for scale. They are acquiring for skill. Whether it is a three billion dollar Wipro adding the next pearl to its now famous “string of pearls” or a $100 million Sasken Communications acquiring Finland-based wireless firm Botnia Hightech Oy or even a $18 million Infrasoft Technolgies acquiring U.K.-based specialized services delivery firm M Consulting, all these acquisitions are meant to add skills that can act as fuel for future growth. They are not buying growth; they are investing in future growth.

On the contrary, most inbound acquisitions in India are still for a delivery presence with some scale or getting into the Indian domestic market in a big way.

Does that contrast have any future implications? Well, no one knows for sure. But experience gives some indications. America’s pre-eminent position in global business is, as Richard Florida argues, because of the rise of its creative class or the innovation culture. If Indian firms manage to even partially replicate that in India, then even established developed-world firms will find it increasingly difficult to compete with them.

But is there something called developed-world companies or developing-world companies? Ask Cisco. After setting up a big globalization center in Bangalore with much fanfare, now the company is eyeing to acquire in India. And it is clear that it would acquire companies that can add value, not scale to it.  

Globalization is truly a two-way road.