OA500 2024: Top Outsourcing Firms Drive Growth Through M&A

Special Report

OA500 2024 analysis found that the world’s top outsourcing firms boosted revenues by $12.1 billion through mergers and acquisitions (M&A) in 2023. The OA500 2024 study, conducted by global outsourcing marketplace Outsource Accelerator, found that the top 10 firms increased revenues by 42.3%, which stood at $8.5 billion before the acquisitions.

A quick look at the top ten OA500 firms shows a total volume of 45 M&A deals entered in 2023, based on filings on Crunchbase and ZoomInfo.

Accenture led the pack, with most of its 35 acquisitions focused on artificial intelligence (AI) firms like Ammagamma, Redkite, and Nextira. This aligns with Accenture’s $3 billion investment plan announced in 2020 to expand its AI capabilities through M&A and other initiatives. By expanding its business portfolio, Accenture is bracing for the AI wave.

Capgemini’s two acquisitions in 2023 also beefed up its tech portfolio. In June, it bought Tokyo-based cloud services provider BTC Corporation. Months later, Capgemini acquired silicon design and verification services firm HDL Design House.

Enterprises also conduct cross-industry deals, which enables them to reduce risks if their own industry is facing headwinds. Wipro’s Consumer Care and Lighting acquired spice brand Brahmins – its lone purchase in 2023. It enabled Wipro to have a presence in the thriving food segment. 

OA500 labor force surges following M&A deals

In terms of employee headcount, the OA500 firms experienced a massive 363% surge to 399,282 workers after the M&A deals, up from 86,232 pre-acquisition. The added manpower allows these outsourcing giants to meet client demands better and enhance service capabilities.

For example, Cognizant’s acquisition of information technology and consulting firm Thirdera added over 940 workers to its ServiceNow Business Group, which initially had 1,500 employees.

In addition to meeting the demand in the ServiceNow unit, the deal also gave Cognizant access to Thirdera’s consultants from North America, Spain, Colombia, the Netherlands, and Australia, among other places.

OA500 firms in telco lead in revenue boost

Broken down by segment, OA500 firms in the Telecommunications sector saw their revenues increase by $13.2 million from $1.4 million before M&A. This is followed by the Software ($2.4 billion), Hospitals & Physicians Clinics ($4.1 million), and Hospitality ($1.04 million) segments. 

The growth in telecommunications can be attributed to the continuous rise in demand for high-speed internet services. Work-from-home arrangements, the growing adoption of mobile devices, and the growing online gaming industry are seen as the growth drivers in the telecommunications industry. 

In response to this trend, the outsourcing sector has turned to M&A to beef up its services, including customer and technical support, finance billing, cybersecurity services, and lead generation. 

Case in point: Accenture’s acquisition of AI-powered cybersecurity company MNEMO last October strengthened its managed security offerings for telecom, banking and insurance clients across the Americas.

OA500 M&A prospects 

The robust M&A activity by the OA500 firms signifies increasing demand for outsourcing services, particularly expertise in AI and other emerging technologies. Combining strengths through acquisitions is an effective way for companies to expand suite offerings, stretch their global footprint, and fortify their workforce.

However, intricate challenges such as aligning corporate cultures, managing intellectual property rights, and streamlining the decision-making process must be navigated. But over time, the synergy becomes seamless as both parties learn about each other’s customs and inherent potential.

As AI evolves, we might observe a slowdown in post-merger workforce growth. As seen in other industries, AI has pushed companies to lay off hundreds and thousands of employees. The outsourcing industry is not immune to this possibility. 

To prepare for this future, leading outsourcing firms are prioritizing workforce retraining and upskilling initiatives. This will position them to steer their talent pool through the volatility ahead.