By Aditya Kumar Gupta
11 years ago, Wipro took over three major firms as part of its Infocrossing deal, one of which was a data centre business. Yet, due to the developments in cloud computing, the data centre business has not proven profitable for Wipro and the company has decided to let go of it. Wipro is selling its stake in hosted data centre services to an American IT services company named Ensono Holdings.
Specifics of the deal
The deal has been concluded at a sum of $405 million, with Jefferies Llc serving as the primary financial advisor to Ensono Holdings and Credit Suisse as the financial advisor to Wipro. According to the terms of this deal, Wipro will transfer control of eight data centres and nearly 900 employees to Ensono Holdings, which is currently a 1,000 employee-strong company. The deal will add to the already hefty takeover portfolio of Ensono Holdings, which has executed a number of such takeovers over the last few years.
Ensono Holdings primarily conducts a hosted data centre business, connecting businesses across the world. Through this deal with Wipro, it will significantly expand its geographical footprint and establish a presence on the Indian subcontinent. A presence in an IT-booming nation like India could be incredibly beneficial for Ensono Holdings.
A new focus
Wipro has decided to divert its major focus towards digital innovation and away from data centre management. Hence this deal allows it to rid itself of any businesses which may have been holding it back. As an additional clause of this deal, both companies have decided to enter into a joint long-term agreement to collectively address the IT requirement of Wipros clients. Through this arrangement, Wipro will be sure not to lose any of its client-base due to a lack of technical support. This deal perfectly addresses the needs of both companies and combines their plans for future growth under a single umbrella plan.
As a part of this long-term agreement, Wipro will be making a strategic investment of $55 million in Ensono Holdings. This will help to boost the companies potential for expansion and will assist Wipro in its client management and support. Wipro, for its part, will get access to data centres on a global scale, which until now was limited to the Indian subcontinent.
Although Wipro made an initial investment in the data centre business, the development in cloud computing has made this investment unprofitable. Therefore greater focus on core growth-oriented operations is important for the future of both companies. The execution of this deal is sure to bring about positive movement in the entire data centre business space. As more and more companies decide to revert back to their core business functions, outsourcing service providers need to capitalise on the opportunities that are being created.