''Value migration can take place in any direction, and if you are too specialised, and you are caught unawares, it could be a huge problem'' Ashvin Parekh, Executive Director, Deloitte Touche Tohmatsu

First of all, the story makes an important observation that the business has grown on the basis of niche businesses. In its first meeting, the team has spoken of an overdependence on the niche, and this seems to be the reason that the company has earlier grown and why it is now slowing down. Now, this is true with all niches; you are at risk, for you can't be sure of value migration, and which way it will go. It can be in any direction, and if you are too specialised, and you are caught unawares, it could be a huge problem.

That is among the reasons Shankar Varma is trying to broadbase his revenues. Bascially, he is getting into four new sets of business, through acquisitions, and thereby spreading the risk his company bears. One thing is for sure: he knows that information vending-as a broad activity-is very important, and that is why he is moving into three more information vending businesses.

If we examine his acquisition of MES for $2.9 million, an enterprise application enterprise, it is plain that Varma wants overall control, as far as the financial stake goes. Next, the company acquired a majority stake in the German-based Mondo Software, a banking software company, for $25 million. Here, he is taking a chance by assuming that the value migration is in this direction. It could, of course, go as planned and pay off handsomely. But what about the call centre? This is becoming a commodity business. And what about Gulf Tech? If Varma has to justify all these moves, the overall diversification logic holds more soundly than the individual businesses.

By virtue of how different these businesses are, all the acquisitions have different profit and revenue potential. The last two acquisitions have low profitability, since the actual value addition is quite low, but are at least revenue generators. The first two acquistions of MES and Mondo Software will deliver low and medium results in terms of revenues, but their profitability will be medium and high. It's a mix, evidently, and it is clear that Varma is trying to spread out.

Broadly, he is working on the premise that information is of value. But he is uncertain which way value migration will go-so spreading out makes sense.

Another point brought out is that Varma is not acquiring companies to take over the day-to-day running, which remains with the earlier management. He has worked out a framework to reward the management for their performance. That must be a risk-reward calculation, and it looks like a clear case of buying revenues.

If we examine the saturation aspect, the enterprise market is a short-term revenue buying programme. The banking software company is a medium-term revenue buying programme. The call centre is a short-term programme, but can continuously add revenues. The fourth acquisition is probably more for its project-to-project potential.

There does seem to be a method to this madness, and Varma clearly believes that information is value. Note that IBM's recent acquisition of PWC was also on the premise that information will bring in value. Within information, there will be segments that will do well, and as it is, it is difficult to say where value is going to migrate these days.

In all, while Varma may have diversified his holdings and added revenues, he is still at considerable risk. Unless he knows something about value migration that he isn't telling us.

''The new phase of growth in IT services will be driven by established service providers who build credibility with their client bases over a period of time'' Ashok Wadhwa, Managing Director, Ambit Finance

In technology, there are no half-measures. It services competitiveness is about building scale in the depth and breadth of services. The truth is that the easy phase of organic growth led by massive, sometimes indiscriminate, outlays for it spending, is now over. The new phase of growth in it services will be driven by established service providers who build credibility with their client bases over time, and who take the effort to establish preferred vendor relationships.

Look around to understand how the notable Indian it services companies have grown; all the key players have grown around a set of deep client relationships that gave them the ability to develop to a critical size. As the market matured, these companies built domain skills around this initial base to propel growth.

That is what has happened. Now let's examine this case in particular. As the Case Game makes clear, BDL has been a change agent through its high quality, cutting-edge technology skills, leveraged to service overseas technology clients. In addition, BDL is respected today as an Indian services entity on the cutting-edge of technology thanks to that focus. Having created a respected business in that specific segment, this phase of growth requires that BDL build on its foundation to establish a similar franchise in additional business segments to develop the breadth and depth in its service offering.

BDL's strategy to compete globally is to create a leading provider of outsourcing services across domains.

In the current environment, that strategy is best executed through the acquisition of deep client relationships and preferred vendor relationships in targeted areas. If you examine the specifics, BDL's acquisitions have been along those lines, and in this endeavour, its strategy at its core has been no different from that of leading, established, global it services players.

While the cultural aspects of acquisitions in the manufacturing sector are important, the cultural aspects of acquisition in a services-driven business are absolutely critical. BDL's acquisitions need to be evaluated in the context of this sensitivity, heightened by the conditions of the current economic climate. Integration may not be apparent immediately, but needs to be viewed over a longer time frame than would have been considered in an earlier time.

Finally, while the acquisitions may appear uncorrelated, each of the acquisitions fills a domain skills gap or builds geographical presence, or both. Some of the acquisitions (e.g., Mondo Software) provide tight client linkages that deliver not just revenue, but the opportunity to deepen BDL's domain expertise. Other acquisitions (e.g., Gulf Technologies) provide BDL an inroad into the few areas of it services (US government services) that are growing but hard to penetrate in the current environment. And the call-centre acquisition (Delfast), in particular, provides BDL an excellent platform to build scale in an entirely new growth area in the outsourcing business.

All acquisitions take time to show results, and all require careful handling to do so. While BDL's acquisitions may appear disparate, the strategy does tie them together. Needed now: a year of solid execution.

''Focus should be on integration. It is crucial to research extensively during the due diligence process of a potential investment for clearer understanding'' S.L. Narayanan, Corporate Vice President (Finance), HCL Technologies

Shankar Varma's predicament is understandable. At a time when the business is faced with challenges posed by a radically altered market that no longer plays to BDL's traditional strengths, he wants to reengineer the portfolio for the future. For this, he has chosen the M&A route.

It is axiomatic that organic growth is simpler. Indeed there is enough published research and other material to show that the acquirer companies more often than not, end up destroying shareholder value. Accordingly, the board's discomfort with his gameplan will require careful handling and clear articulation of how the different pieces can work, and they can.

What key touchstones should guide Shankar?

• Develop a commonality of purpose: do not allow for divergent initiatives-stay focused on the plan. Matching up strategic objectives, determining the potential synergy between businesses, and putting a fair price on a transaction requires an objective, but educated perspective. It's about understanding the available options and, frequently, creating new ones.

• Make the integration process the No 1 focus: it is crucial to research extensively during the due diligence process of a potential investment in order to develop a clear understanding of the way the acquired business will be run post-acquisition.

• Compatibility: It is imperative that during the consolidation phase, sufficient corporate energy is devoted to harmonising the organisational philosophies between the parent and the newly inducted entity. Successful companies pay particular attention to the cultural sensitivities.

• Align financial incentives: Given the fact that Shankar's strategy is towards creation of a confederacy of businesses held together under a pan-BDL framework, he should look at a rewards system that incentivises the SBU heads for all efforts that create value at the holding company. A win-win approach will engender the right kind of attitudes and responses.

• Face the differences head on: Shankar has a tough job with a lot riding on his company's execution skills. The hazards are daunting, but they should not overwhelm him to the point of inaction. After all, business is all about managing, not avoiding, risks.