SopraSteria Grabs CIMPA and Proves the Engineering Services Sector is Red Hot

The recent acquisition of Airbus subsidiary CIMPA by SopraSteria is an important event and validates few of trends we identified in our recent Engineering Services Blueprint.

CIMPA was started in 1995 as a fully owned subsidiary of Airbus and provided PLM services to Airbus group companies. Later it also started providing services to companies outside of Airbus group. In 2014, it had 940 employees and €100 million revenue. Before it was acquired by SopraSteria the media reported that Infosys, HCL and Tech Mahindra were also interested.

SopraSteria was formed last year from the merger of two old French IT firms Sopra and Steria. The combined entity has revenue of €3.4 billion and 37,000 employees. SopraSteria, like other large French IT companies Capgemini and Atos, is on an acquisition spree to augment its capabilities and create new growth engines.

This acquisition is important for the engineering services industry because it:

1. Signals both the interest of engineering service providers in acquiring and the intent of enterprises in selling their captives or subsidiaries: Service providers, in general, have worked hard in the last decade to build trust with engineering services enterprises. Enterprises are ready to expand their scope of work with service providers.
2. Shows broad-based service providers willingness to enter engineering services market and make investments: In our Engineering Services Blueprint, we came across two broad service providers—Genpact and Cognizant—that recently entered engineering services and quickly scaled up their practice. Now, SopraSteria joins that list.
3. Supports our Engineering Services Blueprint finding that broad based engineering services providers are making investments in their engineering services practices: These practices are growing faster than specialist engineering service providers.
4. Validates our Engineering Services Blueprint finding that the competition in the space is between European service providers and Indian-heritage service providers: Now, one more European service provider—SopraSteria—will be competing for engineering services contracts.
5. Implies that service provider consolidation in engineering services is still not on the cards of enterprises: Airbus has declared, as part of the Make in India campaign, that it is working with all leading Indian-heritage engineering service providers, including Tech Mahindra, TCS, Infosys, Wipro, HCL, L&T Technology Services, QuEST Global, Cyient, Geometric, and Axiscades. Now another service provider SopraSteria joins the list of engineering service providers for Airbus.

This is a healthy and growing engineering services outsourcing market.

We believe there will be more engineering services captive acquisitions, and forecast that the service provider outsourcing market will grow faster than the captive outsourcing market. Ultimately, engineering service provider outsourcing will overtake captive outsourcing.