Wipro to Acquire Harman Connected Services for $375 Million to Boost ER&D Capabilities

On August 21, Wipro, the Bengaluru-based IT business said that it would pay up to $375 million to Harman International Industries for a 100% stake in Harman Connected Services Inc. (DTS) and its subsidiaries, as well as some other assets. Subject to US antitrust clearances and other regulatory approvals, the all-cash deal is anticipated to be completed by December 31.

Boosting ER&D and AI-Powered Engineering Capabilities

According to a press statement, the acquisition broadens Wipro’s capabilities and ER&D service offerings by strengthening its AI-powered digital engineering and device engineering, which includes design-to-manufacturing across the consumer, industrial, healthcare, and aerospace sectors.

Harman Connected Services: Global Footprint and Growth

With more than 5,600 workers spread across 14 countries—including India, the US, South Korea, the UK, Poland, and Germany—Harman Connected, a multinational provider of engineering research and development (ER&D) and information technology services, has its headquarters located in Connecticut, USA. Services accounted for almost 85% of the company’s 2024 revenues, which were $315 million in 2022, $308.2 million in 2023, and $314.5 million in 2024.

Wipro Strengthening its ER&D Market Position

According to Wipro, the business hopes to give customers the flexibility and accuracy of a specialised supplier as well as the reach and capabilities of a global leader by fusing Harman Connected’s individualised, high-touch delivery strategy with its global scale and technological ecosystem.

Industry Trend: IT Firms Accelerate M&A in ER&D

This transaction represents yet another consolidation effort in the ER&D and digital engineering services sector. According to analysts, IT companies’ inorganic strategy reflects a larger trend in the sector, whereby they may use mergers and acquisitions (M&A) as a means of overcoming slow organic growth.

Wipro Expanding its Service Portfolio

HCLTech purchased an automotive engineering services provider in 2023, while Infosys has already acquired two businesses to expand its ER&D service capabilities by 2024.

To assist Olympus Corp., HCLTech will set up a special ER&D services centre. Traditionally, domain experts like L&T Technology Services, Cyient, Tata Elxsi, and others have supplied the majority of ER&D services. However, IT services providers are rapidly seeking to capitalise on this new growth area as ER&D spending has accelerated over the past two years. Cognisant, an IT company with its headquarters in Teaneck, has increased its revenue in the last two quarters by acquiring ER&D firms Belcan and Thirdera.

Government and Market Outlook for ER&D Growth

It’s interesting that the government has taken notice of the sector’s explosive rise. In FY23, ER&D Global Capability Centres (GCC) grew by more than 30% to around $25 billion, according to the 2024 economic survey. In contrast, the business process management (BPM) and traditional IT industries developed on a lower base but at a quicker rate in percentage terms. In FY23, GCCs in the IT segment increased by 30% to $9.7 billion, while the BPM segment increased by roughly 27% to $10.7 billion.