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Hitachi to buy GlobalLogic for $9.6B
- petercooper 6y agoI love stories like this because it tends to result in a "Who??" from all over the place and reminds us that, yes, you too can be a multi-billion dollar company with very modest mindshare in the broader industry.
- qaq 6y agoIt's outsourcing company there is a decent number of them. Many from small Eastern European countries like EPAM Systems from Belarus (Stock: EPAM) Mkt Cap 22.55B. They tend to have HQs in US fo obvious reasons though. Surprised there is not much invest in this space as you can grow one pretty rapidly to a fairly large size.
- 55555 6y agoWow, impressive. Probably not much interest because they trade at a low multiple, but that's quite the company. In my experience the quality of the experience you get when working with a software consultancy/dev shop is inversely correlated to the size of the firm. But I guess it works for others.
- azinman2 6y agoThey probably have enough processes in place and enough longevity to be able to get government contracts, big corp contracts, etc.
- tstrimple 6y agoI've seen the same pattern as well. Growing dev teams quickly without quality drops is difficult. At some point, if you're successful enough in that space, your need to bring in more bodies outpaces your ability to ensure you've got good staff and processes.
- varjag 6y agoEPAM is there for soon three decades, I dunno about "quickly".
- qaq 6y agoThere is a good bunch of companies that got to Billion plus land much quicker than a decade. It is very feasible to do it in 5. You have to realize that most of them were bootstrapped and to grow you need enough resources to have a decent sales office/HQ in US which is out of reach for a long time unless you start with a very solid financial backing.
- varjag 6y agoIf you read my reply in the context I wasn't saying it in a negative way.
- imtringued 6y agoIf you don't have qualified staff then that should be part of your business model and you should be honest about it to your customers. Of course what happens is that managers ride on the reputation for some short term money.
- qaq 6y agoIt's way lower risk and if you can grow 50M into billions thats pretty much Unicorn level returns
- dopidopHN 6y agoI work with them on a regular basis. You are correct, talented folks. But they get the short end of the stick when it come to who does what. Moral is not super high.
- jan_Inkepa 6y agoI like that they chose the name "Effective Programming for America".
- AlotOfReading 6y agoIsn't EPAM a consulting company? I didn't think they designed their own products to outsource.
- Yizahi 6y agoThis distinction (and naming) is really not strict today, especially when total corp headcount exceeds a few thousands. One project may be pure software consultancy, another may be a a complex solution, yet another can be a hardware project inside the big corp (so if it was a separate entity it would be called a product company or startup). People can be outsourced or outstaffed or anything in between. Basically in a case of 10k outsourcing corp it is pointless to think about it as a single entity, it's a collection of projects each managed differently, with different expertise and different share of in-house development, from original products to dumb legacy support.
- ridethebike 6y agoDisclaimer: former EPAM employee (early 2010-s). Such big* consulting/outsourcing companies in Eastern Europe(epam, globallogic and the like) have competent engineers. I can see it especially clearly after moving to the US and having to interview engineers from other big consultancies. *big - everything with several k employees is considered big in Eastern Europe.
- wil421 6y agoThe Big 4 consultancies hire college grads give them basic training on the big cloud platforms and then fill up projects. Otherwise they hire cheap engineers from Eastern Europe or India. They are not looking for experienced engineers. At least in the Technology Advisory space.
- MangoCoffee 6y ago>The Big 4 consultancies hire college grads give them basic training on the big cloud platforms and then fill up projects. that's correct. i went thur that with Avanade. they teach us some basic about the security system that they implemented for their client and client ask for tech support and guess who they send.
- raincom 6y agoThat's how these offshoring consulting companies make money: for every 7 fresh undergrads, there is one senior person. They pay $3500 per annum for these cheaper resources; the senior resource gets paid about $16000 per annum. Profits for these consulting companies come from these $300 per month resources.
- texasbigdata 6y ago$300 per month for an undergraduate? Genuinely seems a bit low
- imtringued 6y agoThere are countries in Africa that pay more than that for unskilled manual labor. Even the cheapest software developer should be able to get $1k before tax per month. Of course I am assuming that these people actually became software developers, if those 7 juniors are merely trainees who haven't written a single line of code in their life then that salary may be justified.
- redisman 6y agoSame reason that WeWork was magically worth 100x equivalent real estate companies because Adam Neumann was so cool and quirky.
- redis_mlc 6y agoI talked to some non-real esate people about We. They couldn't separate the fact that WeWork offices seemed like a good idea overall from also being a financial dud.
- reader_mode 6y ago> Surprised there is not much invest in this space There is - huge spike in demand for talent locally in the last 5-10 years as this business model started becoming popular. Also seeing smaller agencies being acquired by larger ones in some decently sized acquisitions recently. Initially the local IT sector was undeveloped, there were quite a few good engineers working in really poor condition, the only decent option was relocating to Western Europe. So there were experienced developers available for cheap, and, compared to India, Central/Eastern Europe is closer to US (some overlap in work hours), usually a much nicer destination to travel to for offshore offices (depending on the country, Croatia for example is a really nice tourist destination, good English level and the culture should be more familiar). So initially that higher quality talent got absorbed at below market rates (especially for US standards) and there were quite a few success stories and reputation builders. But now as this model expands competition is driving up the price locally as well - there just isn't enough people to outsource - they are starting to scrape bottom of the barrel talent, asses-in-seats, straight out of college Indian code farm model with all the problems that had. Also portals like toptal made it easier to skip these agencies and work directly for clients so now the agencies have to compete with that for talent. I think the peak for this agency model is behind us and I think the quality has started to drop (there were a few smaller agencies that built their reputation like I described above and had great success, they used availability of local talent to built respectable teams and getting hired there was a resume highlight, sort of like getting hired at FAANG on a local level. Nowadays they are hiring people they would screen out after an initial call and it's selling asses in seats, cashing in on built reputation)
- missedthecue 6y agoSame goes for Hitachi... I thought they mainly dealt in heavy industry like Caterpillar. They seem to be more of a Samsung.
- nolok 6y agoAs a rule of thumb Asian giants tend to deal in everything. Especially true for Japanese giants (which is weird, since for Japanese companies it's also common to find small giants that deal in one thing only and never integrate). Especially especially true for Korean giants.
- DoofusOfDeath 6y agoAgreed. Hitachi makes a rather famous "muscle relaxer" called the Magic Wand.
- Ftuuky 6y agoFrom magic wands to self-propelled mortars, Hitachi manufactures pretty much anything that has enough market demand. https://en.wikipedia.org/wiki/Hitachi#Products_and_services https://en.wikipedia.org/wiki/Hitachi#Products_and_services
- MangoCoffee 6y agoyup. i didn't even know Hitachi is in IT. (https://en.wikipedia.org/wiki/Hitachi https://en.wikipedia.org/wiki/Hitachi) so many Global IT houses like IBM, Avanade...etc. is IT outsource/consulting pie so large to feed all these companies?
- dcolkitt 6y agoI would honestly love to read a write up from somebody closer to the source, what the hell do all these companies do? I’ve been in tech and tech-adjacent companies for over a decade. And not once have I or anyone around me ever thought “we really need some IBM/Hitachi/Avanade products now”. What value proposition do firms like this actually fill? I’m genuinely curious.
- namdnay 6y agoThey’re outsourcing firms
- ab_testing 6y agoI have worked in this space for a long time . Most of these companies implement COTS software . So if you want to implement Oracle, SAP, Salesforce, Service Now , JIRA or other such enterprise software , you will invite bids from these consulting companies for implementation, support and SLA .
- keypusher 6y agoThe short answer is that they deliver solutions and support. What they sell, primarily, is the ability for someone at your company to call them and say "we have problem X" and they will respond "no problem, we can solve problem X for you", and they will take care of the rest. This usually costs millions of dollars. Let's say you are a large Fortune 500 company. A bank perhaps, a large retailer or an oil company. Your net worth rivals Amazon. You do not use AWS or GCP, you host your own data centers, and you have for decades. Now let's say you need another few petabytes of storage with global replication, durability, availability, you need hardware delivered, fibre cables routed, software to tie it all together and someone to call when you run into problems or someone on your backend application team can't figure it out. Or maybe you need Oracle and SAP integrated with Active Directory for your 100,000 employees. Well, these companies will make that happen. Or many other problems you might have, such as building custom applications, implementing tooling, designing systems, whatever. It's kind of like asking "who employs all these personal chefs?! I've been eating for years and I've never needed a personal chef. I just go to the store, buy some groceries, and make food from the recipes I find online!" The thing is that some people just don't want to deal with all that, and they have enough money to make it someone else's problem who has done it before.
- spaetzleesser 6y agoThat’s pretty common. There are a lot of super successful companies that do good business without any mention in the media. I think a lot of SV companies are very dependent on media coverage to get their valuation up. Especially since they don’t have an idea how to make profits.
- dna_polymerase 6y agoThe Silicon Valley rockstars you are talking about are usually customer facing, therefore media coverage is of interest for a broader mass. GlobalLogic provides services to companies, which makes them less commonly known. Meanwhile Hitachi is known in a certain niche at best...
- fireattack 6y agoI honestly think Hitachi is well-known even for average people (not for IT division though). Not Sony level for sure, but isn't exactly niche. But maybe it's just my bias too.
- okl 6y agoI think so, their name is on a lot of construction equipment.
- pySSK 6y agoThey also have the Hitachi Magic Wand vibrator, which is commonly known as just Hitachi. The brand was also known for power tools but that's not a part of the company anymore and is being rebranded to Metabo.
- sangnoir 6y agoNo - I'm afraid you are mistaken: what Hitachi sold was a "massager" - they were "distraught" to discover it's salacious "alternative" uses as it harmed their brand. Hitachi only agreed to continue selling the product as a joint venture (IIRC) if they removed the Hitachi name from it. So it's rebranded as just the "Original Magic Wand" now - no Hitachi :)
- flycaliguy 6y agoPlenty of people saying “who?” because they only know the sex toy I suspect.
- antonvs 6y ago> you too can be a multi-billion dollar company with very modest mindshare That's in terms of valuation, not revenue. GlobalLogic has barely hit $1 billion in annual revenue. Its FY 2019 revenue was $771 million, according to [1]. It's projecting $1.2 billion for 2021. It has somewhere around 17,000 - 19,000 employees, which works out to somewhere between $40k to 60k revenue per employee per year. And that's not even profit. (As a completely unfair point of comparison, Google's revenue per employee is upwards of $1m.) So a $10bn valuation is just ~18,000 people, times ~$55k revenue per person, times a 10x "times-revenue" multiplier for the valuation. I think a lot of the surprise at unexpected multi-billion valuations comes from the perspective of how big $1bn seems to an average individual. But it's not that big once you do the math for companies with 10,000+ people. [1] https://www.prnewswire.com/news-releases/hitachi-to-acquire-globallogic-a-leading-us-based-digital-engineering-services-company-301259254.html https://www.prnewswire.com/news-releases/hitachi-to-acquire-...
- brd 6y agoI'm not at all surprised to see this. The writing has been on the wall that Hitachi has an appetite for getting into enterprise software. 5-ish years ago they bought an SAP infrastructure shop that I used to work with when I consulted in the space. At the time it seemed they were dipping their toes but it felt like only a matter of time until they made a bigger push into enterprise software services.
- mooreds 6y agoThey also bought Pentaho, an ETL tool, in 2015: https://www.hitachivantara.com/en-us/newsroom-hvtv/in-the-press/2015/gl150604.html https://www.hitachivantara.com/en-us/newsroom-hvtv/in-the-pr...
- keypusher 6y agoThey have actually been in this area for quite a while. My first real dev job was at HDS after they acquired Archivas back in 2007. We built off the Archivas foundation to deliver petabyte-scale object storage for big enterprise/govt, kind of like selling S3 in a box for companies to put in their datacenter. HDS made the hardware and software. https://www.crunchbase.com/organization/archivas https://www.crunchbase.com/organization/archivas
- diogenescynic 6y ago"Software developer" is being used very generously here. GlobalLogic from what I understood was more of an Infosys or outsourcing company.
- deleted 6y ago[deleted]
- Taylor_OD 6y agoThe lines between a consulting company and outsourcing company don't really exist anymore. Especially at this size.
- ullevaal 6y agoWhat distinction are you making? I take your comment as pointing at the fact they they are not owners of the software when it’s done, but developing software for others still makes one a software developer, or no?
- iujjkfjdkkdkf 6y agoA lot of the "system integration" work that these big consultancies get hired for is more like configuration (of big erp systems like SAP and Oracle or whatever)? There may be some overlap but as I understand it's very different from what many people would think of when they hear software development. Edit: I think this causes internal confusion as well, like consultancies hear "software project" and assume their team can do it because they have "software" experience, and then you end up with these disasters like you hear about from Accenture and Deloitte where they spend 10's of millions of dollars building a website that doesn't work. The parallel language in a academic, SV type tech, and tech consulting is actually a source of a lot of confusion.
- paxys 6y agoThe thing with these consulting companies is they will never say no (including for stuff that they are wildly unprepared to do). You can hire them for installing software on employees' computers, deploying and managing some SaaS product, building a healthcare signup website for an entire state, building an internal portal, running a tech conference, even planning a company picnic (not kidding). So trying to define what area they operate in and what exact role their employees play is impossible.
- i6ruce 6y agoHuh, an American company. The majority of the employees of which are from eastern Europe or India.
- tootie 6y agoThere's a few of those EPAM is also US-based but has most of it's workforce in Belarus and Ukraine.
- simonw 6y agoInteresting section on their Wikipedia page: https://en.wikipedia.org/wiki/GlobalLogic#OpenStreetMap_Foundation_2018_elections_incident https://en.wikipedia.org/wiki/GlobalLogic#OpenStreetMap_Foun... OpenStreetMap Foundation 2018 elections incident "The OpenStreetMap Membership Working Group released a public report [25] alleging that this was an orchestrated, directed campaign by GlobalLogic to register in mass their Indian subsidiary employees, and suggested an attempt to manipulate the election" The linked report has way more details: https://openstreetmap.lu/MWGGlobalLogicReport20181226.pdf https://openstreetmap.lu/MWGGlobalLogicReport20181226.pdf
- macintux 6y agoFascinating read, thanks. Curious about the two board candidates who didn’t wish to co-sign the letter recommending an investigation.
- stereo 6y agoI'm one of the report authors, and was elected to the OpenStreetMap Foundation board one year later. One candidate thought that the OSMF shouldn't ever choose who gets to be a member. We respectfully agreed to disagree. The other candidate, despite being shown all the evidence, thought that there was nothing nefarious, and that asking the OSMF board to investigate was a "witch hunt". The previous OSMF board chairperson and secretary are no longer active in the OpenStreetMap project.
- madara7890 6y agoNice
- oliv__ 6y ago> San Jose-based GlobalLogic is currently owned 45% each by Canada Pension Plan Investment Board and Swiss investment firm Partners Group Man, what? What a weird set of owners
- vco3340 6y agoExtremely common for mature companies to be backed by private equity and pension funds
- MattGaiser 6y agoCanada Pension Plan is the equivalent of Social Security in the USA, except that it invests. They own all sorts of stuff all over the world. Bridges. Airports. Hotels.
- whalesalad 6y agoNorway does something similar afaik and are sitting on a pretty wicked pile of cash.
- Twixes 6y agoNot a pile of cash really, but a trillion+ dollar diverse portfolio of investments. Still wicked
- bidirectional 6y agoWhy is it weird?
- pottertheotter 6y agoThey are actually pretty normal, but I guess not well known outside of the investment world. These are two of the largest groups making private equity investments. Partners Group is a very large investment management firm with $109bn assets under management (AUM), of which 48% is in private equity. It is pretty common for pension plans to invest in private equity firms, but the larger ones also make direct investments, usually alongside a large PE firm such as Partners Group. CPP Investments, the entity that manages all of the assets of the Canada Pension Plan, has US$378bn AUM. ~25% of that, $90bn, is in private equity. Some of their direct investments, which you can see on their website[1], are Blackhawk Networks, Jimmy John's, Neiman Marcus, Petco, Qlik, SUSE, and Waymo. They also have investments in VC firms, such as A16Z, Sequoia Capital, and even Y Combinator. [1] https://www.cppinvestments.com/the-fund/our-investments/investment-private-equity https://www.cppinvestments.com/the-fund/our-investments/inve...
- spaetzleesser 6y agoThis could just be a product of the specific people I have dealt with but I have had the (dis)pleasure of dealing with quite a few outsourcing companies and GlobalLogic so far has been the only one where I felt the relationship is productive and we are getting good people.
- sdwvit 6y agoUsed to work for GL, they treat employees well.
- failwhaleshark 6y agoSo it's a San Jose-based TCS-alike. Outsourced software development, including industries like automotive. Yikes. :-/ Remember how 737 MAX MCAS happened? Outsource software development. Outsource developers don't have the same motivations and interests to produce and support good code over the long-haul. The old proverb usually holds: "If you pay peanuts, you get monkeys."
- WanderPanda 6y agoWould be great to have a census on programming power worldwide. Like the hash rate in bitcoin. Probably going straight up, and though it feels like almost all apps and websites are hacked together without any eye on details and even increasingly limited features
- dustinmoris 6y agoHitachi is definitely going into the digital services market. They have been working on a lot of various iterations of VeinID technology and have launched their own cloud hosted finger vein authentication solution last October and are definitely investing into this market. This from the article confirms by thinking: > Past GlobalLogic projects include working with McDonald’s on its customer app and in-store digital ordering system and with chipmaker Qualcomm on a fingerprint recognition system, according to its website. And here are some resources to the VeinID innovation which has been going on at Hitachi: https://social-innovation.hitachi/en/case_studies/finger_vein_smartphone https://social-innovation.hitachi/en/case_studies/finger_vei... https://social-innovation.hitachi/en/case_studies/pbi https://social-innovation.hitachi/en/case_studies/pbi https://social-innovation.hitachi/en/article/touchless-finger-vein/?WT.ac=fb_en_touchless-finger-vein_2103 https://social-innovation.hitachi/en/article/touchless-finge... And here is the press release of Hitachi launching their Biometric cloud service: https://social-innovation.hitachi/en/topics/pbi-cloud https://social-innovation.hitachi/en/topics/pbi-cloud