SAIC is a $10-billion scientific, engineering, and technology applications company. It has a subsidiary in India that operates in Noida and Bangalore. SAIC’s oil and gas information technology practice provides consulting, system integration and outsourcing services to global oil and gas majors involved in upstream activities. 

The acquisition will be funded through internal cash resources. The acquisition entails the acquisition of SAIC’s assets in the US and equity in its UK and Indian subsidiaries.

SAIC’s oil and gas information technology practice has revenues of around $188 million. It is said to be servicing around six global-500 oil and gas majors. The integration is expected to be complete by the first quarter of next fiscal after which it will start getting reflected on Wipro’s books.

All 1,450 employees of the acquired division will transition to Wipro across North America, Europe, India and the Middle East. Around 450 of them are based in India.

Wipro hopes to combine its IT services capabilities with the consulting expertise and oil and gas domain skills offered by SAIC’s arm to offer more comprehensive solutions. Wipro’s oil and gas business is part of its energy, natural resources and utilities strategic business unit (SBU). Currently around 5% of the oil and gas revenues comes from upstream IT services. However, subsequent to the latest acquisition, this will go up to 17.5%.

Anand Padmanabhan, senior VP of Wipro’s energy, natural resources and utilities SBU, said that upstream work typically involves higher value and margin work as compared to downstream ones.

Upstream work of oil and gas companies typically involves work related to exploration, transportation etc which requires higher elements of innovation. Downstream involves retail and distribution.

“This SAIC practice addresses the IT needs of the upstream segment by offering domain capabilities in the areas of digital oil field, petro-technical data management and petroleum application services,” Padmanabhan said.

He added that IT spend in this sector is expected to grow as customers increasingly look to grow newer streams of revenues, optimize their operational cost and find better ways to become environmentally conscious. The addressable market size in the upstream IT services segment is expected to touch $19 billion by 2013 growing at 10% CAGR.

The energy and utilities sub unit currently contributes around 9% of Wipro’s revenues. With this acquisition, the company expects the sub-unit to contribute 11% of earnings going ahead.

Wipro has made about 17 acquisitions in the past decade. Unlike Infosys, which has sat on huge cash reserves for long, Wipro has been steadily using its reserves to make acquisitions to close technology gaps – a move that company chairman Azim Premji once described as ‘a string of pearls’ strategy.

The latest acquisition is the first one post the recession. The last big one was that of Citi Technology Services for $127 mn in December 2008.