TUSC - Now an Indian-owned company
17 Feb 08
Note: In the interest of full disclosure, please
note that Burleson Consulting is a direct competitor of TUSC. Wherever possible, I have tried to cite
verifiable third-party sources in this news report.
TUSC web site has announced that TUSC has been acquired by
Rolta, an IT company owned and based in India. The TUSC official
business name is “Broech Corporation”, an amalgam of the names of
the founders, Joe Trezzo, Rich Niemiec, and Brad Brown.
As a self-proclaimed "leading provider" of USA
Oracle consulting, TUSC has a history of actively seeking awards which are reserved for American Owned
companies. In the past, TUSC proudly advertised their All-American
status (Niemiec liked to mention that he is an ex-Marine) and TUSC
award by Inc. 5000 list of the fastest growing USA companies, an
award for which they appear to no longer be eligible:
“they had to be U.S.-based,
privately held, and independent--not subsidiaries or divisions
of other companies--as of December 31, 2006."
Rolta says that their purchase of TUSC will
provide them with improved access to the American market, and
suggests that TUSC will be used as a vehicle for for deploying their
Indian experts within the United States:
“[The acquisition of
TUSC] will bring to Rolta a strong portfolio of products and
customers; improved access to complementary markets and industry
service lines; and strengthen its global delivery model”
Dan Norris blog, some people predict a rough
road ahead for TUSC now that they are an Indian-owned entity:
“I definitely think
that most people could not have foreseen TUSC being acquired,
especially by an Indian firm, but it looks like Acquisition
Wednesday is just full of surprises!
I know things must have changed
since I worked there as I certainly could never have imagined this
event coming to pass. I’m unable to predict how TUSC (or any
17+-year-old private firm) will fare as part of a public company.
Challenging times and big changes are in store I suspect.”
A bargain basement price for TUSC?
As an MBA, I was taught that the industry
guidelines for the sale of a corporation is 2x of the past years
gross revenue, plus goodwill that could take the price as high as
10x for a growing company with lots of growth potential. Jason
Starr of the
notes that TUSC's Goodwill centers on the expertise of their staff,
and given the probability of a talent fallout, 1x gross is a fair
price for TUSC:
"Keep in mind that these are basically
service-based businesses...and the assets walk out the door and
go home every night.
There is no guarantee that people will
stick around post-acquisition."
But not everyone agrees. Bill Callahan
notes that the sale price of TUSC of $48m is far too low for a
company that claims gross revenues of $48m in 2007.
“I don’t get it. Why
did they sell out for just the revenue? I mean, the company expects
growth right? So, they should at least be worth twice that.
Also, interesting that
after years of “The American Way”, they sell to an Indian firm.”
With existing TUSC clients throughout the USA, there is some
industry concern of increased exposure now that TUSC is owned by a
foreign corporation, especially with the record of
data theft by foreign owned Oracle providers.
K. K. Singh
The new Indian face of TUSC
|The new face of TUSC, Dr. K. K. Singh, makes no qualm
about their plans to use TUSC to increase Indian consulting
in the USA:
“We will now be able to provide Enterprise level
solutions to our customers worldwide, thereby increasing the
value for our stakeholders”.
Jason Catena, notes that the Rolta association with TUSC may
devalue TUSC as just another of many offshoring solutions:
"At a time when offshoring is still often perceived to be a
"bad thing" and India is viewed by many in the U.S. as a
second-class citizen of the world, does this make sense?
Absolutely! I say get over it and welcome to global economy.
Thomas Friedman would be proud...and more importantly, congrats
to the founders (again, it was supposedly an all cash deal...yee
No word yet on how TUSC customers are reacting to working with a foreign-owned company, but many U. S. companies,
(especially in the financial sector), require that their Oracle support be from
wholly-owned U. S. corporations.
Deloitte white paper suggests that special considerations
are required when managing the risks associated with
Foreign-owned IT providers:
"Many outsourcing and offshoring initiatives fail to live up to
their potential or the expectations of the parties.
Even worse, a fair number of them fail outright, leading the
company to either pull the operations back in house or to start
anew in the search for a reliable, mutually beneficial partner"
Legal issues with foreign-owned companies
Do TUSC customers need to be concerned that TUSC is now Indian
owned? Indian owned companies regularly steal intellectual property from
Burleson Consulting, and BC has found that the victims of IP theft
from India have limited legal recourse when dealing with Indian-owned
companies, who quickly claim to be outside the protections of U.S. copyright
This article "Concerns of offshore outsourcers" notes that
American companies may loose the legal protections that are afforded
by U. S. owned companies, especially when managing databases, where
mission-critical data could be siphoned-off to a foreign country,
leaving the Oracle shop with little legal recourse:
"Bribing system, management cost of negotiation with
officials, risks of detection of illegal activity, risk of
breached contracts, etc. Increase the cost and difficulties of
offshore business. Bangladesh, one of the popular destinations
of offshoring, is the most corrupt country in comparison to
Russia, India, China, etc.
Other concern is the theft of intellectual property.
Sometimes domestic companies find that cosmetically
near-flawless copies of their goods are sold cheaper in price
than that of legitimate goods. Often these fake goods are
returned to the company at the legitimate price.
Though IP laws are there, tracing down the overseas fake
producer is extremely difficult. If these problems arise, the
domestic companies doing business overseas may have no legal
recourse. There are also reports of malpractice. "
The article also notes a Duke University study that indicates
that Indian engineers are not of the same quality as U. S. Trained
"India is also supplying same number of graduate engineers as
that of America, but they are not qualified enough.
Only 25% of technical graduates and 10 to 15 per cent of
general college graduates are suitable for employment in the
offshore IT and BPO jobs."
CIO magazine in an article titled "31
Risk in Offshore IT Outsourcing Contracts: Or Buying Promises",
notes the significant legal risks associated with a foreign-owned IT
"No matter how much due diligence you attempt, making a
decision on contracting with an onshore or offshore IT service
provider is much like buying promises. . . .
No matter how much time on money you spend developing a clam
tight contract with an offshore outsourcing provider you never
want to have to consider international litigation or
international arbitration for contract disputes."
Update 13 March 2008: Dan Norris notes: "I do
not share your views. For the record, I hope TUSC continues to
be successful and that they are able to adapt to their new
Update September 21, 2008:
It appears that Dan Norris comment above did not
disclose a small tidbit, that Rolta was in the process of negotiating
to buy his company! We see that Rolta has announced the
acquisition of Piocon Technologies, where Dan Norris works.