HCL Buys Microsoft CRM Superstar PowerObjects for $46M

HCL Technologies now possesses one of the largest Microsoft Dynamics practices in North America after purchasing PowerObjects, a $37 million, pure-play customer relationship management solution provider.

The $6.1 billion Noida, India-based IT outsourcing giant said acquiring Minneapolis-based PowerObjects for $46 million marries HCL's global scale with PowerObjects' capability and expertise. The firm has stronger functional talent than many of its CRM competitors, which is vital when working inside the front office, said Greg Palesano, HCL's executive vice president and global head of application services.

This, in turn, should allow HCL to better capture growing opportunities in the CRM services market and better serve customers who rely on Microsoft as a strategic platform, Palesano said. Microsoft has also been moving to better integrate Dynamics into its mainstream business, which poses a challenge to specialized firms like PowerObjects.

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"Microsoft is really demanding that their partners step up, and they obviously want some strong global players to team with in the CRM space," Palesano told CRN on Friday. "PowerObjects saw that happening, and knew they wanted to go global, so this checks two boxes -- size and scale -- for them."

The acquisition, which closed Wednesday and was revealed Thursday, should provide HCL with more services, support, education and add-ons around the exponentially growing Dynamics platform. PowerObjects has won Microsoft's Partner of the Year award in three of the past four years, most recently for its mastery of cloud CRM.

"As clients attempt to grow their revenue by improving their CRM processes and technologies, we believe that blending our teams and areas of expertise will result in increasingly transformational products and services," Dean Jones, PowerObjects CEO, said in a statement.

Palesano praised PowerObjects for its add-on offerings intended to fill gaps in Microsoft's off-the-shelf software, provide better integration with other products, and add functionality in areas Microsoft isn't planning to get to for several years. Plus PowerObjects' educational services can help familiarize customers with Dynamics so they can maximize the efficiency of their toolset.

PowerObjects is primarily focused on the United States and Canada, with a little work in Europe, Palesano said. HCL hopes to expand PowerObjects more deeply into Europe and Asia-Pacific in the coming years, he said.

PowerObjects will retain its own brand and operate as a standalone unit within HCL, according to Palesano. This deal is HCL's first applications-related acquisition in a couple of years, Palesano said.

As an Indian company, HCL often interfaces with Dynamics as part of a larger support services contract that entails working with legacy applications across a number of vendors, including Microsoft. Palesano said HCL is also Microsoft's partner of choice for the vendor's own CRM work.

PowerObjects' existing leadership team will remain in place post-acquisition, according to a company statement, with no changes planned to the solution provider's 250-person workforce. PowerObjects' $46 million purchase price is being paid entirely in cash, and includes payments contingent upon hitting certain financial milestones.

PowerObjects was founded in 1993 and shifted its business to focus solely on Microsoft Dynamics in 2008. The solution provider strives to be the top Microsoft Dynamics partner in the world, Chief Operating Officer Jim Sheehan said in 2013.

Microsoft Dynamics delivered 21.7 percent growth last year, according to Gartner, well above the 13.3 percent expansion recorded by the CRM industry as a whole. Gartner predicts that CRM will be the single fastest-growing enterprise software category, with revenues reaching $36 billion worldwide by 2017, as businesses look to build upon long-term customer relationships.

HCL's global applications business is focused on complex application management across a multitude of landscapes, according to the company. The company went global in 1999 after undertaking an initial public offering, and now has 105,000 employees operating across 31 countries.

The company has massively expanded its North American end-user outsourcing efforts in recent years, growing the business from $140.9 million in 2012 to $235.6 million last year.

A March survey of 1,700 hosting and cloud services customers across 10 countries found that HCL was the third-most-likely independent software vendor (ISV) to win their business, tied with Google and HP and behind only Microsoft and IBM.

HCL has also seen a significant shift from on-premise software to Software-as-a-Service, with at least half of all software deals including some kind of cloud or SaaS component, Tom Schwab, HCL's head of business development and global alliances, told CRN in 2013.

The company's areas of focus include outsourcing, digitalization and the Internet of Things, with a focus on infrastructure, application and business services. HCL focuses on a multitude of verticals including financial services, manufacturing, telecommunications, media and publishing, and entertainment.

PUBLISHED OCT. 30, 2015