India’s second largest software services firm Infosys Technologies Ltd is following the “buy-business” example set by its peers and taking over three back-office service centres of the Netherlands-based Royal Philips Electronics NV.
For $28 million, which is how much it will spend on the acquisition, Infosys will get promised business of about $250 million (Rs1,000 crore) as part of a seven-year outsourcing deal from payroll processing and other services it offers the Dutch electronics firm.
The three centres of Philips at Chennai, Lodz in Poland and Bangkok employ around 1,400 professionals. Infosys will execute payroll processing and other financial services for the Dutch major. This is only Infosys’ second acquisition: in December 2003, the company had acquired Australian firm Expert Information Services Ltd for $22.9 million.
Wednesday’s deal, analysts said, would boost Infosys revenues starting this financial year. “The Europe revenues could go up by 1-2%,” said Hitesh Zaveri, head of the strategic team at investment bank Edelweiss Capital Ltd.
The Infosys-Philips deal is the second biggest back-office contract to be awarded to an Indian vendor after an October 2005 deal that Tata Consultancy Services Ltd forged with UK-based Pearl Group for Rs3,810 crore. TCS took on its rolls 950 employees from the customer.
The Philips acquisition will help Infosys expand its footprint in Europe as part of its strategy to look beyond the US, the market from which it gets over 60% of its revenues. “While we will serve (exclusively, the) needs of Philips for at least one year, eventually we may look at other clients as well,” said S.D. Shibulal, co-founder and chief operating officer of Infosys.
The acquisition will raise Infosys’ headcount in Europe to nearly 4,400. “The biggest advantage is that Infosys can get into the European markets in a much stronger way,” said Sabyasachi S. Satyaprasad, senior director at neoIT, a Bangalore offshore advisory firm. The technology outsourcing market in Europe has grown at 80% in the first half this year.