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Infosys Consulting eyes US buy

Source : BUSINESS_STANDARD
Last Updated: Thu, Nov 19, 2009 20:00 hrs

Infosys Consulting Inc, the strategic consulting arm of IT services giant Infosys Technologies, is planning to acquire a small consulting company with revenues in the $100-140 million range (Rs 450-650 crore) as part of its inorganic growth initiatives in the US.

Market sources said Infosys had been looking at a suitable acquisition target in the US with consulting expertise in verticals like aerospace, retail, healthcare and financial services.

"These are areas where the company has been targeting deals worth $20 million and above. Acquisitions in these verticals are integral to the company’s plans to further penetrate the US government and municipal sectors," the sources added.

Infosys did not respond to questions on the development. Sources added that to impart depth to its consulting portfolio, Fremont, California-based Infosys Consulting was in the process of hiring consultants with experience in handling clients from the oil and gas, financial services and government utilities sectors.

"These consultants will be placed at Infosys Consulting’s Houston, New York and Fremont offices. They are also looking to recruit consultants in the utilities space across locations, including their Mexico centre," sources said.

They noted that the fresh recruitments by the company had also been necessitated by exits of key employees who had joined competitors like IBM and Accenture in recent months.

A leading market analysts noted that the company had not been able to gain leverage on the pricing front with large clients.

"Pricing has been a point of contention for them in the key US and European markets where they are still not able to make the kind of impact they want to. Their average billing is in the $100-150 per hour range. On the other hand, competitors like Accenture and IBM have been extracting per hour billing rates of $200-250. Established players like McKinsey and Pricewaterhouse, which are audit firms in the top consulting bracket, command billing rates as high as $500-1,500. Obviously, Infosys is betting on inorganic ramp-ups as a quick way to close the odds," an analyst said.

The company serves aerospace and defence, hi-tech manufacturing, insurance, healthcare and life sciences, media and entertainment, energy and utilities, retail, distribution, consumer packaged goods, and transportation services industries, as well as communication service providers, and banking and capital markets.

According to Infosys’ annual report for 2008-09, the company invested Rs 22 crore in Infosys Consulting Inc last year. Since the inception of its consulting arm in 2004, Infosys has invested Rs 193 crore ($45 million) in the wholly-owned subsidiary, including Rs 81 crore invested in 2008. During 2008-09, Infosys Consulting serviced 96 clients, and generated revenues of Rs 287 crore with net loss of Rs 59 crore, according to the annual report.

 




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