Cognizant Technology Solutions, a U.S. outsourcer with large Indian operations, said Tuesday it had entered into a definitive agreement to acquire the Indian services operations of CoreLogic, an information services and analytics company, in a bid to increase its services capabilities for the mortgage industry.
The purchase price will consist of a cash payment of about US$50 million, plus adjustments for working capital and other charges or credits that will be determined at closing, the companies said. Cognizant will as part of the transaction enter into a services agreement with CoreLogic for a minimum revenue commitment of $324 million over five years to provide services to CoreLogic and its customers.
After the completion of the transaction, CoreLogic’s Indian operations in three cities will provide capabilities in software product development, analytical modeling, back-office services and technology support to CoreLogic and its customers, primarily in the U.S. mortgage and real estate markets.
Cognizant will be absorbing about 4,000 of CoreLogic’s 10,500 staff, a spokesman for CoreLogic said. The tie up with Cognizant will provide CoreLogic in Santa Ana, California, the platform to expand both in the U.S. and other markets, as Cognizant has a large number of skilled staff, broader capabilities, technology services, and global delivery platforms, the spokesman said.
More than 75 percent of Cognizant’s 111,000 staff at the end of March were in India, according to a Cognizant spokesman.
Cognizant and other outsourcers are trying to add analytic capabilities and proprietary algorithms to their business process outsourcing businesses, said Amneet Singh, vice president for global sourcing at the research firm Everest Group. Cognizant added to its analytics capability in 2007 by its acquisition of marketRx, a provider of analytics and related software services to life sciences companies.
A number of outsourcers have bought out the Indian services operations of multinational user organizations, as most often these companies wanted to focus on their core businesses, rather than run a services subsidiary.
Citigroup, for example, sold its IT services and software development subsidiary in India to Wipro and its interest in a business process outsourcing company to Tata Consultancy Services, in return for a commitment of services business.
The Cognizant acquisition is different as CoreLogic is a services provider, selling its Indian operation, Singh said. CoreLogic may have decided to sell its Indian subsidiary as it may be trying to convert its fixed costs in staff in India to a variable cost, even as its revenue and profits dipped in 2010, he added. As the company plans to expand in a competitive market, this model it has with Cognizant is likely to be more flexible, Singh added.
Cognizant said it has entered into a formal joint go-to-market strategy to pursue additional opportunities to market and support the CoreLogic information management and analytics services in existing and emerging markets. Together the companies will provide end-to-end services across the mortgage value chain, from loan origination, escrow, title and closing services, through secondary markets, loan administration, loan default management, and analytics, it added.
The transaction is expected to close in August.
John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John’s e-mail address is email@example.com