Infosys BPO, the business process outsourcing (BPO) subsidiary of Infosys Technologies, said on Thursday that it has signed a definitive agreement to acquire all of the outstanding interests of McCamish Systems, a small BPO company in Atlanta, Georgia, focused on the insurance and financial services market.
Infosys said the deal involved an upfront payment of US$38 million with an additional $20 million payable to the sellers if McCamish Systems achieves certain financial targets in the future. The acquisition is expected to be completed later this year subject to the satisfaction of certain closing conditions, Infosys said.
The acquisition will bring to Infosys BPO technology and products that McCamish has developed for the delivery of services to its clients, said Amitabh Chaudhry [CQ], CEO and managing director of Infosys BPO, in a telephone interview.
Acquiring McCamish will also give Infosys clients in the insurance and financial services industry, while also providing a base for services delivery from the U.S., Chaudhry said.
McCamish has about 260 employees working out of Atlanta, and has about 39 clients.
It reported revenue of $38.2 million in its fiscal year ended December 31, 2008.
There is a consolidation likely in the outsourcing industry, as valuations are low, and also as some of the large outsourcers expect an improvement in business, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International (TPI).
Infosys’ main benefit from the acquisition is likely to be the technology platform that it acquires from McCamish, Pai said. This may help Infosys BPO move from a business model priced around staff time, generally known as a “time-and materials” model, to a model based on pricing for certain results, Pai added.
Indian outsourcers are focusing on non-linear growth of revenue, that is less dependent on addition of staff, he added.
Infosys BPO operates in India, the Czech Republic, China, the Philippines, Poland, Thailand, Mexico and Brazil and employs over 16,400 persons. It closed its fiscal year ended March 31, 2009 with revenues of $316.2 million.
Indian outsourcers are hiring more staff and expanding in various locations as they are expecting an improvement in the outsourcing business which was affected by the recession.
Tata Consultancy Services (TCS), India’s largest outsourcer, said last month that it would be adding 8,000 new staff in this quarter. It also said last week that it is expanding a development center in the U.S. Infosys, India’s second largest outsourcer, announced earlier this week that it is setting up a second software development and services center in Monterrey, Mexico.
Infosys BPO also plans to add 2,000 staff by March 31, 2010. Having a delivery center close to its U.S. customers, after the McCamish acquisition, will help its business, Chaudhry said.
Infosys plans to market some of its other services, including software development to McCamish’s clients, Chaudhry said. The company also expects some of these clients to take advantage of Infosys’ ability to deliver low-cost services offshore from India, he added.