Can British Buy Help Infosys Win Higher Value Business?


This is a big week for outsourcing-related acquisition announcements. HP speedily closed its $13.9 billion acquisition of EDS. A rumor broke that BT may sell some or all of its 31 percent ownership stake in India's Tech Mahindra.


And India's Infosys is buying a British consulting company to expand its presence in Europe, reports the New York Times. Though the $753 million price Infosys is paying for the Axon Group values the company at a 19.4 percent premium over its recent stock price and 33 percent more than its average price for the last six months, it could be worth it considering Europe's strong appetite for outsourcing. The deal also gives Infosys the kind of consulting capabilities it will need to compete for higher-margin contracts.


This Information Age article (written before the acquisition announcement) relates Infosys' efforts to move up the outsourcing value chain. It apparently has a way to go, as just 585 of its nearly 100,000 employees are part of a mentoring program designed to build business and leadership skills. The article notes that buying these capabilities overseas is an option for Infosys, and one the company obviously chose to take.


But not all experts think it will bring Infosys into the same league as multi-nationals like IBM and Accenture. Sid Pai, a TPI analyst, says Infosys should focus on the burgeoning domestic market for IT and BPO services in India before adding more sophisticated services. Says Pai in the Information Age piece:

They are never going to expand into the $80 to $100 per hour consultancy market -- that's wishful thinking. Rather than making a diagonal shift of raising local presence and contract scope at the same time, they need to be able to make a lateral shift and do what they do already but execute it locally.