Source: Economic Times

Pipping global software major CapGemini and IBM to the post, Infosys will be taking over three captive BPO units of Royal Philips Electronics, a Netherlands-based consumer electronics major for Rs. 114.8-crore ($28-million). Infosys’ second inorganic move, it acquired Australian Expert Information Services in December 2003 for $22.9-million in another cash deal.

With this, Infosys Technologies has taken another step towards increasing its footprint in Europe, by signing a $250-million outsourcing contract with Dutch Royal Philips Electronics (RPE). The 7-year contract will see Infosys BPO shouldering the responsibility of providing finance and accounting (F&A) services, including the processing of purchase orders worth $250-million. As well, 1,400-employees that are a part of Infosys’ Bangalore unit, will handle administration, patent research and product development work on a global scale for Philips.

In addition, Infosys BPO takes over Philip’s shared service centres in Chennai, Thailand and Poland that have a total staff count of 1,400-employees, after making an upfront cash payment of $28-million. TV Mohandas Pai, Chairman of Infosys BPO explains: “The cash payment is, because Philips had invested in setting up the centres, IP and processes.”

Not an acquisition, the deal is more like Infosys taking over a business that has an assured stream of revenue, after paying a relatively small amount of cash for Philips captive operations. A big client win, it is said to be amongst the largest F&A contracts bagged by any Indian BPO firm.

“For the first year, the three centres will exclusively service the global operations of Philips. After that they will start acquiring clients outside of the company,” says TV Mohandas Pai, Head (Education & Training) in Infosys.

This is the first time that Infosys, like its Indian counterparts TCS and HCL, is taking over a sizeable number of people, as Pai says: “Now that we have grown into a sizeable entity, this is the way forward for us to expand our business.”

Infosys’ second largest European deal, after its Euro 100-million deal with ABN Ambro in 2005, the Philips deal will help it expand its global network, including strengthening its European operations and catapulting Philips amongst Infosys’ Top 5 customers list.

Acceding to Philps demand, Infosys has demonstrated a willingness to invest in people with the assistance of a strong HR process, better solution quality, ability to leverage end-to-end process improvements, a robust risk mitigation and transition plan.

With the Philips takeover, Infosys BPO’s 2007 - 08 revenues are expected to touch $17-million. During 2006 – 07, Infosys BPO revenues grew over 70% - $148-million, while its client base increased by over one-third. Chasing a target of $250-million for this fiscal, its first quarter revenues of $50-million could well see it achieve its goal.

Infosys’ Background

1. Infosys BPO set up Progeon in April 2002.
2. Current staff count = 11,200, with Philips bringing in another 1,400.
3. 2006 – 07 revenue = $148-million (Rs. 600-crore).
4. Infosys is ranked 9th in NASSCOM’s list of India’s biggest third party BPOs.
5. Infosys has established its footprint in India, Philippines, Czech Republic, China, and Philips will bring in Poland and Thailand.

One may well ask, what the big deal is about? Well, it will help Infosys fight off competition from TCS, CapGemini and other European majors, including pushing Infosys among the finance segment’s Top 5. As well, it will get assured revenues of Rs. 1.025-crores.

Taking a leaf out of TCS’ book e.g. when TCS bought out UK-based Pearl Group in 2005, including bagging a 12-year contract valued at Rs. 3,810-crore (Pounds 486-million), the deal has received a positive response from stock markets and credit rating agencies, with Infosys’ share price closing high at Rs. 1,989 on the Bombay Stock Exchange. It has led analysts to predict that the Royal Philips deal could be the window to many new outsourcing contracts.

Source: Business Standard

Expressing confidence in India’s economic and business climate, Japanese IT major Fujitsu, plans on expanding its Indian operations, while hoping to grow rapidly over the next five years. Sensing India’s huge potential, it is confident that it can rely not only on application development and software services, but hardware product development, as well. And, the confidence is not misplaced, as Fujitsu India and Fujitsu Consulting India’s consolidated revenue for financial year 2006-07 stood at $35-million (around Rs. 140-crore).

Chiaki Ito, Corporate Senior Executive Vice President and Representative Director for Next-generation Technology Strategy and R&D for Fujitsu, on his first visit to India told Business Standard: “The Indian IT market will grow by nearly 20% annually and I expect more growth from the operations in India.” Re-establishing its IT business in India with a new focus on management, Fujitsu intends to strengthen its distributors, system integrators and partner relationships, enhancing their support capabilities at the same time.

As well, the Japanese firm plans to set up its business process outsourcing (BPO) operations in India, for which purpose, it recently ended its JV with RPG Enterprise by selling its 29.5% stake in Zensar. Industry. Sources confirm Fujitsu is already looking for acquisitions in this space. “It is no doubt that we should enhance our BPO capability on a global scale, since software and services business is our dominant business. India has excellent know-how and resources for BPO,” Ito says. Adding that his firm does not expect low-cost labour and simple software development like coding from India. However, Fujitsu will not build its R&D centre in a hurry, as it is important that it ensures the R&D centre is created based on Fujitsu’s global mid / long term strategy.

Currently, Fujitsu is catering to its US operations from global delivery centres in Pune, Noida and Hyderabad, where 1,400-employees work for its consulting and products segment.