Infosys buys Philips BPO for Rs 110 cr

In one of the largest acquisition cum outsourcing deals by an Indian information technology (IT) firm Infosys Technologies has bagged a $250-million (around Rs 1,010 crore) contract from Royal Philips Electronics.

The Bangalore-based Infosys will also take over Philip's finance and accounts business process outsourcing (BPO) centres, which is spread across three countries in the process. It will pay $28 million (around Rs 110 crore) to Philips to take over its BPO assets (infrastructure, processes and intellectual property) from October 1, 2007.

The deal also entails a seven-year contract with Philips to provide finance and accounting services and processing of purchasing orders. For the first year, Infosys would provide services to Philips at a reduced billing rate (which it declined to specify). After one year, Infosys would have the freedom to service clients other than Philips.

This will be Infosys' second acquisition in its 25-year history. The first acquisition was of Expert Information Services in Australia for around Rs 104 crore ($22.9 million) in 2003.

"We are excited with this engagement. Global operations (like that of Philips) require transformation partners such as Infosys to enhance their competitiveness," said Infosys CEO S Gopalakrishnan.

Infosys will take over 1,400 Philips professionals working at three different centres in India, Poland and Thailand. "This is for the first time that we are taking over professionals from varied cultural backgrounds. We intend to complete the integration process in a gradual manner spread over one year. There will be no lay-offs or shifting of work from these centres to India," said Infosys BPO Chairman T V Mohandas Pai.

Pai pointed out that the acquisition will strengthen Infosys' foothold in Europe. "The BPO teams have diverse language capabilities, technical expertise and domain knowledge. There is a significant number of clients whom we can service from Europe with this kind of an expertise. We expect this acquisition will contribute to our revenues from the next quarter," he stated.

Infosys intends to bring down the operation cost of these three BPO centres. "We have a strategic plan to bring down the costs which we will roll out as soon as we take over officially," said Pai.

"Infosys has clearly demonstrated a willingness to invest in people with a strong HR process. Their leadership qualities were evident in all interactions and proposal submissions," said Royal Philips Electronics Chief Strategy Officer and Group Controller Gerard Ruizendaal in a statement.

Currently, Infosys BPO has close to 11,000 employees and for the financial year 2007 it posted a top line of around Rs 662 crore and net profit of Rs 151 crore.