Simplus acquisition shows Infosys' bet on inorganic route for growth

Firm may have shed its inhibitions of making acquisitions of slightly bigger size, say experts

Infosys’ move to acquire Salesforce consulting firm Simplus is a reflection of its current management’s aggressive approach of taking inorganic route to enhance capabilities in future growth areas. According to experts, the company may have shed its inhibitions of making acquisitions of slightly bigger size.

The Bengaluru-headquartered firm on late Monday announced to acquire Simplus, a US-headquartered company, for $250 million (around Rs 1,750 crore). This acquisition is expected to boost its capabilities in the fastest-growing Cloud segment. This is also the second-biggest acquisition by the company after Lodestone, which it acquired in 2012 for around $350 million.  

“When enterprises are increasingly migrating to Cloud, Infosys’ move to acquire Simplus shows its focus on high growth areas like Cloud. Global firms like Accenture and Cognizant are also heavily investing into Cloud,” said Pareekh Jain, an IT outsourcing advisor and founder of Pareekh Consulting.

Founded in 2014, Simplus is one of the fastest-growing Salesforce platinum partners in the US, with presence in Australia (Sudney, Melbourne), the UK (London) and in The Philippines (Manila), where it has a large delivery centre. The acquisition is expected to close during the fourth quarter of FY20. While Infosys will spend $200 million for acquiring shares of Simplus, the company has committed another $50 million towards employee incentives and retention upon meeting certain performance conditions over three years.

This acquisition, along with that of Fluido, which the company had acquired in September 2018, is expected to strengthen Infosys’ Cloud offerings. “Simplus has strong presence in Australia, which will definitely supplement Infosys’ growth in this key market. Also, Simplus’ onshore-offshore model, with delivery centre in Manila put Infosys in good stead,” said Jain. 

However, some experts said the payout of $250 million seems to be expensive for Salesforce. “On a revenue of $70 million, the acquisition seems to be a bit expensive. So, it has to be seen how much revenue upside this buy out can provide to Infosys,” said an analyst. Under current CEO Salil Parekh, Infosys is aggressively pursuing the joint venture route apart from acquiring entities to supplement its revenue growth through inorganic route. Since his appointment in January 2018, Infosys has acquired five companies, including Wongdoddy, Fluido, Stater and Eishtec.