iGate on lookout for acquisitions

After acquiring Indian IT firm Patni two years ago, iGate is now on the lookout for smaller acquisitions of about $25-50 million.

"We are looking for smaller acquisitions, something like a tuck-in acquisition, in the range of $25-50 million. The acquisition should help us strengthen our platforms and operations, especially in the banking, financial services and insurance space," iGate Chief Executive Officer Phaneesh Murthy told PTI.

     
In 2011, US-based iGate acquired nearly 63% stake in Patni Computer Systems (then India's sixth largest IT firm) for $1. 22 billion.

     
The company has about $600 million in cash on its balance sheet as well as a debt of $1.1 billion.
 

Besides, iGate will soon start the second phase of communication for its iTops model.

     
The company has been challenging the IT outsourcing industry's billing model through its iTops or results-oriented charging mechanism rather than fees based on time and labour."We plan a dipstick somewhere around September-October to gauge how successful our campaign has been but initial response from customers has been great. The second phase of communication will begin next month or so," Murthy said.

     
The marketing campaign of iGate, published primarily in newspapers like the 'New York Times', 'Wall Street Journal' and the 'Financial Times, read: "The arch enemy of big corporations isn't recession. It's the outdated, inefficient time and material model, which forces you to pay the outsourcing services vendor, even when a project fails."

The outcome-based billing model helps clients, especially in uncertain economic environment, iGate said."If you look at the environment, clients don't know exactly what their revenues are going to be and therefore having an outcome-based model makes sense," Murthy said.

     
IGate and smaller IT services companies compete with larger rivals like TCS and Infosys on pricing of services.

     
Though the outcome-based model accounts for a small portion of the company's revenues now, iGate expects it to grow to about 30% by 2017.