Infy for small buys in Europe

Infosys Technologies, the country’s second-largest information technology (IT) services company, is looking at small acquisitions in France and Germany to expand footprint in the region.

“We will acquire a couple of small companies in Germany and France where we had appointed a country manager (Jackie Korhonen) to look at the operations last December,” said V Balakrishnan, chief financial officer of the Bangalore-headquartered company.

While Balakrishnan did not elaborate on how much Infosys would invest in new buys, he said inorganic growth would help to penetrate sectors like manufacturing and retail in Europe.

The company derives around 23 per cent of its revenue from Europe. Despite economic uncertainty in the region and volatility of the euro and pound (GBP), Infosys plans to build inroads into package integration, BPO and consulting space in these geographies. Balakrishnan acknowledged the challenge of penetrating these markets, such as cultural issues, labour laws and strong local players, but indicated it remained focused on developing these markets and making the requisite investments.

“Post-recession, retailers seem to have heightened e-commerce related spends and are increasingly looking at outsourcing activities like payroll processing, procurement, analytics etc. We believe France and Germany have a number of global retail clients who will have to manage their costs through outsourcing,” said Balakrishnan. He is confident that business from Europe can contribute up to 40 per cent to it revenue. A retailer spends two per cent of its revenue on IT (both hardware and software) and close to one per cent on IT services.

Last year, Infosys acquired a small BPO, McCamish, in an all-cash-deal of $38 million that gave it headway in the insurance space in the US. It has low exposure to the public sector business, another area that could get impacted, as government spending is curbed across the European countries.

Though Infosys does not have direct exposure to banks in the troubled geographies of Spain and Greece, it continues to remain cautious. “Direct exposure to Greece, Spain and Portugal is minuscule — less than 0.5 per cent of the business revenue. Also, IT spend from most clients has not seen any material changes in their plans over last few months. So we aren’t a worried lot at the moment or in the medium term,” claimed Balakrishnan. He noted that the current crisis in Europe was accelerating the outsourcing business to reduce costs.