MphasiS scouting for firm to boost ITO biz

IT consulting and BPO services provider MphasiS Ltd is scouting for a company with revenues in the region of $45-60 million, and having a good presence in the cloud computing space, with a view to growing its Infrastructure and Technology Outsourcing (ITO) business, according to industry sources.

“The company’s ITO business is presently dependent on HP for a majority of its revenues. MphasiS is looking to extend its market reach in infrastructure services like utility computing, green IT initiatives, cloud computing and de-duplication of applications,” sources said, adding that the company is presently evaluating acquisition targets in the US and Europe.

Sources noted that while the company has been looking to push inorganic growth at both its applications and ITO divisions, the ITO business is presently ramping up to handle some large solutioning deals won during the first quarter.

Mphasis has been scouting for talent in the ITO space to be based out of its delivery centres in Pune, Singapore, New York and London, sources said.

The ITO division, which presently brings in 17 per cent of MphasiS’s topline, has been the company’s fastest growing division on an aggregate basis in the last three quarters. Though the share of the ITO business in the total revenues declined marginally in the first quarter, the gross margins were at 33 per cent.

The ITO division has been focussing specifically on the insurance and healthcare verticals where new consultancy projects are being signed. “MphasiS has been positioning itself as a company which can offer ITO solutions to specific business problems and looking to acquire companies which have strong vertical experience in the insurance and healthcare space,” sources added.

A MphasiS spokesperson, acknowledging that the company was looking out for potential acquisition targets, did not want to comment on specifics or on what she termed “speculation”.

MphasiS presently has about Rs 1,400 crore in cash flows from Rs 200 crore in January last year. In keeping with its inorganic growth plans, the company has also been looking at acquiring companies in the banking and finance space, where it is ramping up in Europe and Asia.

The company’s consolidated net sales were at Rs 1,191.6 crore, while the consolidated net profit stood at Rs 268.3 crore for the first quarter of fiscal 2011-ending January 31. Nineteen new clients spanning six verticals were added including 11 from the HP channel.

The 36,000-strong company presently generates over 71 per cent of its business through the HP-EDS sales channel, which translates into just over 30 per cent of its revenues. MphasiS has been working towards developing more business through its own sales channels, thereby reducing its dependence on holding company HP. Company officials have said that two of every five new projects won in the January quarter were through the company’s own channel.

MphasiS’s operations predominantly relate to providing application development and maintenance services, business process outsourcing (BPO) services and ITO services delivered to clients operating globally. Application services cover consulting, application development, testing and application maintenance services. ITO covers a range of infrastructure management services and technical and service help desks.

After the Bangalore-headquartered company’s acquisition of AIG Solutions and Services (AIGSS), the IT arm of American insurance major AIG last year, it is understood that MphasiS has been providing a range of ITO services as well as inbound BPO work to AIG’s customers.