Infosys reveals price paid for Gen-i's software division; analysts weigh in

Indian company Infosys has now revealed how much it paid for the software division of Telecom's Gen-i division: $NZ5 million.

Gen-i's software solutions practice had 110 staff operating who were all offered jobs with Infosys (taking Infosys total NZ staff to around 150).

According to a statement from Infosys' CFO, the acquisition would add around $NZ12 million revenue this financial (ending March 31, 2012).

Infosys and Gen-i originallly withheld terms of the deal.

Market researcher IDC said Infosys had kept on all Gen-i's software staff for their knowledge, and to help it retain customers.

IDC analsyts Rasika Versleijen-Pradhan Louise Francis said they expected Infosys and Gen-i's partnership, announced at the same time of the deal, to help Infosys gain market share in Australia, and Gen-i gain market share in Australia - particularly in areas like cloud computing.

In Australia, Infosys is now the third largest IT services provider, according to a second market research company, Ovum..

Another market research company, Ovum, said "The value potential of this transaction is about access to the list of 3500+ Gen-i customers in this market [Australasia], use of joint Infosys/Gen-i engagement teams (including over 300 Gen-i sales staff), leveraging Gen-i’s hosting capabilities (given Infosys’s asset-light approach), and the realisation of a reasonable domestic resource footprint in New Zealand (now over 150 staff)."

Ovum's Jens Butler added:

With a portfolio of clients that includes Telecom, Norfolk Group, Air New Zealand, and Fonterra, Gen-i opens up access to a large proportion of the ANZ services market that may have otherwise taken many years for Infosys to crack. With over $1.4bn of services deals due for renewal in the next 12–18 months, this initial $5 million could be seen, over the course of two to five years, as one of Infosys’s best investments."

Giant Indian outsourcer buys Telecom's software business

June 8: Telecom's Gen-i business has sold its software solutions practice to the Australian subsidiary of Infosys Technologies, which is offering positions to the more than 110 employees and contractors affected (Gen-i has around 3000 staff in total).

The employees in Auckland, Wellington and Christchurch will expand Infosys’ New Zealand team to more than 150 people, and the business has plans to hire an additional 15 to 30 people.

Infosys, based in India, provides business consulting, technology, engineering, outsourcing and offshoring services worldwide - making it, on the face of things, a Gen-i competitor.

Growth after Aussie acquisition
The company does not usually work on an acquisition model, according to Infosys Australia chief executive Jackie Korhonen, but its Australian operation did merge with local company Expert Information Systems in 2004. Since that time, Australian staff numbers have grown from 350 to 1765.

Infosys opened its first New Zealand office - in Wellington - in 2009 and now employs around 40 staff (not including those being taken on in the Gen-i deal).

The current management team will lead New Zealand delivery for Infosys, with Patrick Kouwenhoven, currently Gen-i’s head of software solutions, appointed to run New Zealand operations under the leadership of Ashok Mysore, associate vice president, Infosys.

The deal involves an ongoing partnership arrangement between the two companies.

"Our strategic partnership with Infosys increases the breadth and depth of solutions we can deliver to trans-Tasman clients," said Chris Quin, chief executive of Gen-i Australasia.

Financial terms of the deal were not disclosed.

Ironcially, Telecom recently brought 300 IT positions back inhouse. The roles were formerly outsourced to HP/EDS. 

Chief executive Paul Reynolds said the new arrangement was better for Telecom because it no longer had to pay a margin.