Infosys Technologies is looking at acquiring companies engaged in consulting, BPO, packaged implementation services or IP-based services, in Germany, France and Japan in the price band of $200-$300 million. The effort is accelerate its non-linear growth strategy as well as to expand its geographic reach. As usual Infosys does not give a time frame for an acquisition as it is an on-going process.
Unlike the traditional linear business model, where the revenue is effort-based (more the number of people working, more the revenue), the non-linear business model is based high-value services.
Infosys says that they are focusing on packaged implementation related to SAP and Oracle, where the margins are higher. Application, development and maintenance (ADM) is still the largest services segment of Infosys, which is almost a headcount (effort) based business, which is not scalable long term.
Its great to hear that finally Infosys is adopting a non-linear growth model providing value-add premium services rather than depending heavily on the headcount business. In order to do this, Infosys will need to take the inorganic growth route of acquiring efficient vertical companies to move up the value chain. With the huge cash reserve, acquisitions should not be an issue for Infosys. Changing the strategy would help them recover from rising rupee and the slowdown in the US. [via et]