17.2.15

Infosys buys Panaya

Infosys is buying a startup that helps companies manage major changes to their software systems, in the first signature acquisition by Vishal Sikka after he took over as CEO in August last year. Panaya is being valued at $200 million (Rs.1200 crore)
“The acquisition of Panaya is a key step in renewing and differentiating our service lines. This will help amplify the potential of our people, freeing us from the drudgery of many repetitive tasks, so we may focus more on the important, strategic challenges faced by our clients,“ Sikka said in a statement.
Infosys plans to bring Panaya's technology, currently centered around enterprise resource planning software management, to other service lines such as its banking software Finacle, application development, and infrastructure management. “We see great potential in their core technology. It will take us couple of more months to see how we can bring the technology to other areas, and any investment in those processes can be funded from internal cash flows,” Sikka said on a conference call with analysts. He reiterated that the company would continue to look at acquisitions to plug holes in its capability offerings.
Panaya gets about 12% of its revenue from other system integrators such as IBM, CSC, Logica, HP and others. Infosys plans to continue to work with other systems integrators in the future.
“Working with other system integrators is part of the growth strategy. We plan to be open. Organisationally, we are placing this acquisition under Abdul Razack in our platforms group so that other system integrators and we can work with this company,“ Sikka said. Panaya CEO Doron Gerstel will continue to lead the company.
Sikka, a former SAP board member credited with the creation of the German software firm's blockbuster database software Hana, is betting on what he calls a `renew and new' strategy for Infosys as he tries to balance the twin demands of building revenue momentum while positioning the company to cope with changes brought on by technologies such as cloud computing.
The Bengaluru-based firm said Panaya's technology would help it bring automation to several service lines through cloud computing, reducing risks, costs and time. The startup, based in the US and Israel, counts Benchmark Capital, Hasso Plattner Ventures--which receives most of its capital from SAP cofounder Hasso Plattner--and Battery Ventures as its main investors. Its clients include Coca-Cola, Mercedes-Benz, Bosch, Whirlpool, GSK and Siemens, although this deal is less about clients and revenue than it is about intellectual property.
Over the last few months, the first non-founder CEO of Infosys has been evangelising what is known as `Design Thinking', which involves a user-centric problem-solving approach, and embracing automation to reduce costs and improve efficiency. His aim, he has said, is to restore Infosys as the growth leader after a period of three years in which it lagged the broader IT services industry. Sikka, who took over after founder NR Narayana Murthy unexpectedly cut short his comeback after just a year, has also increased five-fold the size of the company's innovation fund to $500 million.
This is Infosys' largest acquisition since it bought Lodestone in 2012 for about $350 million.
Infosys has paid about six-times revenue for Panaya and the deal would be EPS-accretive in 12-18 months, the company said on a conference call with analysts.
Infosys and the other IT players are expected to become more acquisitive. Another pointer to this trend was the acquisition late last year by Cognizant of healthcare technology firm TriZetto for $2.7 billion.

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