Infosys BPO buys U.S. firm, to pay $38 mln upfront

By Sumeet Chatterjee

BANGALORE (Reuters) - The back-office services unit of Infosys Technologies Ltd, India's No. 2 software exporter, will acquire U.S.-based McCamish Systems for an upfront payment of $38 million to boost its service offerings.

Infosys BPO will pay an additional $20 million to the sellers on meeting certain financial targets, its chief executive Amitabh Chaudhry said, but declined to disclose the targets that have been set.

McCamish Systems, which posted $38.2 million in revenue in 2008, provides business process outsourcing solutions to the insurance and financial services companies in the United States. It counts 10 of the 20 top insurers among its clients.

"This acquisition gives us the ability to pitch for bigger deals in the insurance sector," Chaudhry told Reuters in a phone interview. He said the deal would be completed later this year and revenue would start flowing from January.

Shares in Infosys, which the market values at $29 billion, were up 0.5 percent at 2,319.95 rupees by 0655 GMT in a flat market. The stock had risen 1.7 percent in opening deals.

McCamish has 260 staff, and Chaudhry said the employees would become part of Bangalore-headquartered Infosys BPO, whose offerings include finance and accounting, human resource and legal services outsourcing.

Indian outsourcing firms have thrived by providing Western firms with services such as processing insurance claims, managing payrolls and customer support.

The boom in business process outsourcing, or BPO, is built on a large, skilled and cheap English-speaking workforce, but a global economic slowdown has crimped spending by companies.