Offshore IT services holdings group iGate Corp is buying two companies in the US and India as part of a strategy to restructure its business into two large operating divisions.
Pittsburgh, Pennsylvania-based iGate has 4,000 employees based at offshore development centers in Bangalore and Chennai, as well as sales and marketing operations targeting Fortune 500 companies in the US, Europe and the Far East. Its main subsidiaries include Mascot Systems, Mastech and Red Brigade, and the group made a net profit of $1.3m on sales that fell 28% to $72.1m in the third quarter to September 30.
To arrest the decline in revenue, iGate is aiming to bid for larger global contracts, and said yesterday that from January 1, 2003, it will operate as two strategic business units: iGate Professional Services and iGate Solutions. It also plans to increase its sales and marketing capabilities through the acquisition of Pittsburgh-based eJiva, which specializes in enterprise application integration and business intelligence development.
iGate is also buying Hyderabad, India-based Aqua Regia which provides offshore software development services exclusively to eJiva. The two target operations have a combined workforce of 1,750, including 900 in India, servicing 145 clients, and between them made revenue of around $28m in the three months to September 30. Both eJiva and Aqua Regia will be rolled into the Mascot Systems subsidiary. The price of the deals was undisclosed, although iGate said it is currently working with an unnamed investment bank to conduct a valuation.
iGate said the acquisitions will give it the mass it needs to compete against India’s tier-one software services providers including Tata Consultancy Services, which has 19,000 employees, and Wipro Technologies Ltd, which has 13,000 staff. A gap has emerged between the sector’s top five players and India’s medium-sized companies in 2002, with multinational clients committing to larger, longer-term contracts with single suppliers.