Wipro Infocrossing marriage starts paying dividend
On August 8 when Wipro paid $600 million to acquire US-based Infocrossing, a $234-million infrastructure service provider, many analysts felt that it was an expensive deal.
By Mitu Jayashankar, TNN |
BANGALORE: On August 8 when Wipro paid $600 million to acquire US-based Infocrossing, a $234-million infrastructure service provider, many analysts felt that it was an expensive deal.
But two months later the reasons for the acquisition, the largest overseas deal so far by an Indian IT company, are beginning to get clear.
Wipro Infocrossing has recently won a $275 million multi-year outsourcing deal to provide BPO and IT services to Missouri HealthNet Division, an agency run by the state government to provide health care services to Missouri residents.
Infocrossing Inc has been awarded a six-year contract to manage insurance claims and health care processes of the division. The contract can be renewed for two more years, which could take the deal value to up to $420 million, according to Infocrossing CEO Zach Lonstein. Missouri HealthNet Division was an existing customer for Infocrossing with annual billings of about $20 million.
Although the deal with Infocrossing was signed post its merger with Wipro, Lonstein says that the company had been in talks with Missouri HealthNet for some time now.
“I can’t say that we won this deal because of Wipro,” says Lonstein, “but we are seeing a lot of other new opportunities after merging with Wipro”. Lonstein says that after its acquisition Infocrossing has been able to generate 19 new customer opportunities in just one month, “Never in the history of this company have I seen scale like this, I am not just surprised by this response, I am shocked.
The speed at which things have moved since the merger is just amazing, two of these opportunities have already reached proof of concept,” he says. While some are from existing Wipro clients, the rest are new clients. The data services business is extremely sticky and generates good cash flows says Lonstein. Once signed, clients could pay as much as $150,000-200,000 per month for several years.
Lonstein admits that before it merged with Wipro, Infocrossing was under pressure to set an offshore facility in India for protecting its margins. “The choice was to set up our own centre in India, or tie up with a mid-sized company or even acquire a small company, but we felt that the learning curve would have been very steep,” says Lonstein.
He says that the success of Indian companies such as Wipro has put economic pressure on American outsourcing firms. Even though Wipro wasn’t a direct competitor, “by acquiring Infocrossing Wipro eliminated the threat of us aligning with one of its competitors”. Infocrossing felt the need to align with a “large global company to scale up our customer engagements”, says Lonstein.
The integration process with Wipro is on track says Lonstein, and it has been able to retain most of its 920 employees post the acquisition.
“Our employees now have added benefits like a 401 K plan, which a large company like Wipro can contribute to”, says Lonstein. Last year Infocrossing grew its business by 15%. Although Lonstein did not give a target number, he said that business would definitely grow much faster now that Infocrossing was a part of Wipro.
But two months later the reasons for the acquisition, the largest overseas deal so far by an Indian IT company, are beginning to get clear.
Wipro Infocrossing has recently won a $275 million multi-year outsourcing deal to provide BPO and IT services to Missouri HealthNet Division, an agency run by the state government to provide health care services to Missouri residents.
Infocrossing Inc has been awarded a six-year contract to manage insurance claims and health care processes of the division. The contract can be renewed for two more years, which could take the deal value to up to $420 million, according to Infocrossing CEO Zach Lonstein. Missouri HealthNet Division was an existing customer for Infocrossing with annual billings of about $20 million.
Although the deal with Infocrossing was signed post its merger with Wipro, Lonstein says that the company had been in talks with Missouri HealthNet for some time now.
“I can’t say that we won this deal because of Wipro,” says Lonstein, “but we are seeing a lot of other new opportunities after merging with Wipro”. Lonstein says that after its acquisition Infocrossing has been able to generate 19 new customer opportunities in just one month, “Never in the history of this company have I seen scale like this, I am not just surprised by this response, I am shocked.
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The speed at which things have moved since the merger is just amazing, two of these opportunities have already reached proof of concept,” he says. While some are from existing Wipro clients, the rest are new clients. The data services business is extremely sticky and generates good cash flows says Lonstein. Once signed, clients could pay as much as $150,000-200,000 per month for several years.
Lonstein admits that before it merged with Wipro, Infocrossing was under pressure to set an offshore facility in India for protecting its margins. “The choice was to set up our own centre in India, or tie up with a mid-sized company or even acquire a small company, but we felt that the learning curve would have been very steep,” says Lonstein.
He says that the success of Indian companies such as Wipro has put economic pressure on American outsourcing firms. Even though Wipro wasn’t a direct competitor, “by acquiring Infocrossing Wipro eliminated the threat of us aligning with one of its competitors”. Infocrossing felt the need to align with a “large global company to scale up our customer engagements”, says Lonstein.
The integration process with Wipro is on track says Lonstein, and it has been able to retain most of its 920 employees post the acquisition.
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“Our employees now have added benefits like a 401 K plan, which a large company like Wipro can contribute to”, says Lonstein. Last year Infocrossing grew its business by 15%. Although Lonstein did not give a target number, he said that business would definitely grow much faster now that Infocrossing was a part of Wipro.
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