Infosys' Lodestone purchase beefs up SAP consulting

Summary:With the move, Infosys significantly beefs up its army of SAP consultants and expands its global footprint.

Infosys, an Indian outsourcing company, on Monday said it acquired Lodestone, a Zurich based consulting firm, in a deal valued at CHF 330 million ($348 million).

With the move, Infosys beefs up its SAP consulting practice and expands its footprint into the manufacturing, automotive and life sciences verticals. Infosys said in a statement that its SAP consulting practice will have revenue topping $1 billion a year.

Expanding consulting is part of Infosys' so-called 3.0 strategy.

Lodestone has 850 employees and 750 of them are SAP consultants. Lodestone, which has 200 customers, will sit in Infosys' Consulting and Systems Integration unit. Infosys has more than 700 consulting clients, 30,000 consultants and covers 10 industries. Consulting and integration accounts for 31 percent of Infosys' revenue.

For Infosys, the Lodestone deal gives the company more of a global footprint and bolsters regions such as Europe, Latin America and Asia Pacific.

The deal is expected to close by the end of October. Here's a look at Lodestone's focus areas:

lodestone

Lodestone had about $221 million in 2011 revenue.

Analysts generally gave the deal high marks. Infosys rival HCL recently acquired Axon, another SAP integrator. Meanwhile, Infosys had to diversify since it was focused too heavily on financial services clients.

Deutsche Bank analyst Aniruddha Bhosale said:

We believe the acquisition is a step in the right direction and will help Infosys diversify its geographical (improve its positioning in Continental Europe) and vertical (reduce dependence on financial services) exposure...Lodestone has a meritocratic culture with a mindset different from that of most offshore vendors. We believe, Infosys should maintain Lodestone’ brand and run it as a wholly owned subsidiary.

Wells Fargo analyst Edward Caso said:

After losing out to competitor HCL in 2008 for European based SAP integrator Axon, it appears that Infosys is now able to 1) upgrade its frontend capabilities in the critical SAP related area, 2) expand its penetration of Europe, and 3) extend its client base.

Morgan Stanley broke down Lodestone's units and how they diversify Infosys. 

lodestone2

Topics: Outsourcing, Enterprise Software, India, SAP

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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