At the end of the day size does matter and when it comes to IT services, a bigger company does bag larger projects. Phaneesh Murthy, CEO, iGATE Corporation tells HT that acquisition of Patni Computer Services would help build up scale. Excerpts:
Why did you choose to acquire Patni Computer Services? What kind of synergies you expect for the combined entity post-acquisition?
I think it is important to understand what were we looking for. At iGATE we are strong in banking and financial services but were looking for a player strong in other business verticals such as manufacturing, telecom and insurance. We were keen to have a credible platform that has over billion dollar revenues and over 25,000 employees so as to compete very effectively in the market. Patni fits that space and gives us the opportunity to compete in different verticals with different scale. We were looking for a company where there is potential to grow earnings in the long term. Patni has gross margins of around 35% gross margins and we could take it over 40%.
How will all this help you bag bigger IT projects?
Many customers have artificial constraints when they say that only companies that have, say, 25000 employees or revenues in excess of a billion dollars can compete for their IT projects. A small company cannot compete for many of these deals. Now with the combined entity we can look at almost all the deal sizes. So the company size will not be a bottleneck for us to bag larger deals.
What about the employees of Patni? What lies ahead for them?
The closure of deal augurs well for employees who can now start proper planning of their careers. As the company achieves stability we will ensure there is no attrition in the company. In fact the reasons to buy Patni has largely been because of its employees and for its customer contracts.
What about the role of Patni CEO Jeya Kumar….
We would want to retain all the people that we can but will also see what roles an individual can perform. It would be too early to comment on specifics.
Tell us about business operations plans of the combined company. Will you continue your US-focused approach?
The combined company earns around 80% of its revenues from North America, 14% from Europe and 6% from Asia Pacific. Going ahead we will invest in those markets which offers growth opportunities. I feel there are very few markets in other regions apart from North America that has high growth prospects. But as the two leadership teams meet over the next few weeks they would sort out the finer details.