Infosys on Monday announced the acquisition of US-based software automation technology firm Panaya for $200 million in an all-cash deal.
This is the software major’s first acquisition after Vishal Sikka took over as the CEO in August last year. Panaya is being seen as a fit for Sikka’s strategy of “renew and new” aimed at enhancing competitiveness and productivity by leveraging technologies of automation, innovation and artificial intelligence.
The Infosys scrip ended marginally lower by 0.78% on Monday on the Bombay Stock Exchange at R2,278.50.
Sikka said the acquisition of Panaya would help differentiate the firm’s service lines. “This will amplify the potential of our people, freeing us from the drudgery of many repetitive tasks, so we may focus more on the important, strategic challenges faced by our clients,” Sikka said.
Panaya’s cloud-based solution operates on the software as a service (SaaS) model offering automated testing services focused largely on products of SAP and Oracle. Besides the US, the company has a presence in multiple locations such as Israel, Germany, Japan and Australia.
Panaya chief executive officer Doron Gerstel said, “I am confident this integrated proposition will uniquely position Infosys as the services leader in the enterprise application services market.”
Ray Wang, principal analyst, Constellation Research, said, “Acquisitions such as Panaya are important to making the shift from a services driven to a software driven player. Panaya’s strength is utilising hard core math to solve problems such as upgrades, extensions and testing. The acquisition means Infosys is serious about software driven solutions.”
Sikka’s move to Infosys was expected to be accompanied by a step-up in inorganic activity; the CEO has said he would be interested in smaller acquisitions that gave the firm an edge in technology.
Sanchit Vir Gogia, chief analyst, Greyhound Research, believes the mid-size acquisition allows Infosys to onboard the new IP without problems and also that the two teams should be able to easily integrate. With clear benefits on automation, Panaya brings with it a differentiation in the testing services space, otherwise a manual process for many service providers.
Sikka had, in an earlier analyst interaction, said Infosys expects to get back to industry-leading growth in the next 18-24 months. The key to this was renewing its services through automation, artificial intelligence and more innovation. That was expected to lead to further productivity, which is now a key measurement index for the company.
However, he was categorical that Infosys will stay a pure-play services company and that there was no desire to become a product company.
Sanjoy Sen, doctoral researcher, Aston Business School, UK, said, “Over the last few years, Indian IT and ITeS organisations have been focused on reinventing themselves from Indian offshore IT companies to global business solutions providers that operate with a global presence.
Therefore, for an organisation like Infosys it makes immense sense to acquire an overseas headquartered company in this area.”