MphasiS, an Indian IT services subsidiary of Hewlett-Packard, said on Thursday that it has signed a definitive agreement to acquire Fortify Infrastructure Services, a provider of offshore based remote IT operations and management (ROM) services.
MphasiS will be paying US$15.5 million up front in an all-cash deal, followed by two performance-related payments over two-and-half years, said Ganesh Ayyar, CEO of MphasiS.
Privately-held Fortify has annual revenue of about $20 million, and operations in the U.S. and India. The acquisition is expected to be completed over the next six weeks.
Besides bringing 24 clients to MphasiS, privately-held Fortify also has the platform and processes to offer customers outcome-based services relating to both technical and business results, Ayyar said. MphasiS will also be merging some 280 staff from Fortify into its operations, he said.
As it expands into the remote services market, MphasiS expects that its offshore delivery of services at a low cost will be attractive to its target market of mid-market customers.
The market for remote monitoring from offshore locations is about $4 billion, and will grow about 30 percent this year, according to Ayyar. About $1.2 billion of that business is from mid-market customers, who are looking for partners to solve the challenges of operating and managing their IT, he said.
HP owns close to 62 percent in MphasiS which is listed on Indian stock exchanges. The company was earlier a subsidiary of Electronic Data Systems (EDS) which was later acquired by HP.
About 58 percent of MphasiS current business comes from HP's clients, Ayyar said. About 10 to 12 percent of business comes directly from HP.
MphasiS currently specializes in application development and maintenance, business process outsourcing, and IT infrastructure management, Ayyar said. Application development and maintenance account for 67 percent of revenue.
The company had 35,690 staff at the end of January.