{"id":1334,"date":"2012-09-10T18:33:00","date_gmt":"2012-09-10T18:33:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/infosys-lodestone_091012\/"},"modified":"2012-09-10T18:33:00","modified_gmt":"2012-09-10T18:33:00","slug":"infosys-lodestone_091012","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/infosys-lodestone_091012\/","title":{"rendered":"Well stone the lodes… Infosys cranks up its SAP-ness with the acquisition of Lodestone"},"content":{"rendered":"
\"\"<\/a><\/p>\n

Cindy Carpenter is Research Vice President, HfS Research (click for bio)<\/p>\n<\/div>\n

So the providers are upping the ante with their acquisition push of late, with Accenture augmenting its regulatory capabilities in pharma with the\u00a0pick up of Octagon<\/a>, and IBM making a strong move<\/a> into recruiting services with Kenexa. \u00a0Infosys now pipes in by focusing on the tech consulting side with the acquisition of global SAP consulting shop Lodestone. \u00a0HfS new Research Vice President, Cindy Carpenter joined this morning’s analyst call to investigate further…<\/p>\n

Will Infosys Be Able to Get the Lodestone Horses on the Right Track?<\/strong><\/span><\/p>\n

Infosys’s acquisition of management consultancy and SAP integrator Lodestone Holdings lines up perfectly with their long-term strategy of moving to higher value services, but this acquisition is a risky way to grow these capabilities.\u00a0 Management consulting firms are usually seen as poor acquisition targets, because the assets go home every night.\u00a0 If they’re not happy, they can usually find plenty of opportunities elsewhere, and the value of what you’ve bought may decline very rapidly.\u00a0 This goes double when the acquiring company is in another country from the acquiree.\u00a0 (We need only look at Capgemini’s struggles with consulting acquisitions in the U.S. to underscore this point.)<\/p>\n

Infosys understands the challenge of managing consultants well.\u00a0 On the analyst call discussing the transaction, Infosys Consulting CEO, Steve Pratt, commented that “good consultants are like thoroughbred race horses” – they can be temperamental, but get them excited and point them in the right direction, and they’ll do great things.\u00a0 He also noted that they need a “collaborative environment” and a lot of freedom.\u00a0 This is a very different culture from the culture of most Indian IT outsourcing\u00a0 companies, which tend to be structured and hierarchical, with an emphasis on following methodology, process control and predictability.\u00a0 So how has Infosys grown its integrated consulting and technology business?\u00a0 Very carefully. From its inception in 2004 until just this past year, Infosys Consulting has been a separate company, incubated and nurtured along different rules, operating models and margins.\u00a0 Infosys Consulting is now up to 30,000 employees and part of the parent company, but it still has a distinct footprint (mostly United States) and delivery model (about 30% onsite\/70% offshore) compared to the legacy Infosys technology business.<\/p>\n

The key to success in this acquisition will be bringing the same kind of understanding of different organizational cultures and models to the integration of Lodestone into the Infosys business.\u00a0 Lodestone’s 750 consultants operate from 17 countries today, but India is not one of them.\u00a0 The company has 200 clients, which means either that their consulting engagements are very small on average, or that they are claiming past and active clients.\u00a0 Contrast this with Infosys’ 711 clients to about 150,000 employees, averaging about 210 employees per client, mostly for ongoing, multi-year engagements.<\/p>\n

If Infosys wants to reap downstream revenues from Lodestone’s consulting engagements, it will have to teach Lodestone employees not only about Infosys’ services, but also introduce them to their global delivery model and how to work effectively with their new colleagues in India. Ronnie Hafner, Lodestone’s CEO, has no concern about his employee’s inexperience in this model, but Infosys does plan to groom Lodestone consultants to cross-sell the Infosys offerings and provide training in the Infosys methodology.\u00a0 Remember that they are thoroughbred racehorses – mostly German and Swiss – and give them plenty of room to run.<\/p>\n

Key Takeways:<\/strong><\/span><\/p>\n

On the positive side, this acquisition fits Infosys’ strategic goals beautifully:<\/strong><\/p>\n