$200 mn well spent? 3 reasons why Infosys buying Panaya makes sense

Infosys on Monday  announced that it will be shelling out $200 million for a little known US-based firm Panaya that is a privately held company backed by venture capital firms like Benchmark Capital, Hasso Plattner Ventures and Battery Ventures.

“The acquisition of Panaya is a key step in renewing and differentiating Infosys’ service lines,” CEO Vishal Sikka said in a statement following the acquisition.

But here’s three reasons why the company may have spent its $200 million well for the acquisition:

Another step towards becoming a major software player

Ever since he took charge at the helm of Infosys, Vishal Sikka has made it clear that he wants to get the company out of its comfort zone of services and analysts see the acquisition of Panaya as major step in that direction.

Panaya’s CloudQuality suite will allow Infosys to bring automation to its service lines through an agile software as a service (SaaS) model, help mitigate risk, reduce costs and shorten time to market for clients, the company said.

“Acquisitions such as Panaya are important to making the shift from services driven to software driven player.  Panaya’s strength is utilizing hard core math to solve problems such as upgrades, extensions, testing, etc. The acquisition means Infosys is serious about software driven solutions,” R Wang, Principal Analyst & Founder of Constellation Research said.

Will optimise usage of manpower

The acquisition of the new company is expected to significantly help Infosys free up its workforce towards higher skill processes and Sikka has already made it clear in his announcement of the acquisition.

“This will help 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 in the official statement.

Analysts agree that Panaya will help Infosys grow quicker in the software space.

“Clearly, the company has long had a few offering gaps that it needed to fill. This was expected given the recent announcements by Vishal on his intent to be focused on acquisitions to help the company make significant progress on non-linear growth. The mid-size acquisition allows Infosys to onboard the new intellectual property without facing any hassles and also prove easier and lighter for the teams to integrate,”  Sanchit Vir Gogia, Chief Analyst and Group CEO, Greyhound Research told Firstpost.

“With clear benefits on automation, Panaya will offer significant differentiated advantage to Infosys for its Testing Services which continues to be a manual process for many service providers. Testing is one of the critical pain points for end-user organizations given the rampant adoption of new technologies like Cloud, Mobility and User Experience Management,” he said.

An impressive client list

Apart from having a unique product offering, one major factor in New Jersey-based Panaya’s favour is the fact that it has a very impressive client list that automatically comes over to Infosys.

Panaya, which provides cloud-based quality management services for enterprise applications has clients that include major companies such as Coca-Cola, Mercedes-Benz, Unilever, General Motors among others.

About 1,220 companies in 62 countries, including a third of the Fortune 500, use Panaya’s CloudQuality Suite and Infosys will be hoping to entice them with other products in the future.