IT services firm Kanbay to address new industries

Kanbay International, an IT services firm focused on the financial services industry, plans to diversify into also offering services to the consumer and industrial products industries, according to an executive of the company.

The consumer and industrial products industries, including the manufacturing, distribution, and retail parts of these industries, are a large and growing segment of the IT services market, said Cyprian D’Souza, head of Kanbay’s Indian operations, in an interview Friday.

In line with its new strategy Kanbay, of Rosemont, Illinois, announced this week an agreement to acquire privately held Adjoined Consulting, an IT services company in Miami, Florida, for about $165 million in cash and stock.

Adjoined has about 140 customers, of which the majority are in the consumer and industrial products industries, D’Souza said. The company has operations in the U.S., and employs about 550 staff.

After the acquisition of Adjoined is complete by March this year, Kanbay plans to offer customers of Adjoined the option to have services delivered from offshore in India where Kanbay has facilities in Chennai, Hyderabad, and Pune.

“One of the reasons why Adjoined found this deal interesting was because a lot of their customers were looking for an offshore offering,” D’Souza said. While Kanbay in India has the technology expertise, the industry-specific expertise for the consumer and industrial goods industries will come from Adjoined, he said.

The two companies will together have over 5,700 staff, of which about 4,200 are in India. Kanbay does not have any immediate plans to set up offshore services facilities in locations outside India, D’Souza said.

The company is instead expanding in India, and plans to build there by the end of this quarter new facilities that can accommodate 6,500 staff. The company has not, however, disclosed when all the 6,500 positions in India will be filled.

Kanbay currently gets a large proportion of its revenue from two of its largest investors, banking company HSBC in London, and investment bank Morgan Stanley in New York. Last year, these two customers accounted for about 60 percent of the company’s revenues of $230.5 million, according to D’Souza.

Kanbay has stated its intent to build up revenue from other customers, and the acquisition of Adjoined will help the company build up a more diversified customer base, D’Souza said. Last year, revenue from HSBC and Morgan Stanley grew by only about 15 percent, while revenue from other customers grew 48 percent, according to D’Souza. The trend is likely to continue this year, he added.

Kanbay is targeting revenue of at least $370 million this year, including results of Adjoining Consulting which had revenue of $95.3 million last year, the company announced this week. On a stand-alone basis, assuming no contribution from the Adjoined acquisition, it is targeting revenue of at least $280 million this year.