Infosys is reported to be looking at potential acquisitions in the consulting and enterprise resource planning (ERP) space, according to a report by investment news website vccircle.com.

The report suggests that the main attraction for the IT major to try and break into this space is the 30-40 per cent higher billing rates that their current back office applications maintenance and IT support provide, for which the company will look at targets in the consulting, transformation capabilities and ERP areas.

Software consulting is seen as the high-margin differentiator between consulting firms IBM and Accenture, and Indian software companies such as Infosys and HCL. However, competition in the arena can also be very intense, the report said, while saying that the IT major's move to reinvent itself may have been prompted by the economic recession in the US.

Cost pressures and wage inflation along with skill shortages in the face of international competition from countries such as Vietnam, Ukraine and the Phillippines has increased in the low end of the business or the back office application maintenance and support jobs, the report said. It quoted CEO S Gopalakrishnan as saying that Infosys would be looking at acquisitions in the geographies of Germany, France, and even Japan.

Other reports in the media pegged targets as firms with revenue up to $1 billion. Business Line quoted Infosys board member and COO SD Shibulal as saying that the company would go ahead with acquisitions if it is able to find a company that has the right valuation in the areas of consulting, transformation capabilities or ERP. He also said that given Infosys' cultural knowledge of Europe, acquisitions in continental Europe would make sense. At the end of 2008, Infosys had $1.9 billion in cash and deposits.

Infosys had to relinquish the UK-based Axon Group Plc, which was finally acquired by rival HCL, even though it gained around Rs18 crore from the attempt, having spent around Rs15 crore on the failed deal and received Rs33 crore from the UK firm as inducement fee.

Previous acquisitions by the company include that of Philips global finance and accounts BPO in 2007, and Australian IT company Expert Information Services Pty Limited in 2003. It also acquired the trade IQ product division of IQ Financial Systems Inc, a Deutsche Bank-owned company recently.

Meanwhile, Gopalakrishnan dispelled talk about Infosys being ready to poach clients of fraud-hit rival Satyam, saying that Infosys would not proactively approach clients of Satyam, though it remains open to evaluate their proposals basis individual merit if they were to approach Infosys "on their own".

Reports also quoted Infosys board member T V Mohandas Pai as saying that Infosys had consciously decided not to act on resumes received from Satyam employees. He said it would not be right to poach or hire from a company in trouble and where thousands of careers were at stake.