HiSoft Technology International Ltd, a major local software outsourcing service provider, said it has completed a deal to acquire its US counterpart Envisage Solutions, to further penetrate the US and European markets.

Beijing-headquartered hiSoft declined to reveal the value of the cash-and-stock deal.

But its offer could be as much as two times Envisage's revenue, which is around $9 million, according to Loh Tiak Koon, chief executive officer of hiSoft International.

"The merger will greatly boost our client base in the US and European markets. Meanwhile the complementary mix of our services will also benefit the new company," Loh said yesterday.

After the deal, hiSoft will see more than 50 percent of its total revenue coming from the US market, compared with the current 35 percent. Analysts said the profit margin of the US market was much higher than in Japan, which used to account for the bulk of HiSoft's revenue.

Established in 2000, California-based Envisage Solutions employs 62 consultants in the US. In previous years, it has worked with Fortune 1,000 companies such as Novell and General Electric in the automotive, telecom, high-tech, pharmaceutical and financial sectors.

"The merger gives hiSoft a shortcut to explore the US and European markets, which will boost its scope for growth, compared with the Japanese market," said Wang Tao, an analyst with market researcher Analysys International.

According to hiSoft, the US and Western European markets made up 75 percent of the world's $30 billion IT outsourcing market in 2006. And it said global spending on outsourcing services would maintain an annual growth of 16 percent in the next five years.
Domestic software outsourcing companies have been gearing up to expand in recent years, as the nation's IT outsourcing sector shows early signs of taking off.

The sector is expected to grow at an average annual rate of 50.2 percent to US$7.03 billion by 2010, according to CCID, a local consultancy specializing in the IT sector.

Beijing-based hiSoft will strive to grow faster than the market and plans to increase its headcount to 8,000 by 2009, according to Loh.

Established in 1993, HiSoft now has 2,000 engineers in China, Japan and the United States. And it provides services such as testing and application development to major clients including Microsoft and Symantec.

"We also expect to hold a share offering in 2008, either in the US or Japan," said Loh.

HiSoft received the US$30 million in second-round investment from US venture capital firms including Granite Global Ventures, Intel Capital and ePlanet Ventures.

(China Daily March 2, 2007)