Revenue at the wholly owned subsidiary of Infosys Ltd. fell 4.3% to $442 million in the year ended December 2023, according to the company’s annual report earlier this month.
“Revenue and margins of McCamish declined in FY2024 as a result of muted demand environment compounded by impact of ransomware attack,” Kotak Institutional Equities analysts Kawaljeet Saluja, Satishkumar S, and Vamshi Krishna said in a note dated 18 June.
Another analyst also attributed the revenue decline to the ransomware attack.
“Revenues have fallen because of the cyber attack as the company had to pay off money to fix the damages,” a Mumbai-based analyst said on condition of anonymity.
This was Infosys McCamish’s first revenue decline since the year ended March 2015. It switched to calendar year reporting in 2019. Parent company Infosys follows an April-to-March financial year.
Infosys bought Atlanta, Georgia-based McCamish Systems, which provides insurance process management solutions and services, through one of its six subsidiaries, Infosys BPO, for $58 million in December 2009.
The revenue decline for one of Infosys’ first acquisitions adds fuel to the fire left by the ransomware attack on its systems reported in November 2023. The incident rendered services unavailable and led to unauthorised access to sensitive customer information.
Infosys McCamish’s net profit tumbled 69% to $10.7 million whereas operating margins crashed 570 basis points to 3.4% by the end of 2023.
Costs incurred
While Infosys deployed a third-party cybersecurity products provider to resolve the issue, the incident cost the company.
“Loss of contracted revenues and costs incurred with respect to remediations, restoration, communication efforts, investigative processes and analysis, legal services and others amounted to approximately $30 million,” according to Infosys subsidiaries’ financials for the year ended March 2024. However, it was not known if the parent company paid this sum or if this amount came out of McCamish’s coffers.
Bank of America (BofA) informed the Maine Attorney General in February that 57,028 clients were impacted by the data breach at Infosys McCamish, which included their personal information and social security numbers.
The ghost of the cybersecurity incident has not stopped haunting Bengaluru-based Infosys as it now runs the risk of a class-action lawsuit. On 6 March, a class-action complaint was filed in a Georgia district court against Infosys on behalf of individuals in the US whose data was leaked due to the cyber incident.
The complainants accused Infosys McCamish of concealing the existence and extent of the data breach for an ‘unreasonable duration of time,’ and for letting them believe their data was safe. The complainants sought a jury to look into the matter. Infosys is yet to respond to the suit.
An email sent to Infosys seeking comment was unanswered at the time of publication.
Infosys McCamish has more than 680 employees. Richard Magner took over as chief executive officer in 2017 from Gordon Beckham, who headed McCamish Systems from the time it was taken over by Infosys BPO in 2009.
The acquisition came when Infosys was looking to scale up its business process outsourcing (BPO) unit. The availability of a large, English-speaking population in India only made it easier for Indian outsourcing firms to handle work for their western clients.
Infosys tapped into the growing demand for BPO in 2002 when it formed Infosys BPO to provide clients with legal services outsourcing, human resources, finance and accounting functions.
As of March 2024, the company has 28 direct subsidiaries which have 63 subsidiaries. Of these direct subsidiaries, Infosys BPM Ltd., renamed from Infosys BPO in 2017, and the owner of Infosys McCamish Systems, is one of the biggest.
Infosys BPM’s revenue grew 2% to $953 million as of March 2023, which was the slowest increase in seven years.
Infosys reported $18.6 billion in revenue for the financial year ended March 2024, of which 27% or $5.1 billion came from its financial services business. A modest to low or no growth of its subsidiaries resulted in the IT services company reporting revenue growth of 1.9%, which was the slowest among the top three Indian IT services companies, including Tata Consultancy Services Ltd and HCL Technologies Ltd.