With consolidation expected in the outsourcing industry in the next two years, what’s a midsize outsourcer to do?

For Jerry Rao, the chief executive of MphasiS, an Indian outsourcer, the answer is: embrace it.

This week, Electronic Data Systems, the information technology consulting giant, made a $380 million offer for a 52 percent stake in MphasiS. The company’s board was receptive to the offer. The potential for a deal was put in place last year when Barings Private Equity Partners decided to sell its 35 percent stake in MphasiS.

The company, with headquarters in Bangalore and New York, has a work force of 12,000 and $170.44 million in 2005 revenue. MphasiS specializes in information technology services and business process outsourcing.

The outsourcer made news last year when three former employees at one of its call centers were arrested for stealing passwords from Citibank. Mr. Rao said the incident gave him restless nights, but that it was an important learning experience and subsequently Citigroup increased its business with MphasiS. Read more…

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