BANGALORE, INDIA: The back-office services unit of Infosys Technologies Ltd, India's No. 2 software exporter, will acquire U.S.-based McCamish Systems for an upfront payment of $38 million to boost its service offerings.

Infosys BPO will pay an additional $20 million to the sellers on meeting certain financial targets, its chief executive Amitabh Chaudhry said, but declined to disclose the targets that have been set.

McCamish Systems, which posted $38.2 million in revenue in 2008, provides business process outsourcing solutions to the insurance and financial services companies in the United States. It counts 10 of the 20 top insurers among its clients.

"This acquisition gives us the ability to pitch for bigger deals in the insurance sector," Chaudhry told Reuters in a phone interview. He said the deal would be completed later this year and revenue would start flowing from January.

Shares in Infosys, which the market values at $29 billion, were up 0.5 percent at 2,319.95 rupees by 0655 GMT in a flat market. The stock had risen 1.7 percent in opening deals.

McCamish has 260 staff, and Chaudhry said the employees would become part of Bangalore-headquartered Infosys BPO, whose offerings include finance and accounting, human resource and legal services outsourcing.

Indian outsourcing firms have thrived by providing Western firms with services such as processing insurance claims, managing payrolls and customer support.

The boom in business process outsourcing, or BPO, is built on a large, skilled and cheap English-speaking workforce, but a global economic slowdown has crimped spending by companies.

Infosys BPO, which was set up as a separate unit of Infosys in 2002, is looking to buy firms in the United States and Europe, Chaudhry had said on Monday, adding the size of any deal would be between $50 million and $100 million.

Infosys, which has shied away from large acquisitions in the past, has built up a cash pile of $2.8 billion and is now looking for buys to establish its presence in new markets and add new service lines.

In 2007, Infosys signed a $250 million outsourcing contract with Royal Philips Electronics, and bought three of the Dutch firm's back-office centres to expand its presence in fast-growing European markets.