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What do you perceive if you see a profile of an IT outsourcing company that has a single digit profit margin and a very small offshore presence? Answer: A stale company to invest in with some dormant business practices!!!

In most cases your answer will be right, but not in case of Perficient Inc. (NASDAQ:PRFT). The stock was trading just above $1 in July-2003 and as of Aug-13,2007 it was trading at $23.00 [market cap: $675 million]. A 23 times increase in market cap. This stock may not have fit most people's investment criteria in 2003 because it was merely $30mn in market cap.

However, the interesting point to note is that the company has managed to get institutional investors' attention. This evident by the fact that it has $147mn as additional paid in capital even though its book value is around $107mn. So how has it managed to do that???

Steady increase in revenues :From 2002 to 2006 the revenues have increased from $22mn to $160mn and gross margin during this time frame has increased from $8.9mn to $53mn.The assets have increased from $19.5mn to $131mn and the book value has increased from $19mn to $107mn during this time period.

Focus on acquisitions: The very first section of its 10-k report where the company mentions about its business overview it says that the technology consulting business is a fragmented industry where a substantial number of privately held information technology consulting firms can be acquired for a fair amount of price. Since 2004 the company has acquired 8 technology consulting firms successfully.

eNable methodology: A unique and proven execution process that allows for repeatable, high quality services delivery. The eNable Methodology leverages the thought leadership of their senior strategists and practitioners to support the client project team and focuses on transforming their clients' business processes to provide enhanced customer value and operating efficiency, enabled by Web technology. As a result, they can offer clients the dedicated attention that small firms usually provide and the delivery and project management that larger firms usually offer.

Use Of Offshore Services When Appropriate: Solutions and services are typically delivered at the customer site and require a significant degree of customer participation, interaction and specialized technology expertise which tends to offset the potential savings from utilizing offshore resources.

However, there are projects in which they can use lower cost offshore technology professionals to perform less specialized roles on their solution engagements, enabling them to fully leverage their United States colleagues while offering their clients a highly competitive blended average rate. They have established partnerships with a number of offshore staffing firms from whom they source offshore technology professionals on an as-needed basis. Additionally they maintain an exclusive arrangement with an offshore development and delivery firm in Macedonia.

Smart use of subcontractors: As of December 31, 2006, they had 972 employees, 853 of which were billable professionals, including 198 subcontractors, and 119 of which were involved in sales, general administration and marketing. This is very critical for small consulting firms because they can't afford to have large pool of resources at their disposal.

CEO with a legal background: Very rarely do I see this combination for a CEO of IT consulting company. Since 1999 John T. McDonald has beenChief Executive Officer, and was elected Chairman of the Board in March 2001. From April 1996 to October 1998, he served president of VideoSite, Inc., a multimedia software company that was acquired by GTECH Corporation (GTK) in October 1997, 18 months after he became VideoSite's president.

From May 1995 to April 1996, he was a Principal with Zilkha & Co., a New York-based merchant banking firm. From June 1993 to April 1996, he served in various positions at Blockbuster Entertainment Group (BBI) , including Director of Corporate Development and Vice President, Strategic Planning and Corporate Development of NewLeaf Entertainment Corporation, a joint venture between Blockbuster and IBM (NYSE:IBM).

From 1987 to 1993, he was an attorney with Skadden, Arps, Slate, Meagher & Flom in New York, focusing on mergers and acquisitions and corporate finance. He currently serves as a member of the board of directors of Interstate Connections, Inc. He received a B.A. in Economics from Fordham University and a J.D. from Fordham Law School.

PRFT 1-year chart:

Source: Perficient: Proficient In IT Consulting