IT Outsourcing India

Essar group company Aegis BPO today said it has acquired 80 per cent stake in Sri Lankan outsourcing company Ismart Timex for an undisclosed amount.

Aegis, through its holding company Essar Services Holdings, has acquired 80 per cent shares of Ismart Timex. The balance 20 per cent continues to be with its parent Timex Garments, Aegis said in a statement.

"Ismart Timex is one of the largest BPO service provider in Sri Lanka and we expect it to grow exponentially to more than double in voice and back office in the next one year. Aegis will now offer services from 35 delivery centres across the world," Aegis MD and CEO Aparup Sengupta said.

The acquisition, which would give management control to Aegis, would add 500 seats to the Essar company’s portfolio, the company spokesperson said.

This is the 14th acquisition for Aegis, after the company completed the take over of Australian BPO firm UCMS Group for AUD 54 million in August.

Ismart Timex provides back office and contact centre requirements in Sri Lanka with services in areas, including human resource profiling, training and quality assurance among others.

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BANGALORE: A potential sale of India-based back office firm WNS Holdings could trigger consolidation in the business process outsourcing sector BPO as IT services firms, knocked back by the global financial crisis, look to bolster their presence in the growing BPO market.

According to a media report last week, private equity firm Warburg Pincus was looking to sell its 50.12 percent stake in WNS, a move that would entail a change of control at the Mumbai, India based call-center operator.

IT services firms have thrived for years by winning contracts from international clients, helped by a large pool of English-speaking engineering workforce and cheaper wages.

But a downturn in the United States, which accounts for more than half of the sector’s export revenue, and turmoil in the global financial sector have halted the scorching pace of growth.

"Perhaps because the IT offshore business slowed down in the recession, IT services firms are looking at other areas where they can make some good progress," Brandon Dobell, an analyst with William Blair & Co, said.

While most of the top Indian IT services firms such as Infosys Technologies and Wipro have BPO arms, some of their U.S. based counterparts such as Cognizant Technology Solutions and Affiliated Computer Services Inc could be interested in the sector.

A Cognizant spokesman refused to comment. Even some of the world’s largest IT services firms such as IBM and Accenture have forayed into BPO services. In 2004, IBM acquired Daksh to create India’s largest BPO firm.

Pure-play BPO firms such as WNS and EXLService Holdings, which largely provide services such as insurance claims processing, payroll management and customer support, are seen by analysts as possible takeover targets.

Sykes Enterprises Inc, Genpact Ltd and ICT Group could also be on the takeover radar.

"Strategically, it makes some sense. There is a lot of offshoring growth opportunities available in BPO, and lot of budget dollars that could be captured by acquiring one of these BPO players," said Joseph Vafi of Jeffries & Co.

A recent Nasscom-McKenzie report had projected BPO to be a $340 billion-$360 billion market opportunity by 2020.

"So, I would look at it as an opportunistic move to expand platforms," said Vafi, adding that companies such as Cognizant and Patni Computer Systems, which do not have a strong BPO platform, could look at BPO firms such as WNS.

In an indication of what lies ahead, Philippines-based BPO firm eTelecare Global Solutions Inc and Boston-based Stream Global Services Inc merged late last week to broaden offerings and geographic footprint.

China’s leading IT outsourcing firm VanceInfo Technologies is also looking at fresh acquisitions to boost its presence in the backroom operations of the financial industry.

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Patni Computer and MphasiS are among the potential suitors looking to acquire the Indian software unit of troubled insurance giant AIG, said a banking source familiar with the development. The software unit, AIG Systems Solutions, is on the block as part of the insurance behemoths plans to divest assets globally and focus on its core business. Deloitte is running a sale process for the unit, which has over 1,000 employees and annualised business estimated at USD 30 million. The sevenyear-old AIGSS has centres in Chennai and Kolkata. The deal-making is still in preliminary stages.

Other middle-rung Indian IT firms like MindTree and a few private equity investors could also be in the race even as AIG’s lack of assurance on a committed business flow in the future has dampened the interest of some suitors, sources added. Polaris, TCS and MindTree figure in AIG’s vendor list.

The recent sale of the captive back-office arms of Citigroup and Aviva came with a multi-year assured business contract from these firms. The issue of business shrinkage as AIG divests many of its divisions was another concern for the suitors. The US Federal Reserve bailed out AIG from bankruptcy by pumping $85 billion loan in return for majority control.

The uncertainty over future business from AIG is likely to impact the deal valuation. One banking source said the deal could be valued at best as one-time revenue, which is around $30 million. But the fact that AIGSS has a high quality team engaged in 70% off-shore work could be a positive.

But the catch is whether AIG would sweeten the deal by offering a long-term outsourcing contract for the buyer. The history of such deals tells us that whoever buys a captive gets guaranteed business from the owner. I don’t think these buyers will buy without a guarantee of business,” said an analyst with an IT research and advisory firm, who did not wish to be named.

Precedents for a deal of this nature include Citi’s sale of its back-office arms Citigroup Global Services and CITOS to TCS and Wipro, respectively, and Aviva’s sale of its captive to WNS. In each case, the deal was accompanied by a multi-year outsourcing contract with the parent company.

AIGSS was set up as a joint venture company where AIG held 80% and Polaris Software Lab held the rest. Polaris incubated this company by sharing its physical and communication infrastructure and processes. But, when Polaris signed a professional services agreement with AIG Global Services last year, it sold its stake in AIGSS.

Source: http://www.offshoringtimes.com/

NEW DELHI: Switzerland-based banking and wealth management firm UBS is considering outsourcing about 5,000 jobs over the next two years, according to people familiar with its plans. This signifies an opportunity to win new businesses for Indian IT vendors such as Wipro and Infosys Technologies that already work with the Swiss bank.

UBS recently appointed consulting firm McKinsey to advise it on the outsourcing process. The decision to outsource thousands of jobs is in line with the ailing bank’s cost-cutting strategy. UBS chief executive Oswald Grubel has already announced 7,500 job cuts across the firm till 2010.

The Swiss bank has accumulated more than $53 billion in writedowns in the global financial crisis and had to receive financial aid from the Swiss government. The bank is an important client for both Wipro and Infosys. While Wipro, India’s third-largest software-services firm by revenues, gets over $50 million in annual revenues from UBS, second-ranked Infosys derives about $40-50 million. Apart from these firms, other vendors for UBS include TCS, Polaris, Cognizant and Headstrong.

In reply to an e-mail questionnaire on the bank’s outsourcing plans, UBS spokesman in Hong Kong, Mark Panday, said: "UBS does not comment on market speculation or rumour. UBS has a well defined offshoring strategy, including judicious use of India and other locations around the world. Offshoring has allowed UBS to reap many benefits, including improved quality, reduced operational risk, new revenue opportunities, cost savings and, importantly, access to talent."

Outsourcing analysts say the bank is more likely to outsource BPO work such as processes related to finance and accounting, procurement and collections. "Large banks have been using IT outsourcing for a longer time than BPO.

About 25-30% of their IT requirements would be typically outsourced, while it’s true for only about 10% of their BPO work," said sourcing advisory firm Everest Group principal Nikhil Rajpal.

With UBS planning to outsource more work, its existing vendors are likely to have a better shot at grabbing more business.

"Wipro and Infosys have worked with UBS for a long time. That means a higher chance for them to win new business from it," a Mumbai-based equities analyst said, asking not to be identified.

In line with its focus on cost-cutting, UBS had appointed Ulrich Korner, a former Credit Suisse CEO and McKinsey management consultant, as its group COO in April. Known to be pro-outsourcing, Mr Korner is overseeing the company’s cost-cutting plans and leading a restructuring of its business processes including the centralisation of functions such as IT, HR, procurement and facilities management.

Europe, with the exception of UK, has been a conservative market when it comes to outsourcing and lags behind mature markets such as the US. The region has emerged as the fastest growing market for IT-BPO outsourcing as companies affected by the global economic downturn aggressively explore ways to cut costs. Demand is particularly strong in markets such as Benelux (Belgium, Netherlands and Luxembourg), the Nordics (Sweden, Denmark, Finland and Norway), Switzerland, Germany and France.

"While the global economic downturn is acting as a catalyst to drive outsourcing, the lack of skilled workforce is another major driver," said sourcing advisory firm Quantum Step MD Sridhar Vedala.

Source : http://economictimes.indiatimes.com/