Buy Now

Short items from Indian press reports that Infosys will buy the BPO operations of Philips Electronics NV. When it closes, it will be another item in the on-going rejigging of the BPO industry. Captive operations become part of independents. And operations that managers once thought vital or contained too many secrets to let outsiders peek at them now become outsource-able. What was it I heard at a cocktail party recently? In rapidly-changing businesses, there are no secrets. Just speed of execution.

India's second-biggest software-maker will be taking over all the costs of this acquisition, similar to the manner in which rival Tata Consultancy Services bought the operations of UK's Pearl Group insurers, the website reported. The acquisition will add to Infosys current BPO unit, which has close to 11,000 employees, providing the company with round-the-clock processing, the report
added.

Here's Times of India's take:

Infosys Technologies is said to be close to acquiring the finance and accounting BPO arm of Philips Global. The Philips arm has an employee strength of 1,500 globally, including a 500 strong force in Chennai. The other facilities are in Warsaw and Bangkok. The BPO arm is said to have assured revenues of $200 million spread over five years.

ePLDT's SPI Making Deals in India

Here's another little tidbit on the globalization front. SPI, a Philippine BPO owned by the nation's largest telecommunications company, is looking to buy Indian companies as it expands its presence in the subcontinent. In the meantime, Indian companies are scouting in SPI's backyard for suitable acquisition candidates in the race to bulk up and develop a full service line. Now which of the many BPO companies around today will become the household name in 2020?

Global healthcare, legal and publishing business process outsourcing company SPi is looking out for suitable acquisitions in India. Ernest L Cu, president and chief executive officer of the Philippines-headquartered Spi, said the company has allocated $50 million for mergers and acquisitions. The company is in talks with investment bankers and is considering several proposals, Cu said while addressing the media here on Wednesday. According to Cu, SPi plans to move its medical billing work to India from the US. He said the setting up of new delivery centre in Chennai and the cost differential between the US and India has made the company favour shifting of medical billing business to Chennai in eight months. The business has the potential to create 150 new jobs. SPi Technologies inaugurated its new 17,000 sq ft facility in the city on Wednesday. The 1,100-seat facility will house the company's publishing and healthcare business operations. The new centre will be the company's fourth in the country after Pondicherry, Coimbatore and New Delhi. Cu said the Indian company would increase its headcount by 700 by the end of this year. In 2003, SPi through its wholly owned Indian subsidiary SPi Technologies Private Ltd
acquired the Pondicherry-based Kolam Information Services Private Ltd, a book
publishing BPO. Two years later, it acquired the medical transcriptions business
of KG Information Services and Technologies Private Ltd in Coimbatore.

Bagging The Citi

Would you buy a business from a bank? Would you buy a business that is solely dependent on that bank? Citibank is close to a sale of its captive BPO, according to Indian press reports. The information asymmetry seems to favor Citibank, since who better knows the bank's prospects -- and the outsourcing potential going forward -- than itself.


If you're a buyer, it makes sense to pay the reported $1.2 billion price if you're confident you can cut costs in the unit faster or deeper than Citi thinks, and if you can use the Citibank BPO as a platform to acquire other bank customers. What better calling card than to say to future customers, "The largest bank in the world outsources to me."

Citigroup's BPO arm, Citigroup Global Services, is likely to find a new owner in a week. Surprisingly, big names like IBM, Infosys, TCS and Blackstone, which were in the race for the BPO firm, have fallen by the wayside, citing expensive valuations. The fight is now between half a dozen suitors comprising Genpact, First Source, WNS, 3i and a couple of private equity investors. Citigroup's BPO arm was recently put on the block and is likely to be valued around $1.2 billion. "The multiples are going to be pretty high here.

That means the buyers require to cough up anything up to $1.2 billion. Third party BPO firms in India are yet to have such deep pockets. Again, sinking large chunks of money upfront on a non-core cause may not be the right option for domestic IT services providers. That clearly leaves the game with big boys like IBM and monied PE guys who are willing to wait for ROI and capable of taking risk,'' says Pari Natarajan, CEO, Zinnov, a Silicon Valley-based offshore research and consulting firm.
For Genpact, the former captive unit of GE, this acquisition would reaffirm its leadership position in the country, while for WNS, acquiring Citigroup Global would give it a presence in the financial services sector. WNS, a legal service and financial services company, has made a few unsuccessful attempts to add financial services to its portfolio and is looking to make a splash by bagging this deal.First Source, on the other hand, is already a specialised player in the banking and insurance sector and the addition of the Citigroup's captive unit will bring them practices that banks usually don't outsource to third party players.