Thursday, May 24, 2007

Another Captive on Sale!

The first round of bids for Citi’s business process outsourcing operations — Citigroup Global Services (formerly known as e-Serve) — is likely to be completed this week. A host of global IT companies and also private equity firms are said to be in the initial race. However, Citi is likely to look at selling part of its operations only to a strategic partner, given the sensitivities involved in the deal. According to sources, IBM, Automatic Data Processing (ADP), Genpact, Infosys and private equity firms such as Blackstone and General Atlantic are in the race for Citi’s BPO business.

Citi is likely to follow the Genpact model, where it is likely to sell off over 50% stake in the BPO firm. It is, however, likely to retain a part of the stake in the firm so that they can not only get the benefits in case of a future listing but would also handhold the firm.

According to sources, one of the main reasons that the group is looking at bringing in a strategic partner is to bring down the overall costs and not monetising the stake.

“Though there is interest from a host of firms, the group is most likely to sell the operations to someone who has experience in the field. They would want a strategic partner in the firm. It’s a core asset and they would not like to have any issues post a sell off,”
said a senior private equity official of a leading firm. ADP and Genpact are said to be the front runners for the deal.

Citi officials declined to comment. When contacted Genpact president and CEO Pramod Bhasin declined to comment while Infosys BPO’s officials were unavailable for comment. However, experts believe that Genpact has more synergies with Citi’s BPO unit because it has the experience of working out of a captive shell. Genpact had started off as a captive for GE in 1997.

GE had in 2004 sold 60% of its stake to Oak Hill Capital Partners and General Atlantic Partners. It was then renamed as Genpact. Citi had delisted Citigroup Global services in 2004. Citi held 44.4% stake in the BPO company. It had accepted an exit price of Rs 975 per share while delisting the firm. At that price the company was valued at around Rs 1,200 crore. According to i-bankers the value of the company now would be at around $700 million.

According to Forrester Research, nearly 60% of the captives in India are struggling due to spiralling costs, high attrition and lack of integration and management support. “Nearly, 10% of these struggling captive BPOs are most likely to sell off and go the outsourcing way,” a recent Forrester study says. Another Mumbai-based analyst voiced similar views about Citi’s BPO stake sale. “It is simply following the trend set by the likes of GE and Deutche Bank,” he added.

Deutsche Bank later sold off its stake to the Delhi based HCL Technologies. Citi globally has been on a major cost cutting spree. It had recently announced that it would cut 17,000 jobs on the back of a restructuring plan that is targeting billions of dollars in cost savings over the next few years. It is also looking at moving out 9,500 jobs overseas and to smaller American cities. Citi’s BPO operations have over 9,000 employees with nearly 4,000 servicing its international businesses.

from ET

Friday, May 18, 2007

Australian BPO to Grow by 60% to Reach $3.84Bn in 2010 – IDC

According to a white paper released by IDC for Accenture, business process outsourcing (BPO) in Australia is expected to increase by about 60 percent from USD 2.387 billion in 2006 to USD 3.84 billion in 2010, reflecting a CAGR of 12.4 percent. This growth is likely to be attributed to the increase in outsourcing in the areas of HR and training, finance and accounting, procurement, and customer care.

Among the key findings, the HR services market in Australia is estimated to grow at a CAGR of 9 percent to reach USD 1.591 billion by 2010, while finance and administration outsourcing will grow at a CAGR of 12 percent to reach USD 2.47 billion in 2010. In addition, the customer care segment is expected to grow at a CAGR of 15 percent to reach USD 833 million by 2010. However, procurement outsourcing by Australian firms is expected to grow at a CAGR of 18 percent to reach USD 354 million by 2010.

HR BPO in Australia has become mature as many HR BPO deals encompass high-end services including recruitment, workforce management, and learning. Growth in finance and administration outsourcing in Australia will primarily be driven by compliance and regulatory mandates.

The study also cited that BPO in Australia is still not mature as compared to the American and European countries. According to Aprajita Sharma, an outsourcing and BPO research manager at IDC Australia, a majority of BPO deals in Australia pertain to single function arrangements rather than complex end-to-end process deals. Sophisticated deals are, however, more prevalent in the overseas locations.

source: globalsourcingnow

Monday, May 14, 2007

Genpact CEO Pramod Bhasin took home $2.8m in ’06

In what could be one of the highest paid salaries to a professional CEO in India, Pramod Bhasin, 55, president and CEO of Genpact, earned an annual salary of $2.8 million in 2006. Bhasin’s compensation includes a salary of $610,000, annual bonus of $100,000, stock option awards of $ 971,123 and the rest in pension and retirement benefits and other benefits like housing, security and so on.

Bhasin is one of the founders of Genpact when GE started the company in India and serves as director on the company’s board. “This package would easily put Mr Bhasin amongst the top 5 highest paid investor-backed professional CEOs in the country” says Priya Chetty Rajagopal , VP, Stanton Chase International, an executive search firm.

Genpact’s next highest earning official is V N Tyagarajan, executive VP, business development and head of sales, who earned $1.2 million followed by Mitsuru Maekawa, CEO of Genpact Asia, whose total package was $844,065. Genpact disclosed the information in a preliminary prospectus filed by the company with the US Securities and Exchange Commission on May 11, 2007.
In what is reflective of the growing importance of India in global markets, CEO salaries in India have gone up sharply in the last few years. “There are at least a hundred CEOs earning $1 million in salary in India today,” says managing partner of EMA Partners International K Sudarshan.

Close to half of this salary includes performance-linked bonuses as well as stock options. Some of the highest paying executives are found in industries like large investment banks, telecom companies and banks. Search executives say that CEOs in companies such as IBM, Bharti, Reliance Retail, HSBC, Cairn and Walmart India are earning salaries in the range of $1 million and above. In 2006, India reported the highest salary increase in the Asia Pacific region.
Genpact began as an India-based captive BPO arm of GE Capital. In 2005, GE spun it off as an independent business and renamed it Genpact. The company has 28,000 employees and earned revenue of $613 million in 2006 with a profit of $39.8 million. It’s attrition stood at 32% last year.

Genpact filed a preliminary prospectus on May 11, 2007 for a listing on the NYSE. The company has not disclosed how many shares it will offer for sale and at what price. GE owns about 29% of the company.

source copy+paste: EconomicTimes

Monday, May 07, 2007

Mergers and Acquisitions:

Northgate Information Solutions has entered into an agreement with ARINSO International to acquire a 60.43 percent stake in ARINSO from Jos Sluys, the company's Founder and CEO, for about EUR 375 million. The acquisition has been approved by the management of both the companies and is subject to approval from Northgate's shareholders. Post-acquisition, Northgate is likely to make a public offer to buy the remaining stake in ARINSO. The deal will allow the two companies to strengthen their position in the HR and payroll service market across Europe, the Americas, and Asia Pacific. The combined entity is likely to have an employee base of 6,000 people and will generate revenues worth EUR 700 million.

Dimension Data has acquired an additional 40.1 percent stake in Datacraft Americas Holdings (DCAH), the wholly owned holding company of Datacraft do Brazil, increasing the company's stake to 50.1 percent. Post-acquisition, Datacraft do Brazil will be known as Dimension Data Brazil. The acquisition will enable the company to strengthen its position in the technology markets. The company can benefit from DCAH's expertise in the areas of networking, converged communications, and security in Latin America. The company also aims to enhance its association with Cisco in Brazil through this acquisition.

HCL Technologies has formed an IT alliance with Saba allowing both companies to expand and enhance their offerings across Asia Pacific, Europe, and North America. The alliance aims to offer IT as well as software services to the companies' common customers across various markets, such as media and entertainment, healthcare, financial services, retail, hi-technology, and manufacturing. HCL's back-end IT services combined with Saba's technology will allow the companies to offer a comprehensive package of IT services to their customers.

CDC Software has acquired a majority stake in Vectra Corporation for an undisclosed amount. The acquisition will allow CDC Software to expand its portfolio of offerings in the IT security and service market and strengthen its operations in the APAC region (primarily in Australia). In addition, the acquisition will support the company's consulting and professional services division (Praxa Australia) in Australia.
Fiserv unveiled its plans to expand its Indian operations by increasing the company's headcount to 5,000 by 2009. Fiserv's Indian subsidiary Fiserv India, has recruited about 1,000 employees since its establishment in 2005. Fiserv India has been offering information management systems and services for the financial and insurance service industries. It specializes in offering various services, such as transaction processing, outsourcing, BPO, software, and systems solutions, to its parent company. Recently, the company has opened a Center of Excellence in India.

Fidelity International has expanded its offshore operations in China by setting up a back-office center in the North-Eastern port of Dalian. The facility is expected to cater to the company's mutual funds and pension business operations in Japan. The center is likely to prove competitive to the company's Indian operations (employing about 9,000 professionals).

The Securities and Exchange Board of India (SEBI), a regulator of securities markets in India, has intervened in the plans of Unit Trust of India (UTI) to acquire a BPO firm. The acquisition aimed at supporting UTI's mutual fund (UTI MF) operations. According to SEBI, an AMC is only allowed to cater fund management, portfolio management services (PMS), offshore fund management, and venture equities companies; however, AMCs are restricted to enter into any other business domains such as BPO.

Oracle is planning to establish a business services division headquartered in New York, which will cater to the financial services industry. The new division will be headed by Rajesh Hukku, the current Chairman and Managing Director of i-flex Solutions. The new division will integrate i-flex's products, such as Flexcube, Reveleus, Mantas, DayBreak, and Insure3, with Oralce's product portfolio. It will also consolidate and manage the financial services software while serving as a vehicle for future acquisitions. Other executives of i-flex who will join the management of Oracle's new division include R Ravisankar and Deepak Ghaisas who will join the team as Vice Chairmen.
M& A Roundup

Citigroup has entered into a definitive agreement to purchase the outstanding shares of BISYS for about USD 1.47 billion. Post-acquisition, BISYS Fund Services and Alternative Investment Services division will be integrated with Citigroup's operations to create a globally competitive entity in the investment servicing industry and allow it to offer a wide range of product offerings. Subsequent to the acquisition, JC Flowers will acquire BISYS' Insurance Services Group and Retirement Service business from Citigroup. Citigroup is likely to gain USD 645 million from this transaction. JC Flowers also plans to merge Crump, the insurance business of JC Flowers, with BISYS's Commercial Insurance Services to create a leading provider of wholesale insurance brokerage and retirement service solutions.

Fidelity National Information Services (FIS) has purchased Marketing Solutions for an undisclosed amount. The executive team of Marketing Solutions headed by Neal Packard will also join FIS. Marketing Solutions offers Web-based technology products which allow financial organizations to modify offerings, cross-sell products, and maximize client relationships. As a result of the acquisition, Marketing's CRM capabilities, profitability solutions, and relationship pricing structure will be merged with FIS solutions. The transaction will also increase FIS' potential, which in turn, will help the company's clients to make more informed decisions.

Wednesday, May 02, 2007

PwC finds fault in Swansea's outsourcing

Big 4 firm PricewaterhouseCoopers (PwC) has found fault with Swansea City Council's £83 million outsourcing deal.

A PwC audit found that the council failed to apply important principles of IT management in the deal, reports Computer Weekly.

PwC's report said that the council failed to check whether the savings Capgemini predicted were accurate.Capgemini was enlisted by the council to replace back-office systems and claimed that the council would save £26 million over two years.

The council stated:
"The PwC report clearly outlines a series of serious weaknesses associated with the development of the e-government programme. As a council we need to frankly admit to the weaknesses and set about creating a sure strategy for ensuring no repetition."

An integral mistake of the council was the failure to benchmark the project against the performance of other councils and their suppliers.Based in Paris, Capgemini operates in over 30 countries around the globe.

via: GAAPweb