IBM’s BPO business sell-off to affect Indian employees

With global information technology major IBM deciding to sell its low-value customer care services business to Synnex Corp, a major chunk of employees to be transferred to the acquirer are expected to be from India.

Sources say this is primarily because India has been at the forefront of IBM Global Process Services (GPS), the business process outsourcing (BPO) services business of the company. In turn due to the huge presence it got in the country with the acquisition of Daksh eServices in 2004.

“This (the selloff) is expected to affect employees partly in countries such as India, Philippines, China and Australia, and several countries in Latin America,” sources said. “Among all these, India seems to have a greater concentration of IBM’s delivery presence in voice-based BPO and call centre space, followed by Philippines.”

“However, among all these, India seems to have a greater concentration of IBM’s delivery presence in voice-based BPO and call centre space followed by Philippines,” it added.

When Daksh got acquired by IBM, it was predominantly providing voice-based BPO services to global clients, mostly out of centres in India. However, IBM was subsequently not expanding the voice BPO business as it was getting commoditised and the margins were low as compared to platform-driven and process-driven BPO.

While IBM does not give its region-specific employee headcount, analysts estimate it might have around 40,000 employees for its GPS business. Among the Indian cities, Gurgaon is expected to have largest concentration of employees offering voice BPO services followed by Bangalore, according to sources within the company.

Replies to a detailed questionnaire sent to the company seeking details on the impact of the sell-off on its Indian operations, is still awaited.

“Typically in the customer care business, costs keep rising, especially labour cost but customers don’t necessarily pay more. In India the salary in ITeS sector has been rising 7-12% annually; so companies providing customer care services are sort of sandwiched. Hence, the source of profitability is only by moving up the value chain,” Sanjoy Sen, senior director, Deloitte Touche Tohmatsu India said.

IBM India did not give a direct reply to a detailed questionnaires sent to the company seeking the impact of the sell-off of the customer care outsourcing services. “IBM remains committed to India with continued focus on our relationships with our clients locally and globally,” the company spokesperson in India said in an email reply.

IBM on Tuesday had announced that it has agreed to sell its customer-care outsourcing business to Synnex Corp. for $505 million. According to various reports, the company’s plan is to get rid of the low profit margin business to focus on more profitable investments.

The IBM spokesperson said that the scope of the businesses the company is divesting with this sale includes contact centers, as well as specialised end-to-end processing for banks, insurers and healthcare clients. “IBM will retain Global Process Services in Finance and Administration, Supply Chain Management, Human Resources including managed human resources outsourcing services and Mortgage Origination & Servicing services”.

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A Tiny, Boring Kodak Takes Consumers out of the Picture

People may no longer buy much film, but breakfast-cereal boxes are forever. That’s the assumption driving Eastman Kodak as it exits bankruptcy this week as a relatively small, relatively staid business focused on printing packaged goods for consumer brands and other corporate clients.

Kodak, it turns out, is really good at large-scale digital printing and something called computer-to-plate technology, which quickly transfers images from a hard drive to a printing press. This is the somewhat sad distillation of more than 130 years of serious and celebrated R&D. Kodak, or what’s left of it, excels at printing things on foil, plastic, glass, and metal, according to its lengthy pitch to stay in business and avoid liquidation.

The Rochester (N.Y.) company will no longer wow the mass market as it did for decades with supersaturated pictures, sharp X-rays, tiny video cameras, and disposable electronics. In fact, it won’t do any business directly with consumers. In place of the once-beloved Polaroid, the new and less lovable Kodak will instead crank out timeshare brochures and toothpaste boxes, candy wrappers, and corporate presentation decks. It will also make touchscreen components for smartphones and tablet computers and film for the movie industry.

Boring, however, may prove to be beautiful for a company that teetered on the brink of the abyss. If all goes according to Kodak’s reorganization plan, the company will post $2.5 billion in revenue this year and $167 million in earnings before interest, taxes, and such noncash expenses as depreciation and amortization. It will also have only 8,500 workers, down from almost 64,000 a decade ago.

But the future is not entirely rosy. The commercial-printing business is not nearly as wide open as the market for digital cameras back in the late-1990s—or, for that matter, the film camera business of the late-1890s, when Kodak really made its mark. The proliferation of tablet computers has led, in part, to a decline in revenue for U.S. commercial printing, which has dropped at an average annual rate of 6.2 percent (pdf) in the past five years, according to market research firm IbisWorld.

The commercial-printing industry is also full of some massive, entrenched players like Hewlett-Packard (HPQ), which posted $24.5 billion in imaging and printing sales last year, about 10 times the amount Kodak is aiming for this year.

Kodak, however, seems to like its chances. “When we created the new portfolio, we were very aware of the fact that we were going to be late coming into this market,” Chief Executive Antonio Perez told  in an interview. “The only way that you could be successful coming in late is to come into the market with breakthrough technologies and very differentiated value propositions, and this is what we have.”