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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