Air India, the government owned airlines, has finally found a BPO partner after much effort, in Sutherland Global Services. Many other potential bidders had avoided the 5-year contract with Air India due to the exacting terms and conditions of the contract. The outsourcing deal was sealed with the US-based company for Rs. 535 crore early this month.
Sources have revealed that the tender was postponed by Air India by almost six months to the end of December. The company also incorporated three amendments in the first draft of the contract sometime in November and finally sealing the deal with Sutherland Global Services.
Bidders refrained from participating in the tender
According to these sources, several other potential bidders like Servion, Aegis, WiproBPO and Serco Global services were also invited to the bid. However, these companies, after going through the exacting terms and conditions of the contract, did not participate in the bidding. Sources also said that the deal with Sutherland is a full time equivalent basis contract with a maximum of 600 seats.
There were several factors which put off these bidders. Some of them were thin margins offered in the contract and the financial condition of Air India which has been under loss. Another prominent reason is the risk associated with undertaking contracts related to the government (especially in the aftermath of the Commonwealth Games that happened in New Delhi), since all contracts are closely scrutinized to verify for potential fraud.
According to Sanjay Dhawan, who is executive director, PwC India, a business that incurs less than the average margin will affect the performance of that company severely. He said that in a deal worth $100 million, in which the vendor is making only half of the average margin, the business will have to grow by four times in order to reach the desired levels.
Will Air India gain from the contract?
It was said that Air India had been looking for a partner who had no links to a close rival. The contract that had been signed with Sutherland replaces a three-year contract with InterGlobe Technologies that had come to an end. Indigo Airlines is run by a group which includes InterGlobe Technologies. Sutherland Global Services has also been in the news recently with the company buying the healthcare BPO belonging to Apollo Hospitals in Chennai for Rs. 1,000 crore.
Dhawan said that companies are often concerned about passenger data security and efficiency of the system. Air India can utilize this opportunity to evaluate the previous contract by incorporating cost efficiency and cost savings in its operations with the help of the new outsourcing deal.