July 18, 2012: India’s fourth largest IT services company, HCL technologies has bagged a huge outsourcing contract from Citibank. As per the Industry analysts, the value of contract would be around $200 million. The BPO arm of HCL technologies will manage back end processes for loans, financial products and customer services. The new project is expected to start by August 2012.
Earlier this year, to say by March, HCL technologies bagged a contract worth $250 million from Swiss banking major, Union Bank of Switzerland and hired 1000 employees to set up an offshore delivery center for UBS in Bangalore to carry out their back-end processes. HCL will hire 800 new employees once the Citibank project goes live. These three deals suggest that HCL is betting high on Banking, Financial Service and Insurance sector (BFSI). Latest reports indicate that this sector is estimated to grow by 10-15% globally this year and HCL will be hopeful to have a bigger share of this pie. Citibank work on pure outsourcing model and already have tie up with TCS to provide back office support services.
As per the industry analysts, BFSI sector accounts for the major share of the overall revenue earned by the IT services company in India. According to the March quarter financial results, 43.3 % of the overall revenue of TCS and 35.3% of Infosys’s revenue is from the BFSI deals. For HCL, BFSI contributed less than 25% to the overall revenue generated. However, with new deals with major banking groups in its kitty, it seems like BFSI sector will be the major contributor to the overall revenue generated by HCL for the current financial year.
According to a latest report by Everest Group, the BFSI sector accounts for the maximum outsourcing deals signed in the March quarter. As per the report the main reasons for the increased outsourcing activity in BFSI sector are:
- Weak Economy
- Buyers focus on reducing cost
- Complex regulatory norms
- Need for IT-BPO integrated environment
- Degree of value generated by outsourcing non-core process.
Further the report also discusses that US and UK would continue as biggest markets for BFSI outsourcing industry and will see increasing number of deals signed from emerging economies like Asia Pacific and Latin American regions.
There is an increasing trend among many MNC banks to outsource non-core process like IT support and data management to third party IT services providers and do other high value works in their in-house centers. The BPO companies are all set to exploit the new trend by moving up the value chain to provide analytical services and regulatory and compliance works for the financial service sector.