Bangalore: Texas-based provider of business process outsourcing (BPO) and information technology (IT) services Affiliated Computer Services Inc. (ACS) has transitioned about 500 of its US employees to Patni Computer Systems Ltd. ACS is one of the largest players in the BPO segment with nearly two-thirds of its $6.16 billion (Rs31,108 crore) revenue last year, coming from this segment.
The ACS employees who have been moved to Patni were working primarily in the IT services space. “The employees will now be on the rolls of Patni and will be governed by its terms and conditions for its employees,” said Aman Mustafa, vice-president and country head, ACS India.
ACS gets about 40% of its revenue from providing information technology-enabled services and IT services to the US government. The development assumes significance in the wake of the Obama administration’s efforts to discourage offshoring.
Trimming expenses: Aman Mustafa is the India head of Affiliated Computer Services, which is among the top firms in the BPO segment.
On Thursday, the Wall Street Journal citing people familiar with the situation, reported that International Business Machine Corp., or IBM, was planning to lay off 5,000 employees in the US with many of the jobs being transferred to India.
Observers say while the move of ACS looks like a typical sub-contracting arrangement, it is an important one because Indian IT service providers have generally been reluctant to take on assets and liabilities even in sub-contracting arrangements, especially onsite. “Indian IT companies are more comfortable when they can take over a process, ship most of the work offshore, typically back home to India and execute only a small component onsite. This also is how they are able to provide a compelling value proposition,” said C.S. Chandramouli, director, advisory services, Zinnov Management Consulting Pvt. Ltd, a leading provider of offshore advisory services.
ACS’ Mustafa says the company examined four Indian IT services providers before zeroing in on Patni. He refused to divulge the size of the contract awarded to Patni, saying: “We will closely monitor the SLAs (service level agreements) and the work being done is in the software services space.”
Patni did not offer comments for the story. A spokeswoman for the company said appropriate people to respond to Mint’s request for comments were not available immediately. ACS itself employs around 5,000 people in India. Globally, it has 70,000 people on its rolls. It has centres in Bangalore, Chennai, Kochi, Gurgaon and Noida. The company is now looking at moving to tier II cities such as Bellary, Mangalore and Coimbatore to cut costs.
“The transport bill alone for ACS’ 3,000 employees in Bangalore is $3 million (about Rs15 crore) per annum. If we move to (a) tier II city, we can cut this by 40%. Other costs like salaries, real estate costs are even lower in the smaller cities. We are closely examining this,” said Mustafa.
It has already started a 50-seater pilot project in Bellary in north Karnataka and depending on its success, it will roll it out to other parts of the country.
ACS also plans to double the India headcount in two years and work with Indian IT companies where “they offer compelling value for us like in the case of the Patni deal”, Mustafa said.