Kolkata: The Indian arm of global consulting and audit firm PricewaterhouseCoopers (PwC) is ceding control of its prized business process outsourcing (BPO) unit to PwC US, ending years of battle between the Indian partners and other PwC network firms.
Because the Indian arm alone cannot anymore support the envisaged growth of the BPO business—or “global delivery service” in PwC’s parlance—over the next few years, it is being transferred to a joint venture with other PwC network firms, according to Ambarish Dasgupta, executive director of PricewaterhouseCoopers Pvt. Ltd, or PwC India.
“Using PwC India’s enterprise alone would limit the scope of expansion of this segment,” Dasgupta said, adding that the revenue of this business could grow 15-20 times over the next two years.
A new firm—PricewaterhouseCoopers Service Delivery Centre (Kolkata) Pvt. Ltd—has been founded and the BPO business has been transferred to it, PwC announced on Friday. It started operations on 1 July, and is being headed by Sumanth Prakash, partner at PwC Australia.
The Kolkata-based firm currently has some 650 employees; over the next two years, it will ramp up its workforce to 2,000, PwC said in a statement.
The service delivery centre will provide back-office support to firms “across the PwC global network” in areas such as tax and assurance services, PwC said.
PwC US owns a controlling 70% stake in the newly-founded firm, according to people familiar with the development, but who did not want to be named. PwC India owns 26%.
PwC firms from Canada, the UK and Australia would also have equity interest in the BPO business. Asked if more network firms could buy into the business, Prakash didn’t rule out the possibility.
“Such investments, particularly from countries where we do business, would boost client confidence,” Dagupta said.
Though PwC refused to comment on the ownership structure of the newly-founded firm, saying that “it was still being worked on”, it said the BPO business would have five directors—one each from the five PwC arms that have equity interest in it.
Dasgupta would be a director of the BPO business, but would not have any day-to-day role in it, according to Prakash.
The technology outsourcing business under PwC India, which develops enterprise resource planning and business intelligence solutions, would for now work closely with the newly-founded firm, according to Dasgupta. Eventually this division, too, could be merged with it, he said.
For years, top executives at PwC India have been resisting this change. Many have quit and joined competing firms such as Deloitte and KPMG.
The people cited earlier said audit arm Pricewaterhouse’s inability to detect gross financial irregularities in the erstwhile Satyam Computer Services Ltd’s accounts seriously weakened the Indian partners. “It broke their back,” one of them said.
When asked if the Satyam fiasco had in any manner influenced this organization change, both Dasgupta and Prakash refused to comment. Following this restructuring, PwC India would be left with its domestic business only. It offers services such as tax advisory and management consulting, and employs around 5,500 people. “The growth potential of the domestic business is extremely limited though in terms of revenue it is, at present, much bigger,” said a former PwC employee and one of the key persons behind the launch of the BPO business.
“Imagine taking away from TCS (Tata Consultancy Services Ltd, India’s biggest IT firm by revenue) its offshore business... What would it be left with?” he asked. What is more, the BPO business is far more profitable than the “rather flat domestic business”, he added.
A number of key people, who led the BPO unit till now, have left PwC lately, according to the people cited earlier.
Dasgupta denied, saying “attrition at top-level was zero”.
Prakash said he did not want to comment on “what happened before 1 July”—the day the new firm started operations. “We are starting afresh,” he said.