New Delhi: Multinationals (MNCs) setting up offshore business units in India for saving costs is an old story — the latest trend is to hive off their Indian units with over two dozen MNCs considering to sell off of their BPO units in the country through a gradual process of exiting.
While British Airways was among the first to spin off its Indian outsourcing unit, today known as WNS Holding, in 2002, the trend is catching up fast with global companies operating in India.
US conglomerate General Electric (GE) sold off its outsourcing operations two years ago for about $500 million (Rs2,224 crore), London-based United Utilities sold its unit, Vertex, last year, while global PC giant Hewlett-Packard is expected to follow suit.
At least over two dozen firms are evaluating sell-off options, said Sudin Apte, head, Forrester’s India, a global technology research firm.
According to Apte, if the size of a company’s own facility is small, with say, up to 100 employees, then outsourcing actually becomes counterproductive, as savings in staffing costs are offset by management overheads. And if size is too large — over 3,000 people — the issues of people, processes and costs emerge, which are time consuming.
The research shows most of the sell offs by MNCs are either to stem further losses or to focus on core competencies and cut costs at the same time, Apte explained.
The reason MNCs are looking for an exit route is that outsourcers are needed only for mundane and low risk tasks, and not for work that defines the core value of the firm, which they are more comfortable managing internally, the Forrester analyst said.
Experts believe MNC’s captive centres do not make sense in most situations as a captive facility is not an end in itself. For most, its a transient stage to go or expand on offshore.