British banking giant Barclays is setting up a 5,000-seat captive BPO unit in India, at a time when the global financial turmoil is forcing many companies to defer their outsourcing decisions. The bank, which sold its 50% stake in BPO firm Intelenet Global Services last year, had earlier asked the BPO firm to set up a 1,000-seat BPO facility under the build-operate-transfer (BOT) model. However, it has now decided to go on its own.
Barclays has brought in Sameer Chadha from Lehman Brothers’ Mumbai office as chief operating officer (COO) of the offshoring unit. An e-mail sent to Barclays Plc did not elicit a response. “As a matter of policy, Intelenet cannot comment on client engagements or project timelines. Intelenet will continue working with key Barclays accounts as usual. Barclays will continue to be a critical customer for Intelenet,” an Intelenet spokesperson said.
While most outsourcing analysts have sounded the death knell for the captive model of outsourcing, banks tend to follow it to maintain data confidentiality and to meet strict regulatory requirements. Citigroup, Standard Chartered, Deutsche Bank, American Express and HSBC, all have their own captive offshoring centres in India.
Last year, Barclays and HDFC, both of which held 50% stake each in Intelenet, sold their stakes to SKR BPO Services, jointly owned by private equity major Blackstone and Intelenet management. Intelenet continues to provide offshoring services to Barclays. At the time of the transaction, Intelenet had agreed to set up a captive BPO unit for the financial services major.
While the current US economic slowdown has resulted in some ITBPO project cancellations, analysts believe outsourcing will get a boost in the medium to long term as companies turn to cost cutting. “The current US slowdown will lead buyers of IT services to consider increasing the percentage of their labour in offshore, lower-cost locations,” research firm Gartner recently said. According to it, India will remain the dominant location for IT offshore services for North American and European buyers as a result of its scale, quality of resources and strong presence of traditional service providers.
Recently, other banks had also announced plans to move more work to India. New Zealand’s largest bank, ANZ National, announced plans to move 500 jobs from the country to its offshoring unit in Bangalore. Australian bank Westpac, too, said it plans to increase offshoring — its technology costs went up by over $70-million in the half year ended March 2008.
Barclays provides consumer and commercial banking, credit cards, investment banking, wealth management and investment management services in Europe, Africa, Asia Pacific and the United States. It is present in India through its investment banking arm, Barclays Capital, and it recently started consumer and commercial banking services in Mumbai, New Delhi, Kanchipuram and Nelamangala, near Bangalore. Early this year, Barclays signed a five-year outsourcing agreement with Mumbai-based BPO firm Firstsource Solutions worth up to $80 million for supporting the banking firm’s operations in the US, including managing its operations centre in Colorado Springs.