“Bangalored” is Back; Outsourcing Returns as Eurozone Crisis Pushes for Cost Cutting

The jargon term "bangalored" has returned in full vigour after a period of lull in the outsourcing sector as a result of shrinking contracts and delayed decision-making by customers. The worsening debt crisis in the eurozone is making it all the more important for companies to cut their operating costs.

Resolution Ltd on Wednesday announced a £143 million cost-saving plan by entering into an outsourcing agreement with Diligenta, a fully owned subsidiary of Tata Consulting Services based in India.

The 15-year contract will see about 1,900 Friends Life employees being transferred to Diligenta UK. At the same time, this will result in no workforce addition for the Indian company.

"According to our records, this is the largest private sector deal in the UK at least since 2005," says Ed Thomas, an analyst with the UK-based outsourcing advisory firm Ovum. The current debt crisis in the EU is making it likely for the banks and insurers in the region to sell their unprofitable businesses to raise capital and reduce debts.

In India, the move is widely viewed as a relief to the BPO industry, as the sector is reeling under the pressure of economic slowdown and rising complaints of customer dissatisfaction. In recent times, many contracts were taken back from these companies citing concerns of poor quality service.

In July this year, the UK-based Santander terminated the contract with MphasiS, an Indian IT services firm, citing adverse customer response.

Diligenta is one of the major outsourcing units in the UK, specialising in life and pension sector. For TCS, it is the second biggest deal after a $2.8 billion order from Citi Group in 2008.
After the announcement of the deal, TCS shares gained 1.8 per cent on the Bombay Stock Exchange and closed at Rs1,123 on Wednesday.