GE may put software unit also on the block

By siliconindia staff writer   |   Friday, 19 March 2004, 08:00 Hrs
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MUMBAI: GE Capital's BPO subsidiary in India , GE Capital International Services (GECIS) is in the process of a major restructuring, reports Economic Times. The initial phase of the restructuring is intended to compare and contrast the cost structure of GECIS with third-party vendors. The result of this process is that some businesses have been identified as non-competitive and are on sale, as reported by ET earlier. However, no business has as yet been sold. The second phase proposes to create a new structure under which GECIS can provide services to |non-GE companies in addition to the parent company. The objective of the restructuring, sources said, is to create a lean and customer-oriented firm. GECIS wants to compete for business against the likes of Daksh, ICICI OneSource, Spectramind and Convergys in the open market. Most of these firms have a lower cost structure as they are mostly venture capital-funded companies focused on the bottomline. The trigger for the restructuring seems to have been some GE affiliates insisting on more competitive rates from GECIS. According to industry sources, almost every business — including the software development business in India — is under the scrutiny of the parent company. The result is that the software development business, which employs around 1,000 people in Bangalore , may also be up for sale. The software development business is under a separate subsidiary. GE did not reveal the name of the company under which this business operates. GE also did not respond to ET’s queries, beyond saying that it does not comment on “speculation or rumours”. Industry sources say that New Jersey-based Cognizant Technologies and Bangalore-based Infosys Technologies are interested in buying part of the software business. However, Infosys officials denied they were bidding for GE’s software business. Cognizant officials did not respond to questions on the issue. The current round of restructuring has also shaken up the top hierarchy at GECIS. If head hunters are to be believed, they have been flooded with calls from people asking for jobs. GECIS has a very large management team and is one of the best paymasters in the industry. This seems to have created its own problems and also contributed to a bloated cost structure. GE Capital’s president Pramod Bhasin has gone on record in the past to say: “We are mission-critical to GE. The 700 business processes done in India save the company $340m a year.” GE is known to be an aggressive buyer of services and almost all its third-party vendors in India , like TCS or Patni, have felt the squeeze of GE’s bargaining power. GE seems to be applying the same parameter to GECIS. Industry sources say that the reason GECIS’ cost structure may have gone up could be due to the captive nature of the business, where all costs are not transparent. Moreover, in the rush for growth and to meet GE’s requirements the company has hired at rates much higher than the market average.

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