by Alex Sinnott

All 40 branches of insurance firm AAMI will close within two months as it moves to a phone and net-based service.

AAMI corporate affairs manager Reuben Atchison said the corporation was keen to retain as many employees within AAMI and its parent company Suncorp.

“A review of our branch activity and revenue streams has shown us that in recent years, our customers have demonstrated through their buying behaviours a clear preference for transacting business over the phone and, increasingly, the internet,” he said. “This trend is expected to continue over the coming years.

“Consequently, the amount of revenue generated by the network has also steadily diminished to the point that it now represents only around two per cent of total AAMI income.

“As a result, we have made the decision to close our branch network and focus our investment on our customers’ preferred channels.

“We will still be here for our customers 24/7, with a real person answering the phone.

“This is not a headcount reduction exercise – we will need many of the people who currently work in our branches to support our other channels and it is our intention to redeploy staff into comparable roles within AAMI and the wider Suncorp businesses wherever possible.”

AAMI has 40 branches nationwide, 13 of which are located in Victoria.

Read more: Sydney Morning Herald

The uncertainty in US and European markets about a global recovery is suppressing the value of outsourcing contracts and buyers are not confident about committing to longer term contacts due to the fluctuations in currency markets especially the US dollar as that is the main currency used to strike BPO contracts.

Infosys CEO S. Gopalakrishnan said in a recent interview at the World Economic Forum in Tianjin, China. “They are cutting large contracts into smaller contracts. They are willing to commit only for the short term.”

Bangalore-based Infosys, which employs about 2,600 people in China, plans to localize overseas by hiring more people in countries where it operates.

Amid woes from the Indian outsourcing sector, China is speculating that India is becoming increasingly wary of the competition from China.

According to KPMG partner Egidio Zarella, “the Chinese outsourcing sector is bound to see the same curve the Indian industry had before — they are in for incredible growth.”

There are however challenges, The factories that make Apple products have recently given their workers a 7% pay rise and the Chinese government is under extreme international pressure to revalue their currency. The wages challenge is not new, four years ago, Business Week ran a story, “How Rising Wages are Changing the Game in China” that noted that in 2005 wages surged 40 percent.  In 2007, the wages in China rose another 30 percent and have continued to rise an average of 15 percent a year since a 2008 labor contract law went into effect January 2008.

Makers of toys, trinkets, Christmas trees, and cheap shoes have folded by the thousands or moved away to Vietnam, Indonesia, or Cambodia.   However, even with higher wages, Chinese wages are estimated to be about 3 percent of manufacturing wages in the U. S.

There are rumours that Genpact Ltd may be up for sale reflect a stark new reality for those BPO companies that are not part of a larger information technology (IT) business.

Genpact listed on the New York exchange is a global BPO company. It was formerly a GE owned company called GE Capital International Services. It operates from India, China, Guatemala, Hungary, México, Morocco, the Philippines, Poland, the Netherlands, Romania, Spain, South Africa, and the United States. Currently it employs over 41,000 people in various locations providing services in 30 languages on a 24/7 basis.

Its services cover areas like Financial Services, Sales and Marketing, Analytics, Supply Chain, debt Collections, Customer Services, IT, Healthcare and learning and Content management.

The rumour reported in the Indian Financial Express is that New Jersey based Cognizant Technology Solutions Ltd is looking to buy Genpact. The report may or may not be true, but it didn’t come as a surprise to analysts who say the era of stand-alone BPO firms may be coming to an end. As many BPO deals are global buyers are looking to only deal with one-stop shops.

Clients’ preference for integrated IT and back office deals is driving this trend. “Pure-play BPOs are facing the heat,” said Vijay Gautam, senior IT research analyst at Jaypee Capital Services. “They have limited options, either offer more integrated services like IT services players or face the risk of being edged out slowly over a period of time.”

Large enterprises in markets such as the US and Europe are going through a vendor consolidation process where they just want “one neck to choke” and not multiple technology vendors supplying bits and pieces of their corporate IT requirement, he added.
“Lots of private equity (PE) players, who had reached the end of their planned investment horizon nearly two years ago, were out in the market looking to exit when the economy slowed down,” said Amit Singh, executive director and head of technology group, and co-head, BPO (business process outsourcing) group, at investment bank, Avendus Capital, “Now that the market conditions are improving, those players are again looking at valuations and exit options.”

In what is now becoming a global trend, another large BPO merger has taken place.

Philippine Long Distance Telephone Co. (PLDT), announced the consolidation of PLDT’s outsourcing business Ventus which merged with SPi and is now known as SPi Global Holdings. It  is now the largest Filipino-owned BPO firm with three core units — content, health information management, and customer relationship.

The new SPi Global President and Chief Executive Officer Maulik Parekh, previous head of Teletech Philippines has established a new executive team including Tim Hardin, SVP for CRM Operations, who came from Sitel/ICT; Belle Bales, Chief People Officer, formerly the head of HR Teletech Philippines; Celeste Ilagan, VP for Corporate Communications and External Affairs – Ilagan was formally at Sutherland but prior to that was the Philippine Department of Trade and Industry (government) in charge of ICT investments—and Gregg Sullivan, SVP for Global CRM Sales, who also came from Sutherland. Former President of Ventus Helen Marquez is now the CIO of SPi Global.

ePLDT’s outsourcing business Ventus was originally set up by the legendary Rosalie Montenegro, the first lady of the call centres in the Philippines.

SPi Global said it has been serving over 500 clients with more than 14,000 employees and 24 locations in North America, Europe and Asia.

SPi Global  has 600 employees in Vietnam, 1,800 in India, and 700 in the United States, the Netherlands, United Kingdom, and France.
hey have some 11,000 people working in 11 facilities all over Metro Manila and three regional sites.

The firm has so far earned $185 million in revenues and wants to reach $500 million in the next three to five years.

We target to be the premier Filipino-owned BPO company competing with the biggest and most renowned foreign outsourcing groups in the world,” said
Parekh. He added, “This is a milestone for PLDT and the country’s BPO industry as a homegrown BPO firm debuts as a globally recognised organisation with excellent standing not only in the country but also abroad.”

Mr. Parekh said the company would sustain its target growth in revenues by offering clients “diversified solutions” and more acquisitions. “The clients now want less vendors or less suppliers. We want to provide them end-to-end solutions. We had also invested on the online gaming segment through ePLDT. We hope to offer human resource-related services in the near future,” he said. “Global competition is intensifying. We have to exploit all the opportunities. But we hope to sustain a double-digit growth in all of our business units.”

Aon Corporation has via its subsidiary, Aon Consulting, acquired Hewitt Associates to create one of the world’s largest HR outsourcing companies. The other big providers left in the global HRO enterprise level space are IBM, NGA / Convergys and Xerox /ACS.

When the merge is finalised, Aon Hewitt will have under its employ over 29,000 associates and operate in 120 countries. Leading the new Aon Hewitt is Russ Fradin, the current Chairman and CEO of Hewitt Associates. Human capital solutions, together with consulting, benefits administration, and business process outsourcing will be offered in numerous areas.

Both Aon Corporation and Hewitt Associates are convinced that this strategic move will benefit both companies and all their clients, as Hewitt Associates is the largest HR business process outsourcing provider, and Aon uses the best technology in analytics through Aon GRIP and Greater Insights. There are however some market analysts who question how the two different cultures will merge.

Aon Consulting CEO, Edouard Merette, says, “The merger is both strategically and economically attractive for several reasons. One is that the new organisation will have a deeper global team with the capability to serve our clients locally in over 120 countries. Another reason is that both our management teams have a strong track record of successful integration.”

The transaction is expected to be finished in mid-November. Prior to that, the two companies will continue their operations independently.

Walgreens, the largest drugstore chain in the United States, finalised a 10-year contract with Indian outsourcing vendor Genpact to handle their accounting processes.

Pramod Bhasin, CEO of Genpact, said, “We are delighted to announce this strategic relationship with Walgreens. This agreement strengthens our ability to deliver end-to-end solutions for the retail and healthcare industries. As leaders in our industry, we are redefining the market by moving beyond just process efficiencies and focusing more on accelerating positive business outcomes for our clients. We believe our domain expertise in finance and accounting, health care, back-office processes, re-engineering and analytics coupled with our heritage of Lean Six Sigma uniquely positions us to support Walgreens growth initiatives”.

“We are definitely seeing a comeback with lot many deals in the pipeline of large value. This is also a large contract considering the number of people involved. We will also keep many jobs onshore and still be able to maintain margins.” He added.

According to the contract, Genpact will acquire Walgreens’ Danville facility in Illinois and manage employment. Approximately 500 accounting employees will be transferred to Genpact payroll in the following months.

Walgreens executive vice president and CFO Wade Miquelon said, “Genpact’s proven ability to bring efficiency to finance and accounting processes and its commitment to our Danville employees were key factors in our decision to forge this agreement. The deal will help us improve cost productivity and facilitate our growth strategy, while maintaining an agile and service-focused organisation.”

The partnership between Walgreens and Genpact will affect accounting employees at Walgreens offices in Deerfield, Danville, and nine smaller accounting sites in the United States.