Fin outsourcing the next big thing

Fin outsourcing the next big thing KESHAV PATANKAR

TIMES NEWS NETWORK SATURDAY, FEBRUARY 12, 2005 12:29:45 AM

MUMBAI: We know outsourcing 's getting bigger, and the next big thing in its realm will be financial Debt Management outsourcing. But exactly how big will it be?

"About $120 billion worth of investments over the next five years," says Micheal Linn, senior executive V-P, Ocwen Financial, an outsourcing company.

How much of it will come India 's way?

"I would say about 70-80 per cent," says Linn, citing Deloitte projections.

But don't start counting just yet. "It's a niche segment. You won't see the kind of volumes that other BPOs see," says Rohit Kapoor, president & CFO, EXL Services, also an outsourcing company. He said it's a segment that will need highly send people, and hence will employ selectively.

Does that mean no fresh graduates? "No. These jobs will need CAs and MBAs at least," says Kapoor. But then will they pay enough to attract the best financial brains?

"Yes, they will have to, though I can't put a number to it. But companies will get employees to sign bonds to ensure that staff stay with them," explains Kapoor. But these contracts will involve big money.

"You can't make a mistake. You have to be correct every time," warns Michael Linn. "A slight error can get you sued or leave you with a big loss," he adds.

What are the challenges for BPOs?

These companies face the FUD rule or Fear, Understanding and Doubt. "They'll need to have specific business knowledge," says Mr Linn.

"Clients have to be buttured of the safety of their data, most of which is sensitive and very valuable. Loss, or even worse, a leak of such data can be very damaging to a business," notes Kapoor. Hence, "staff will have to sign confidentiality agreements, which say that they will not pbutt on the information that they receive due to their work".

He says many companies disallow camera phones or even normal mobile phones on premises to prohibit leakage of information. "Plus, no paper can get in or out of the premises."

While these measures seem strict, "they help BPOs earn the trust and respect of their clients in the West", according to Kapoor. This effectively means more business.

But because of the same reasons, financial Debt Management outsourcing sports some big pluses: "One, it can be a very high price high profit sector. Two, business tends to be 'sticky', which means partners prefer to be loyal, due to sensitive and high-value data. Collaborations thus tend to be fairly long-term," says Kapoor.

There are also the very prohibitive exit barriers to these outsourcing deals, which companies don't want to deal with. However, what about the opposition to outsourcing?

"Outsourcing won't lead to job losses in the West," claims Linn, citing popular studies on the subject. His own company employed about a 1,000 people in 1999 in the US. After they got into outsourcing, their US headcount has inched up to 1,200. Plus they employ 2,300 people worldwide.

Linn cites a McKinsey study, which says that every job that gets outsourced to, say India, creates 1.2 jobs in the US. "Agriculture in 1865 employed 50 per cent of the world's population. Today, it employs just five per cent. But we don't worry that agriculture's not creating more jobs for our children. That's because there are more high-value jobs around," says Linn.

"There's no doubt that outsourcing's creating more value for everybody in the world," he adds. Suddenly turning to politics, Linn says, "The Democrats did a horrible disservice to the American public by talking wrong about outsourcing. But that's politics."