The Future of Outsourcing

An exclusive look inside GE's back-office machine.

Going forward, Gecis wants to add procurement analytics to its supply-chain services. That means seeing what is the global benchmark for pricing, what are the best places from which to source certain commodities, and what are the inflationary, freight, and other trends that are driving the cost of particular goods. “The goal,” says Goel, “is to give insights to our customers and clients on how they can optimize the cost and timing of their procurement and sourcing.”

Despite the amount of work that can be offshored, Gecis says neither captive units — which Gecis once was — nor outsourcing providers are likely to replace white-collar jobs in corporate headquarters. “It’s not replacement, it’s creating more capacity for growth,” says Goel. In one case, however, a GE asset-management business that handles a portfolio of investments has been able to slash down its finance staff to just three people — the controller, assistant controller, and CFO — having farmed out all back-office and research work to Gecis. “It’s an extreme case,” says Modak. “It’s very easy to get feeds on what those investment are, the value of the underlying securities, and preparing the balances that a controller needs to review.”

And despite the level of work that Gecis can do — which translates to the depth of information gathered on the business operation of their clients — CEO Bhasin dismisses growing Gecis in the mold of Accenture or IBM/PwC, which combine offshore BPO with strategic consulting. “Consulting has too many ups and downs,” he says. “I like the annuity business [of outsourcing]; you know where your revenue is coming from, it’s predictable, longer term, and on the ground.” Instead, Bhasin’s goal is to bring benchmarks in the offshore BPO industry.

“There aren’t benchmarks as to what is the best-in-class performance for, say, collections, accounting, or supply chain and how much it should cost you to get there,” says Bhasin. “If you can help define benchmarks, you can save a huge amount of money for companies well beyond anything we could do in cost arbitrage.” As the offshore BPO industry is just taking off, Bhasin may need a good dose of energy drinks to accomplish that.

Captive No More

Take any day this month and Vivek Gour is probably somewhere in Romania, China, Hungary, or Mexico looking after the expansion of Gecis, the India-based back-office operation of General Electric. Armed with US$35 million in free cash flow, the CFO is on a spending spree as Gecis hires 4,000 specialists this year to support its new business model. It’s an enviable task to manage such growth, but it only makes Gour more mindful of his assets, watching meticulously where the money goes “deal by deal, fixed cost by fixed cost,” and how every expense will affect his Ebit “this month, this quarter, this year”, he says.

Just four months ago, Gecis exclusively served General Electric’s businesses worldwide. The sale of 60 percent of Gecis to American private-equity firms Oak Hill and General Atlantic Partners late last year changes its outlook entirely, and with that, the nature of Gour’s job. “The intensity of focus on numbers has gone up dramatically,” he says. “The way you look at your numbers as a division of GE is very different from when you’re an independent company with shareholders who want a return on their investment in a defined time frame.”

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