The Future of Outsourcing

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

Fair enough, but perhaps Gour is only being cautious. The company, which had a turnover of US$404 million last year, is brimming with optimism. Gour himself is eyeing a revenue increase of US$86 million and free cash flow of US$50 million this year. From a zero base, Gecis is also expecting revenues from third-party businesses to equal those from GE in the next three years. That would make Gecis a US$1.2 billion company in just a decade since it started operations in 1997, a feat in the BPO industry in India.

For VN Tyagarajan, leader of global sales and business development, the target is easily achievable. For one, within GE itself remain ample opportunities for growth. “Unlike what a lot of people think, it was never a mandate” for GE businesses to farm out their back-office operations to Gecis despite its being a back-office captive, says Tyagarajan. As such, it has varying levels of penetration among different processes, in different GE businesses. “In some cases, we may have 5 to 10 percent of finance and accounting activity; in other cases, it could be 70 to 80 percent,” says Afzal Modak, senior vice president at Gecis.

For another, GE is known for taking the acquisition route in its growth strategy, “and every time an acquisition happens, we always start with an opportunity at zero base,” says Tyagarajan. All told, he expects revenues from GE to hit at least 15 percent a year over the next five years. Anju Talwar, leader of third-party business, is equally confident. Even before the sale, she says, a number of companies had expressed interest in doing business with Gecis. Already, Gecis has won eight third-party contracts as of March, the first one being a multinational company shutting down its shared-service center, and the most recent one being a large European car manufacturer.

In most cases, the contracts encompass Gecis’s full suite of services. “We started with just finance and accounting, then moved on to financial planning and analysis and pricing support,” says Talwar of the terms of the contract with the carmaker. Discussions, however, quickly evolved into supply chain management, indirect procurement, sourcing activities, and customer-relationship management. Although Gecis itself only started serving GE’s industrial businesses in 2000, “manufacturing seems a very nice area opening up for us,” says Talwar.

Gour says just like with GE, most of the contracts with third-party business are negotiated at a fixed cost over a certain period of time, and the customers are billed monthly. Some of the contracts have a productivity sharing arrangement, where if Gecis delivers more units of work per dollar than initially estimated, it shares the extra savings with the customer. “It helps build a partnership flavor to the relationship,” says Gour.

Despite the rapid growth of the BPO industry in India, Gour plays down the competition. “We don’t have to cannibalize each other’s market share for growth,” he says. “It will be up to the big organizations to establish that doing this kind of work with low-cost countries is viable. If we have too many mom-and-pop shops with inadequate management depth, sooner or later it will start affecting the quality of work coming out of India, and start giving the industry a poor name.”

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