GE to sell 60% of Indian BPO operation

General Electric is selling a 60% stake in its business process outsourcing subsidiary in India, for about $500m (£270m).

General Electric is selling a 60% stake in  its business process outsourcing subsidiary in India, for about $500m (£270m).

GE was one of the first multinational companies  to outsource back-office work, datacentre and call centre operations to a subsidiary in India, and its outsourcing operation, with a staff of 17,000, is one of the largest set up in the country by a multinational company.

General Atlantic Partners and Oak Hill Capital Partners will buy a majority stake in GE Capital International Services (GECIS).

GECIS will extend business-support services to companies worldwide, said Scott Bayman, president and chief executive officer of GE India. The Indian company will continue to serve GE under a multiyear contract.

The transaction is expected to be closed over the next six months.

Established in 1997 to provide internal business support for GE, GECIS has built global operating capabilities supporting nearly 1,000 business processes across each of GE's 11 business units.

Its services include finance and accounting, supply-chain management, customer-service support, software development, data modelling and analytics. Besides India, GECIS operations include facilities in North America, Europe and China.  

GE's strategy to divest in GECIS reflects a growing trend among multinational companies to move away from having wholly owned subsidiaries doing captive software development and business process outsourcing services operations in India, and to instead outsource to independent Indian outsourcing companies.

Initially there were not enough third-party outsourcing companies able to offer quality services to those wanting to offshore to India, said Ravindra Datar, principal analyst for IT services and business process outsourcing at Gartner India Research and Advisory Services, a subsidiary of Gartner Inc.

Multinational companies are also finding that the savings from offshore outsourcing are far higher with an independent outsourcing company rather than setting up a captive operation, Datar said.

"While the captive operation is a cost centre, the third-party outsourcing company is driven by the profit motive," he said. "Also, while the captive operation services the parent company, an independent operation can leverage the same resources across a number of clients."

By selling off a part of the equity in Indian software and business process outsourcing subsidiaries, multinational companies aim to cash in on investments and pass on the management to others, without losing access to the services captive operations in India provided, according to  Datar.

John Ribeiro writes for IDG News Service

Read more on IT outsourcing