Firstsource has signed a five-year outsourcing partnership agreement and the deal size is between $80-100 million, said a company official.

The deal involves management of Barclay card’s credit card and consumer lending business, read the company press release.

“Firstsource have given us a commitment to establish a long-term presence here in Teesside and, with their global footprint, they are also well placed to meet the current and future needs of our growing international customer base,” Barclaycard Global Sales and Service Director Derek Allgood said.

Firstsource will manage the majority of the services currently provided by the Teesside centre as well as related payment servicing team located in Wavertree, Merseyside, the company said in a statement.

“We are delighted to have won this contract from Barclaycard with reinforces the relationship we already have with Barclaycard in the US and is an acknowledgement of Firstsource’s expertise in the financial services sector and in particular for credit card services,” Firstsource CEO & MD Matthew Vallance said.

The partnership is part of Barclaycard’s ongoing programme of improving business efficiency and providing a quality service to customers.

In February 2008, Firstsource signed a five-year outsourcing agreement with Barclays US credit card business. Under the term of agreement, Firstsource is managing and operating Barclay’s operations centre in Colorado Springs, CO, which includes providing customer care and collection’s support to Barclays US cardholders.

Firstsource earns 24 per cent of its global revenues from the financial services sector, providing an extensive range of back-office, customer management and collections services.

Barclaycard, part of Barclays Global Retail Banking division, is a leading global payment business, which helps consumers, retailers and businesses to make and accept payments flexibly, and to access short-term credit when needed

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IT major HCL Technologies has decided to mitigate pressures on operating margins by freezing salary increments through 2009-10.

The company has told its employees that there won’t be wage hikes for the financial year ending July 31, 2009, due to tight demand in the US and Europe, declining volumes, and the need to further tighten expenses across business divisions.

In a harsher step, the company has slashed retainer bonus, which averages 10 per cent of an employee’s salary, from April 1. Travel allowance has been sharply reduced, if not curbed, in most cases. “HCL is discouraging travel requests, except in exceptional cases related to onsite employees. The option for an employee to use his travel allowance has been minimised,” said an HCL employee.

An HCL spokesperson said the recent communication with employees was part of a routine process under which the leadership of the company reached out to employees across the organisation to take stock of the current business environment, changing customer requirements and to together arrive at a comprehensive strategy.

“With increased focus on delivery excellence and operational efficiency, the strategy will enable the organisation to find opportunities in the current environment and carry forward the growth momentum,” said the spokesperson.

The company is also said to be looking at suspending matching contributions to employee retirement plans. Onsite allowances have also been slashed, though the exact quantum in this case is not clear.

Chief Executive Vineet Nayar is known to have met employees of the Chennai office recently, where these cost-cutting measures were spelt out. It is learnt that while the company has not gone for salary cuts at this point in time, a 25 per cent salary cut for employees on the bench has been considered. “Salary cuts were considered, but were not carried out. Instead, employees are now being charged for frills like coffee and refreshments,” said a source.

In January, HCL had said that it would reduce about 280 jobs, or 8 per cent of its global workforce, and implement other cost-cutting measures. The company is learnt to have laid off about 450 people from its British Telecom practice. Redeploying bench resources, which constitute roughly 20 per cent of HCL’s workforce, continues to be a challenging prospect for the company.

Many employees on the bench have been given up to two chances for redeployment on a new project, failing which they have been given the option to leave, sources say, adding that each fresher is being given up to two client interviews.

Besides shrinking IT spends in its key markets of North America and Europe, HCL’s acquisitions of Liberata Financial Services and Control Point Solutions ($20.8 million) last year are believed to have affected its EBITDA margins — which grew 1.1 per cent to 22.5 per cent on a year-on-year basis during the second quarter ending December 31 last year. To add to HCL’s woes, its forex losses owing to the depreciation of the rupee in Q3 of the 2009 fiscal expanded to $207 million from $156 million a year earlier.

While the IT major won big-ticket outsourcing deals totalling $1 billion in Q3, it has decided to strengthen its flagship tech services division by roping in senior executives from its 13,000-strong BPO division.

HCL BPO’s key clients in the UK and Ireland include Axa BPO (acquired by Swiss Re last year) and Barclays Bank.

Mohit Soapbox:
Next captive in line after citibank looking to sell their captives. Seems like the era of large scale captives is almost over. Given the shortage of capital, maturity of vendors to offer global operations more effectively  very few firms are going to be looking at a captive strategy. Interestingly Barclays seem to have announced going a captive route recently. Let’s see how long do their hold on to their captive strategy.

Given the uncertainty in the environment, any buyer today has to have a solid contract and assured promise of future
revenue potential

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Fidelity Investments, the world’s largest mutual fund manager, is reported to be touting for sale a 2,000 strong technology services unit which it runs out of Bangalore and Chennai, India.

As well as taking on all of the existing business operations, the acquirer can expect a multi-year outsourcing contract from Fidelity, early reports are suggesting.

Fidelity is not the first financial services company to look to asset disposals as one way of reducing the operating cost footprint, with US bank Citigroup and UK insurer Aviva both recently having off-loaded certain of their captive outsource units.

The unit is part of Fidelity Research and Management Co India, which provides back office support to Fidelity in the US. According to sources cited in India’s Economic Times, potential bidders are likely to include Wipro, Satyam, Accenture, IBM and Infosys.

In a related announcement, Infosys Technologies Ltd has revealed it has won a five year, multi-million dollar global sourcing deal with AstraZeneca.

As part of that deal, a number of AstraZeneca employees in Sweden and the UK will work for Infosys on the supply of applications maintenance services for the pharmaceutical giant’s manufacturing, supply chain, finance and human resources programmes.

From 31 August, anyone who refuses to take the cut will leave the company.

A spokeswoman for Barclays told the Reg: “We found we were paying over the market rate. This ten per cent cut will bring us more in line with the rest of the industry. There are no implications for permanent staff.”

We are also hearing that Halifax Bank of Scotland (HBOS) is running a similar cost-cutting scheme. Staff there have until 10 August to take the cut or work out their notice and leave.

Contractors working for HBOS via agency Hayes received an email last week warning them: “Effective from midnight on Sunday, 10 August, all IT contractor pay rates are reduced by 10 per cent.”

Cutting contractor rates is often seen as more palatable than reducing headcount amongst contractors or permanent staff. But the danger is that you lose better staff and keep those prepared to do ten per cent less work.

Barclays Capital cut contractor rates from 2 July. It is also offshoring 1,800 jobs to Hungary, India and Singapore

The global infrastructure and service delivery (GISD) roles will be scrapped in the UK and new jobs created in Hungary, India and Singapore over the next two years, with 700 UK posts to be lost by September this year.

By 2010 the number of UK tech jobs at Barclays will be reduced by 1,800 – a figure that includes IT contractors as well as employees. That will leave 1,000 GISD jobs remaining in the UK, based in Cheshire and London.

This will allow Barclays to create around 1,700 new roles offshore in global technology centres of excellence.

Most of the affected UK tech staff will either be redeployed or offered voluntary redundancy packages. Fewer than 50 staff are expected to face compulsory redundancy out of the 700 posts initially affected this year, according to the trade union Unite, which said future growth would further reduce losses.

But Unite warned of higher levels of redundancies in the following years, as many contractor posts will have already been filled by redeployments.

Keith Brookes, national secretary for Barclays at Unite, said: “We can avoid heavy duty compulsory redundancies because of the long lead time on the talks between Barclays and the union.

“The move is inevitable but we have to ensure that the UK is maintained as a centre of excellence and we have that commitment from the bank.”

He said the majority of the redeployed staff would enter jobs at the same level and in the same locations.

Unite asked for all affected staff to be given three months working notice and three months paid redundancy notice, and for redundant staff seeking retraining externally to be given a £2,000 allowance.

Barclays has also promised there will be no more tech job losses this year outside of the offshoring initiative, Unite says.

A spokeswoman for Barclays said: “Barclays ambition is to become one of a handful of universal banks leading the global financial services industry, helping our customers and clients throughout the world to achieve their goals.

“We need to transform to a global organisation, able to serve the needs of our customers and clients who have operations around the world.

“As far as possible, we will manage the reduction in headcount by reducing the number of contractors and temps we employ.”

Mohit Soapbox:
This is interesting today when Citi is scrambling to explain their growth strategy to their investors and looking to
possibly sell of their captive businesses, recent captives in India have been struggling to grow and justify this seems quite the contrarian view. I understand the data risk issue but don’t buy that as the only reason why you should have a captive setup.
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British banking giant Barclays is setting up a 5,000-seat captive BPO unit in India, at a time when the global financial turmoil is forcing many companies to defer their outsourcing decisions. The bank, which sold its 50% stake in BPO firm Intelenet Global Services last year, had earlier asked the BPO firm to set up a 1,000-seat BPO facility under the build-operate-transfer (BOT) model. However, it has now decided to go on its own.

Barclays has brought in Sameer Chadha from Lehman Brothers’ Mumbai office as chief operating officer (COO) of the offshoring unit. An e-mail sent to Barclays Plc did not elicit a response. “As a matter of policy, Intelenet cannot comment on client engagements or project timelines. Intelenet will continue working with key Barclays accounts as usual. Barclays will continue to be a critical customer for Intelenet,” an Intelenet spokesperson said.

While most outsourcing analysts have sounded the death knell for the captive model of outsourcing, banks tend to follow it to maintain data confidentiality and to meet strict regulatory requirements. Citigroup, Standard Chartered, Deutsche Bank, American Express and HSBC, all have their own captive offshoring centres in India.

Last year, Barclays and HDFC, both of which held 50% stake each in Intelenet, sold their stakes to SKR BPO Services, jointly owned by private equity major Blackstone and Intelenet management. Intelenet continues to provide offshoring services to Barclays. At the time of the transaction, Intelenet had agreed to set up a captive BPO unit for the financial services major.

While the current US economic slowdown has resulted in some IT-BPO project cancellations, analysts believe outsourcing will get a boost in the medium to long term as companies turn to cost cutting. “The current US slowdown will lead buyers of IT services to consider increasing the percentage of their labour in offshore, lower-cost locations,” research firm Gartner recently said. According to it, India will remain the dominant location for IT offshore services for North American and European buyers as a result of its scale, quality of resources and strong presence of traditional service providers.

Recently, other banks had also announced plans to move more work to India. New Zealand’s largest bank, ANZ National, announced plans to move 500 jobs from the country to its offshoring unit in Bangalore. Australian bank Westpac, too, said it plans to increase offshoring – its technology costs went up by over $70-million in the half year ended March 2008.

Barclays provides consumer and commercial banking, credit cards, investment banking, wealth management and investment management services in Europe, Africa, Asia Pacific and the United States. It is present in India through its investment banking arm, Barclays Capital, and it recently started consumer and commercial banking services in Mumbai, New Delhi, Kanchipuram and Nelamangala, near Bangalore.

Early this year, Barclays signed a five-year outsourcing agreement with Mumbai-based BPO firm Firstsource Solutions worth up to $80 million for supporting the banking firm’s operations in the US, including managing its operations centre in Colorado Springs.