Obama’s election and the global economic slowdown, two major outsourcing deals in the hospitality and the pharma sectors have been signed which should bring hope and cheer for the Indian BPO sector.
The world’s premier hotel company, Chicago-based Global Hyatt Corporation, has outsourced part of its financial and accounting transaction services to India‘s Genpact. The Hyatt agreement is a trend-setting move in the hospitality industry and follows in the footsteps of other global banking and insurance giants who outsourced a large part of their processes to India’s BPO sector to save costs.
In the other major deal, the $30-billion global pharma giant AstraZeneca has outsourced its end-to-end maintenance services for a variety of corporate services (such as human relations, finance) to Bangalore-based Infosys. While the values of the two deals have not been disclosed yet, both envisage increasing the scope of the work over time.
The Hyatt Corporation chain – which manages over 365 hotels and resorts worldwide under a variety of brands, such as Hyatt, Hyatt Regency, Grand Hyatt, Hyatt Summerfield Suites and Andaz-has awarded a five-year contract to Genpact, covering its North American hotels.
Without getting into the value of deal, Harmit Singh, CFO, Global Hyatt Corporation said: “We have a contract with Genpact for handling the accounting transaction services for some of our North American portfolio, which would be expanded moving forward.” From an initial nine hotels, Genpact’s Hyderabad unit will cover another six hotels next year and then 10 hotels by March 2010. The Hyatt group has 118 properties in North America.
An industry observer said that sooner or later other global hospitality chains are likely to replicate Hyatt’s business outsourcing model. Says Siddharth Thaker, associate director of HVS International, a global hotel consultancy firm: “It makes business sense for many US and European hospitality chains to look at outsourcing their financial and accounting services to India in the wake of the global economic slowdown. Also, since there are not many avenues to increase revenues, outsourcing offers a clear advantage for the bottomline.”
The hospitality industry follows an asset light strategy. Translated, this means that not all hotel properties are owned by the brand name on the marquee. Most properties are operated and managed, and not necessarily owned, by hotel chains like Starwood, Marriott, Hyatt and Carlson Hospitality (owner of Radisson, Regent brands) which put their name on the shingle. There are also instances where the chains own a stake in the property. So, in an outsourcing deal, irrespective of who owns the property, it is the hotel chain’s processes that are awarded to third-party BPO companies.
Hyatt has five properties in India and its financial transactions-including payables and receivables, general ledger process and reconciliation-are handled out of Hyatt’s shared service centre in Mumbai. InterContinental Hotels, the world’s largest hotel chain, is learnt to have a shared service center operating from Gurgaon.
Companies across sectors-from Unilever to British Telecom, from General Electric to AIG-have either set up their own captive unit or outsource some of their functions to third parties. In recent times, many companies have sold their captive back office operations to third parties. For instance, Aviva sold its captive unit to WNS and Citigroup sold its BPO to Tata Consultancy Services. Both these deals came with committed multi-year contracts to the acquirer. US-based asset management firm Fidelity is also said to be exploring a sale of its Bangalore and Chennai captive units.
- Reeba Zachariah, TNN