VideoThere is a buzz at the ground-floor cafeteria of Gecis, the back-office operation of General Electric just outside Delhi. About a dozen people are gathered round a corner, and more are forming a queue. "Have you got your free drink?" a woman in a green sari asks a colleague, lifting a can of Red Bull in her hand. The energy-drink maker is giving free samples of a new flavor. It's nearly 4 p.m. in India, the beginning of the workday for many at Gecis, and they can use the energy boost. By the time their U.S. colleagues clock in, they will have done a fair amount of tasks for GE worldwide, from underwriting insurance and collecting delinquent accounts for its finance businesses, to performing cost analysis and tracking inventory for its industrial operations.
This is the world of offshore business-process outsourcing (BPO), where corporations farm out routine office functions to developing countries to take advantage of lower labor costs and higher productivity. It's the little sister to the phenomenon of manufacturing and IT-services outsourcing — only 3 percent of overall BPO spending is currently spent offshore, according to research firm Gartner. But offshore BPO is catching up, be it in the form of companies setting up captive back-office units abroad or contracting out the work to third-party providers. Either way, the trend may rattle the global labor market yet again. In its World Investment Report 2004, the United Nations Commission on Trade and Development argued that offshoring of corporate service functions could become "the next global shift".
Currently synonymous with call centers, offshore BPO is becoming commonplace, especially in India, by far the most favored BPO location. Gartner estimates the market there will soar from US$3.6 billion last year to US$24.3 billion in 2007. Based on 2004 revenues, Nasscom, the industry lobby group, says a third of all BPO work are in the area of customer care, followed by finance, administration, content development, payment services, and human resources. India already houses captive units set up by multinationals from American Express and HSBC to Dell and IBM, doing mostly standardized tasks such as general accounting, records management, and transaction processes such as accounts payable.
The tasks being remotely processed are now going up the value chain. You no longer have to imagine a company whose finance team in the United States is made up of only the controller, treasurer, and CFO, with their staff in India. This is already happening. What you need to still imagine is what happens when headquarters, unburdened by the rigors of running a factory and the tangles of accounts collection, is left only with the core tasks of selling products, developing new ones, and mapping growth strategies. This scenario may be way out on the horizon right now, but it is worth pondering how far it can go — and how it can change the way CFOs run finance.
The Way Forward
For a hint of where offshore BPO is headed, look no further than to its pioneer. Since 1997, Gecis (pronounced jekis) was the back-office captive of U.S. conglomerate General Electric (GE), the world's second-largest company by market capitalization. With revenues of US$152 billion last year, GE's extremely complex financial operation encompasses 11 global businesses from consumer finance, commercial finance, and insurance, to transportation, healthcare, and energy. Gecis is the back-office hub to 17,000 employees in India, China, Hungary, and Mexico.
Following GE's sale last December of its 60 percent stake to U.S. private-equity firms Oak Hill and General Atlantic Partners, Gecis is extending its services to non-GE businesses. That, says Gartner research director Sujay Chohan, "could redraw the global outsourcing map." The reason? Gecis is a vital, if little-known, factor behind GE's reputation as one of the world's most admired companies. "India has largely been seen as a destination for call centers and low-level transaction processing, and multinational companies in North America and Europe have been reluctant to outsource more complex tasks," says Chohan. As Gecis reaches a wider market, this view will significantly change, he adds.
With characteristic aplomb, Gecis CEO Pramod Bhasin gets keyed up when he talks about what the BPO industry in India is capable of. "In the past, outsourcing was typically around finance and accounting," he says. "But now there's no reason why you can't outsource part of the risk underwriting for a financial services company, claims processing for an insurance company, and a large part of the supply chain for a manufacturing company." It was Bhasin, a chartered accountant, who gave birth to the idea that India could serve as a back-office hub for GE globally, a notion that came to him while he was scouting for a similar solution for GE Capital in India.
The 450 processes that Gecis has been doing for GE businesses go beyond just finance and accounting. These processes are undertaken by ten "centers of excellence" — COEs — which are categorized according to industry or function. For example, the insurance COE provides underwriting, claims processing, and actuarial services for units such as GE Insurance Solutions. Come October, says a smiling project manager working for GE's property and casualty reinsurance business, his team of 23 people will take over the job of the U.S.-based claims handler, who decides the amount of insurance payouts. The claims handler will only review the amount calculated in India.
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