Last week we saw financial service heavyweight, Citigroup sell its interest in Citigroup Global Services Limited (CGSL) to Tata Consultancy Services (TCS). TCS is said to be paying $505 million to acquire the India based BPO services.
With all companies focusing on reducing costs, I believe we will see more and more of these types of deals cropping up. The initial cash raised from the sale, twinned with a reduced price when buying back the ICT services, will certainly come in useful during these difficult times.
These deals have worked well in the past and TCS is no stranger to such acquisitions - the Pearl BPO acquisition was approximately $300 million more than this.
With the credit crunch taking its toll on financial services, large banking firms may well start to follow Citigroup’s lead.
However financial firms must make the decision sooner rather than later in order to take advantage of such deals. As the market saturates late comers will find few buyers, or alternatively only buyers that will just consider heavily reduced prices for their services groups.
With aggressive cost-saving targets set for next year, businesses within the financial services sector will need to consider any deal that brings in money and cuts back on costs.
However, prior financial services experience may well be a deciding factor when seeking a partner. Service providers such as Luxoft, who already has experience in this market (engaging in deals with the likes of Deutsche bank), will certainly be well placed to capitalise on banks looking to sell off their ICT and back-office services.
Outsourcing has always been seen as an industry that can flourish in times of financial uncertainty. However, the looming recession may not be smooth sailing for the entire industry. While larger players can withstand rate cuts, smaller service providers may not have the scale to survive.
Find your next job with computerworld UK jobs