Managing outsourced operations, particularly those located offshore, often proves to be a much bigger challenge than companies anticipate. Barclaycard, the credit card arm of British banking giant Barclays PLC, is apparently negotiating an agreement in which Indian outsourcing provider Firstsource Solutions will take over management of an existing Barclaycard customer service center located in the UK.
According to a Wall Street Journal report, this deal would be part of a broader trend in which Western companies sell their outsourcing operations to Indian companies. Though much of the ink is devoted to deals involving the sale of so-called captive centers in India, Indian companies are interested in acquiring operations in the U.S. and Europe because it allows them to establish an onshore base of operations from which to pursue other Western clients.
The article offers the example of Patni Computer Systems Ltd., which recently closed a five-year deal worth about $250 million from U.S. insurer Universal American Corp. As part of the deal, Patni purchased CHCS Services Inc., a wholly-owned unit of Universal American.
Financial analysts like these deals because they entail long-term contracts between outsourcing providers and more stable flows of revenue. I suspect such arrangements rarely involve contract renegotiations, which drove much of the outsourcing activity in 2010's first quarter.
Two years ago Barclaycard and Firstsource Solutions brokered a deal similar to the one being proposed in the UK, with Firstsource taking over operations of a customer service center in Colorado Springs, Colo.
No dollar amount or timeline has been mentioned for the UK deal. The Wall Street Journal report quotes a Barclays spokeswoman who said the company is "in discussions" with Firstsource, but "can't comment on the commercial terms of the deal." It also includes this statement, posted on Barclays' website:
If the talks are successful, Firstsource will take over Barclaycard's customer service center in Teesside and deliver the customer services for the credit card and payments business, which are currently provided there. Plans for the existing Teesside employees and building will form part of the discussions and Firstsource has given a commitment to establish a long-term presence in Teesside.
Assuming the deal is completed, it will also be an example of an emerging approach some experts are calling vested outsourcing.