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Stitch in time saved millions for Genpact
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Stitch in time saved millions for Genpact
24 Apr 2009 Delhi:Everything was hunky-dory for India’s business process outsourcing (BPO) industry way back in 2007. Business was growing at a breathtaking pace; prestigious contracts were being announced every other day, and all top-notch BPO firms were adding employees by the thousands. So, when the country’s largest BPO firm Gurgaon-based Genpact started belt-tightening, several eyebrows were raised.
The company kept pay hikes to 7-8% compared with the industry norm of 10-12%. Entry-level salaries were frozen. To control infrastructure costs, it took up space in SEZs at 50% lower- than-market rates and expanded into tier-II cities, where costs were 25% lower.
Critics, who missed the point then, got their answers two years later when Genpact announced a 122% increase in its annual net profit to $125.1 million for the financial year ended December 2008. Revenues grew 26.4% to $1.04 billion. While it got increased business from existing clients, cuts in the selling, general and administration expenses helped Genpact increase profitability — at a time when most of its peers were struggling to stay profitable.
Early detection is key to survival during economic downturns. International exposure and a long association with GE may have helped it foresee the trouble, much before it became an everyday reality.
“We can’t control the economic environment. We learnt from GE to try and focus on things we can control — internal cost and expenditure,” said Pramod Bhasin, president and chief executive of Genpact. “We talked to clients, suppliers and advisors, and put all that information together in a cohesive way,” he said. The company stopped adding people in support functions such as IT and finance. It started reducing bench strength. Discretionary travel was also brought under the scanner.
“Genpact’s solid management, scale and ability to apply expertise accumulated from years of servicing GE to other clients are its key advantages. It’s easily outperforming its software services rivals,” said Karl Keirstead, senior equity analyst at New York-based brokerage Kaufman Bros.
Genpact started its journey as GECIS (GE Capital International Services), a customer support centre for GE in 1997. “We got a little bit of money from GE (the parent gave $2 million for the venture). We got a 30-sq ft room at the GE office in Gurgaon and asked people to bring curtains to create barriers while calling,” said Mr Bhasin, then the head of GE Capital in India.
As GECIS grew in scale, non-GE companies started approaching it to deliver similar work for them. Internal discussions on hiving off the captive lasted around a year. In 2004, General Atlantic Partners and Oak Hill Capital Partners acquired a majority stake in GECIS — they got 30% stake each — and GE held on to 40%.
It was re-branded Genpact in 2005 and got listed on the New York Stock Exchange in 2007. The firm raised a lower-than-expected sum of $494 million through the IPO in a turbulent market. The float valued the company at $2.89 billion. The firm’s market value has fallen to $1.85 billion amid the stock market collapse. But Mr Bhasin said the US recession may not be such a bad thing after all — it forces companies to think creatively.
Source:
http://economictimes.indiatimes.com/Infotech/ITeS/Stitch-in-time-saved-millions-
The company kept pay hikes to 7-8% compared with the industry norm of 10-12%. Entry-level salaries were frozen. To control infrastructure costs, it took up space in SEZs at 50% lower- than-market rates and expanded into tier-II cities, where costs were 25% lower.
Critics, who missed the point then, got their answers two years later when Genpact announced a 122% increase in its annual net profit to $125.1 million for the financial year ended December 2008. Revenues grew 26.4% to $1.04 billion. While it got increased business from existing clients, cuts in the selling, general and administration expenses helped Genpact increase profitability — at a time when most of its peers were struggling to stay profitable.
Early detection is key to survival during economic downturns. International exposure and a long association with GE may have helped it foresee the trouble, much before it became an everyday reality.
“We can’t control the economic environment. We learnt from GE to try and focus on things we can control — internal cost and expenditure,” said Pramod Bhasin, president and chief executive of Genpact. “We talked to clients, suppliers and advisors, and put all that information together in a cohesive way,” he said. The company stopped adding people in support functions such as IT and finance. It started reducing bench strength. Discretionary travel was also brought under the scanner.
“Genpact’s solid management, scale and ability to apply expertise accumulated from years of servicing GE to other clients are its key advantages. It’s easily outperforming its software services rivals,” said Karl Keirstead, senior equity analyst at New York-based brokerage Kaufman Bros.
Genpact started its journey as GECIS (GE Capital International Services), a customer support centre for GE in 1997. “We got a little bit of money from GE (the parent gave $2 million for the venture). We got a 30-sq ft room at the GE office in Gurgaon and asked people to bring curtains to create barriers while calling,” said Mr Bhasin, then the head of GE Capital in India.
As GECIS grew in scale, non-GE companies started approaching it to deliver similar work for them. Internal discussions on hiving off the captive lasted around a year. In 2004, General Atlantic Partners and Oak Hill Capital Partners acquired a majority stake in GECIS — they got 30% stake each — and GE held on to 40%.
It was re-branded Genpact in 2005 and got listed on the New York Stock Exchange in 2007. The firm raised a lower-than-expected sum of $494 million through the IPO in a turbulent market. The float valued the company at $2.89 billion. The firm’s market value has fallen to $1.85 billion amid the stock market collapse. But Mr Bhasin said the US recession may not be such a bad thing after all — it forces companies to think creatively.
Source:
http://economictimes.indiatimes.com/Infotech/ITeS/Stitch-in-time-saved-millions-