Tata's UK subsidiary gets $2.2 billion BPO order

Diligenta bagged a business process outsourcing order from insurer Friends Life

Tata Consultancy Services (TCS) has bagged a £1.37 billion (US$2.2 billion) business process outsourcing order from Friends Life, a provider of pensions, investments, and insurance, it said in a filing to Indian stock exchanges.

The business process outsourcing (BPO) order, spread over 15 years, is one of the larger ones for Indian outsourcers who are finding demand slackening because of the economic crisis in Europe and the U.S. It is the largest BPO contract signed in the U.K. in recent years with a new client, said John O'Brien, research director at TechMarketView, a research and consultancy firm in the U.K.

Under the terms of the contract, 1,900 staff from Friends Life will move to Diligenta, the U.K. subsidiary of TCS, taking the total number of staff at the subsidiary to 3,700. The deal is similar to a £486 million order that TCS clinched from Pearl Group in 2005 which also required the Indian outsourcer to absorb U.K. back-office staff from Pearl.

The U.K. BPO market is very active, in both the public sector and private sector, and life assurance and pensions in particular are hot areas, O'Brien said.

Suppliers like Diligenta with the right capabilities and platform offerings are going to do well, he said. "It leaves question marks over how rivals like HCL and Capita are going to compete," he added.

The contract with Friends Life also includes some IT services business in connection with the migration of some accounts to TCS' insurance platform called BaNCS Insurance.

The TCS deal should however not be seen to reflect a significant change in the overall outsourcing market, analysts said.

The global outsourcing and offshoring market saw large drops in transaction volumes during the third quarter this year, a substantial decline for the first time in four quarters, said Everest Group, an advisory and research firm on global services.

The number of outsourcing deals dropped to 472 outsourcing deals compared to 508 in the first quarter and 516 transactions in the second quarter of this year. Everest said it would take some more quarters to figure out if there was a definite downward trend.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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