S G to invest Euro 2 mn in Indian arm

To kick-start ITeS services

Societe Generale, the fifth largest bank in the Euro zone, which manages Euro 298 billion under its asset management and private banking business, has decided to invest Euro 2 million in S G Software, its Bangalore-based captive centre.

The unit was established in 2000 to serve as a knowledge centre and global centre of excellence catering to the financial software, R&D, IT consulting and project management needs of its parent company.

S G Software took three years to break-even after an investment of about Euro 1 million during its inception.

In the last two years, S G Software has helped its parent company save nearly Euro 9 million. The target of this captive unit is to help save Euro 60 million by 2006.

Considering the manner in which Societe General has benefited from its Indian captive unit, the latter is all set to extend its services by taking up work in the IT-enabled services space.

Currently, about 90 per cent of the work done here concerns software development, R&D, testing and enhancement. IT-enabled work was negligible and was mostly research-related for its bankers in the US.

Societe General spends nearly Euro 2 billion on its IT needs every year. Having seen the progress made by the India centre so far, the banking major is all the more keen to reap the benefits of the Indian outsourcing wave.

"We are looking at IT-enabled services only for the corporate investment business of the bank. We would initially begin by providing value-addition and reducing the transaction time for clients in the corporate sector," Ramesh Kumar S, managing director and chief executive officer, Societe General Software Asia Pvt Ltd, said.

SG Software expects to double its 220-strong manpower within one year.

While it is clear that IT-enabled services is set to take off by early 2005, Kumar felt it was too early to comment on the initial employee intake or the investments for the IT-enabled services business.

"The major reason for kick-starting these functions is to benefit from our expertise in technology and functional know-how, cost advantage as well as the proactive long-term strategy. IT-enabled services will initially begin with providing value addition for Societe General Corporate and Investments banking division," added Kumar.

According to a Deloitte study, nearly $356 billion in terms of cost among global financial services will be relocated within the next five years.

"We calculate that this will translate into a bottomline annual cost saving of $138 billion each for the world's Top 100 financial service companies by 2008," the study has said.