Citi BPO may go on recruitment drive

With Citigroup Inc likely to move almost 8,000 jobs to India "� of the total 9,500 jobs it plans to move to low-cost destinations "� analysts are expecting the bank's business process outsourcing (BPO) arm, Citigroup Global Services (formerly eServe), to go on an aggressive recruitment drive to cater to the demand, thus pushing up wages in this employee-starved sector.

Following its acquisition by Citibank in FY05, eServe operated as a Citi captive from its Mumbai and Chennai centres servicing product lines such as trade, cash, mortgage, retail banking, cards and capital markets. Since becoming a captive, it carried out one of the most aggressive recruitment campaigns trying to attract people through the Citi brand name.

Now that Citigroup Inc has announced it will slash 17,000 jobs and move 9,500 jobs to low-cost destinations, the move "� which will enable Citigroup to cut costs by $3.7 billion in the next year "� is being closely watched by the Indian BPO sector. The current job cuts are largely in the bank's investment banking and consumer finance business and Citigroup Global Services' moves are on the radar. A Citigroup spokesperson, when contacted, said: "This is a global decision and we have not got any details as yet. We would not like to comment at this stage."

BPO has always been an aggressive player. Last November, when e-Serve International changed its name to Citigroup Global Services Ltd, company officials said they were planning to set up an international site in Delhi by June this year at an investment of around Rs 100 crore.

The site, to cater to its global operations, is expected to have around 4,000 employees on becoming fully-operational, which would take around three years. This would be third international site for the company, apart from the Chennai and Mumbai centres that have around 4,000 employees each. It's likely that the new jobs would be shifted to this site, said an analyst.

An analyst, who did not wish to be named, opined the company will prefer to grow organically and hence increase the headcount of its Indian BPO arm. He added that Citigroup might also look at an acquisition rather than outsourcing the work to other Indian BPOs. "Even if it does give work to Indian BPOs, it will be for a transition period of a year or so. They will surely either want to add these numbers in their existing centre or acquire another company that will give them the volumes," said a senior analyst.

Currently, the company's anytime money (ATM) operations have been outsourced to Euronet. Some of the names floating around include those of Hewlett Packard and Genpact which have a sound financial and accounting services portfolio.

The remaining 1,500 jobs are likely to be passed on to low cost countries such as the Philippines, Russia and Poland. Malaysia and Vietnam are also emerging destinations for the services sector BPOs.

But where will the staff come from? While BPO exports are growing at about 32 per cent and are estimated to cross $8.3 billion in FY 2007, there's a woeful shortage of "employable" candidates. The shortage of skilled (read employable) IT workers is severe and will worsen by 2010.

Nasscom has repeatedly cautioned that while technology jobs will double to 1.7 million over the next four years, the Indian IT industry could face a shortfall of around half-a-million workers over the same period. Even the Philippines BPO industry will need over 4 lakh workers this year, according to Commission on Information and Communications Technology.

Direct employment in the BPO sector grew by 31 per cent to reach 4.15 lakh in FY 2006 and is forecast at 5.45 lakh in the current financial year. Of the wide range of services offered by the sector, Nasscom estimates the worldwide demand for finance and accounting will grow at a CAGR of over 16 per cent and reach $24.6 billion by 2010. India is witnessing a sustained demand for services in this segment.

However, the attrition rates range between 30-60 percent in the BPO industry, according to experts. This is likely to add to the "war for candidates and push wages up", said an analyst. According to experts, the cost of attrition is 1.5 times the annual salary.

However, there are some BPOs who have reacted differently. Aditya Gupta, President, Infovision, is elated: "It is wonderful news for India." He added this is a trend that not only saves on costs but also leads to cost optimisation, which is a healthy sign for the sector.

Outsourcing work to non-captive centres by such companies is a major support to the local BPO sector. Avinash Vashist of Tholsons Advisory too sees this move as a step towards starting a new trend in the finance BPO sector. He feels, Citigroup is paving a path for other financial organisations to outsource their work.