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BT job cuts may hurt Indian BPOs

By B S Reporter in Mumbai
November 14, 2008 10:47 IST
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The British Telecommunications Group said on November 13 it would cut its workforce by 6 per cent in the year through March which would affect areas of 'indirect labour' such as agency, contractors, sub-contractors and offshore workers.

'It is too early to know country-specific job cuts. The majority of the job cuts will be in the UK with the rest peppered around the world and not just in India,' said a statement from BT. This is all about BT reducing its reliance on third-party contractors, it added. Of the 10,000 job cut (4,000 direct jobs and 6,000 indirect) announcement, 4,000 have already been made.

The move, caution analysts, may impact its India outsourcing partners like Tech Mahindra, Tata Consultancy Services, Infosys, Wipro, and HCL Technologies which together get around Rs 4,000 crore (Rs 40 billion) revenue from BT annually.

For Tech Mahindra alone, the IT arm of Mahindra & Mahindra group, BT contributes over 60 per cent to its revenue (around Rs 2,600 crore or Rs 26 billion as of FY08). For Infosys, BT is its top client and one of among the top 10 for TCS. As for HCL Tech, close to 2,000 people work for BT in Northern Ireland and handle its business telemarketing, billing and conferencing work.

Clive Selley, managing director, BT Design, in an email response said, 'Tech Mahindra is, and will continue to be, a key commercial partner with BT. We have a number of long term contracts in place with Tech Mahindra that will be unaffected. Going forward, we do not see a material impact on our outsourced activities with Tech Mahindra.'

Currently, close to 12,000 employees work on the BT deal at Tech Mahindra. Of this, 10 per cent are onsite and the rest are offshored. "There has been news that many of the employees working in the UK are being sent back to India to be accommodated in the Pune, Mumbai centres. Some of the officials are worried as a large number of people will need to be accommodated," said a source.

Sanjay Kalra, president (strategic initiative), Tech Mahindra, said, "We are well positioned as far as BT is concerned as these are transformational deals. As for the delivery of services, we will serve our clients in all possible ways."

Analysts tracking these firms are worried as this might also impact future growth. "If you see revenue from BT to Infosys last quarter, it was flat and for this quarter it has come down significantly. This kind of news will further impact the growth numbers," said an analyst on condition of anonymity.

However, when contacted Vineet Nayyar, vice-chairman and MD, Tech Mahindra denied any such news. "As far as we go, I do not see any direct impact. In case the work is offshored, it is good news for us as our profits will go up. Of the total people working on the BT deal, 10 per cent are onsite and 90 per cent are offshore," said Nayyar.

Other than their relationship with these top five IT vendors, BT also has a captive centre at Gurgaon -- the Global Operations Centre -- that runs core and mission critical systems and processes for various lines of business apart from providing functional support to group functions like procurement, legal, finance and HR. Close to 300 people work at the centre.
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B S Reporter in Mumbai
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