Financial Daily from THE HINDU group of publications
Wednesday, Oct 19, 2005
Info-Tech - Software
Money & Banking - Life Insurance
TCS bags BPO deal from UK insurer
Mumbai , Oct. 18
TATA Consultancy Services today announced an entry into the UK life and pensions industry space by winning a deal valued at $847 million (around Rs 3,800 crore) for insurance transaction processing for the UK-based Pearl Group, the revenues to be spaced out over 12 years.
TCS will be taking over Pearl Group's transaction processing division in Peterborough through the creation of a subsidiary in which Pearl will be a minority, "passive" partner, the Executive Vice-President of TCS, Mr Phiroz Vandrevala, said from the UK by video-conference here today.
This would take TCS to the second slot in this space in the UK, TCS officials said.
The equity holding pattern of the joint venture - details of the shareholding pattern and the equity capital - will be announced later, said Mr Vandrevala.
The new subsidiary will specialise in BPO for life and pension businesses, starting with Pearl's closed books portfolio and will later offer similar services to other insurance companies. The eventual establishment of a UK-based centre of excellence could cater to clients in the continent as well, said officials.
The potential in the UK itself was enormous, there being 150 million to 200 million policies, pointed out Mr A.S. Lakshminarayanan, Vice-President and Country Manager, there for TCS. The unit will start with processing 4 million policies for Pearl; these closed book ones will reduce to a little over 1 million policies at the end of 12 years.
Third party insurance companies would not baulk at giving business to a joint venture, where Pearl itself is a partner , said Mr Vandrevala.
"This deal validates our strategy of pioneering the next generation of business process outsourcing opportunities," said Mr S Ramadorai, CEO and Managing Director, TCS.
Officials at TCS repeatedly drew attention to the size and strategic nature of the deal. "It is among the largest single deals in the world and certainly the largest in its space in India," said Mr S. Mahalingam, Chief Financial Officer, at a news conference today.
Recently TCS won a $250 deal from ABN Amro to develop and operate software for the bank for a period of five years.
The current deal is not a simple outsourcing deal but one that is platform-based, one that is going to create significant systems capabilities in the insurance vertical that will bring together 13 different legacy systems that exist at Pearl, TCS officials said.
This is moving away from simple offshoring, it is all about business process reengineering capability, said Mr Edward Spencer-Churchill, Director, Pearl, in a videoconference from the UK.
A lease agreement will soon be signed with Pearl for use of its space in Peterborough. Around 950 of Pearl's 1,100 employees will be hired by the TCS subsidiary, with 150 remaining with Pearl which will be investing around £50 million over 4 years in the BPO, part of which will amount to revenues for TCS.
Revenues from this deal will start showing the books of TCS from the last quarter of this financial year itself, said Mr Vandrevala. Sixty per cent of the revenues will come in the first six years and 40 per cent in the subsequent six years.
TCS' revenues from BPO activities amounted to $22 million during 2004-2005, the company was expecting to do $50 million this year. This contract would take it to another level altogether, said Mr Mahalingam.
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