IT News

By Daisuke Wakabayashi, Reuters

BOSTON (Reuters) - Genpact, a global back-office outsourcing business 40-percent owned by General Electric Co, plans to more than double revenue by 2008 as part of expansion plans that may eventually lead to an initial public offering, a company executive said on Friday.

Genpact targets sales to rise to US$1.2 billion in 2008 from an estimated US$490 million this year as non-GE customers hire it to perform back-office functions such as managing procurement, accounts receivable and other processes, Tiger Tyagarajan, Genpact's executive vice president said in an interview.

Industrial, financial and media conglomerate GE sold 60 percent of its back-office operations, GE Capital International Services, to private equity firms General Atlantic Partners and Oak Hill Capital Partners on 30 December for about US$500 million.

Renamed Genpact, the company employs more than 19,000 workers in India, China, Hungary, Mexico and Romania, offering services ranging from operating call centres to performing risk analysis models for customers.

Genpact competes with IBM and Accenture for outsourcing business. Tyagarajan said it aims to gain an advantage by setting roots in new markets early and then use GE's six sigma operating system to lower costs and improve efficiency.

"We are really having the benefit of the GE connection without GE owning us fully," said Tyagarajan, a former executive in GE's equipment financing business.

While GE accounts for more than three-quarters of its business, Genpact recently added Wachovia Corp, the number four US bank, to its list of multinational customers including car maker Nissan Motor, drug giant GlaxoSmithKline Plc and Air Canada.

Outsourcing is a hot-button political topic with opponents arguing that it eliminates American jobs, but the opportunity to shave costs by up to 40 percent for even basic transactions — according to Genpact estimates — is a proposition that many large US businesses cannot ignore.

Genpact has not heard from GE's private equity partners about how they plan to cash in on their initial investment, but an initial public offering is a possibility for a company with profit margins in the 15 to 20 percent range.

"An IPO is one of the clear options that one could think about," said Tyagarajan, who added that there are no definitive plans or any target date for an offering.

The rapid expansion of outsourcing to markets like India has made some services such as operating basic telemarketing call centers into a commoditized business, Tyagarajan said.

The area with most potential, according to Tyagarajan, is what he called "decision support services" that require mathematicians and PhDs to crunch numbers and create models to analyse large chunks of data.