GE Spin-off Pulls Rug Out from Competitors; Signs Wachovia as Client

Genpact, the India-based service provider set up in 1997 and spun off from GE earlier this year and then renamed from Gecis Global in September, won an outsourcing agreement from Wachovia Corp. Although neither company disclosed the financial terms of the agreement, it encompasses a seven-year arrangement for Genpact to establish an offshore operation to support the financial service provider’s business process outsourcing efforts.

As this article in The Miami Herald explains, Wachovia Chairman and CEO Ken Thompson has undergone a shift in his views regarding offshoring. Part of that shift may have derived from a trip he and his team made to India, where they visited Genpact for half a day and met a “broad cross-section” of Genpact’s employees.

According to Genpact Executive VP “Tiger” Tyagarajan, Mr. Thompson, “walked around the facilities. He saw the tools we use. I think the feedback he gave us is that he was very excited with the quality of the work, the quality of the people, the excitement of the people.”

Earlier this year, I attended a Stanford University gathering to listen to experts discussing and debating the globalization of services. Mr. Tyagarajan, one of the livelier speakers, shared the then-Gecis process for moving up the value chain in what it delivers to clients -- taking on more strategic work. He cited process and retention of people as important aspects to gaining this kind of work.

One of the “tools” he talked up, as part of the emphasis on continual process improvement, was Six Sigma -- to “take a process that has 200 people and over time...run the same or more volume with half as many people... while also improving output of that process.”

Therefore, it shouldn’t be a surprise that part of the attraction for Wachovia, according to the press release here, was gaining access to the firm’s extensive base of Six Sigma black belts.

The two companies expect to start the transition of work to the service provider in the second quarter of 2006.

The changes will involve layoffs, as Wachovia hinted at last year and confirmed in mid-2005. At that time, it told its US technology staff that it intended to outsource tech work to one of three offshore providers. The contenders included Infosys, IBM and Cognizant.

According to The Economic Times, Genpact, in which GE still has a 40% interest, plans to hit the $1 billion mark by 2008, from an estimated $490 million in revenue this year. It currently has 19,000 employes in India, the US, China, Hungary, Mexico and Romania, “offering services ranging from operating call centers to performing risk analysis models for customers.”

Genpact clients, aside from GE and Wachovia, include Nissan Motor, GlaxoSmithKline and Air Canada.