Sub-prime woes: BPOs rule out immediate layoffs

Business Process Outsourcing (BPO) players including WNS and iGATE Global Solutions — hit by the meltdown in the US sub-prime mortgage market — have begun redeploying affected employees in other internal projects, while ruling out any immediate layoffs.

“About 500 of our employees were engaged in the First Magnus Financial Corporation contract. We are working on creating internal opportunities for these employees and there will be no layoffs,” the WNS Chief Executive, Mr Neeraj Bhargava, told Business Line.

Mr Bhargava said that the WNS team had started matching skill set of such employees with the internal requirements.

“There is enough growth in the market to take care of the flow of people from the contract, and efforts are on to absorb bulk of them internally within the practices such as financial services, travel and knowledge services. In the rare case of employees with skill sets unique to the client, we will assist them in getting jobs externally,” he said.
First Magnus contract

Last week, the company in a filing to NYSE, said First Magnus Financial Corporation, one of its top clients in the mortgage business, had decided to stop all work with WNS in light of the current volatility in the mortgage market.

WNS also said that its revenue less repair payments were expected to be between $286 million and $291million for the year ended March 31, 2008, about $16 million lower than originally estimated.

The sub-prime woes have prompted iGATE Global Solutions to redeploy close to 150 employees into other services, said the Chief Financial Officer, Mr N. Ramachandran.

Some of the employees have been redeployed into other practices such as insurance, finance and accounting, infrastructure management services and in pH (Process Health) Matrix consulting team.
Voluntary attrition

iGATE also saw some 20-25 people leaving the company voluntarily during the past few months. “We have not filled up the vacancies arising due to voluntary attrition during this period,” Mr Ramachandran said.

At present, iGATE has some 500 employees in its BPO operations. Revenue from mortgage processing, which accounted for about 10 per cent of iGATE’s total revenues two quarters ago, has now come down to around six per cent.

“At present, we have three clients in the mortgage segment and all of them have been affected by the sub-prime crisis. Unlike other companies which have collapsed recently, our clients are big enough to withstand the crisis,” Mr Ramachandran said.

However, the Nassscom President, Mr Kiran Karnik, said that it was early to press the panic button. “While at individual company-level it could hit operations, from the Indian BPO industry standpoint it may not have large implication primarily because the industry’s exposure to mortgage market is quite small and the services are specialised.”