The next step in Wachovia Corp.’s offshoring plans has been put into motion — on Wednesday it signed a deal to have a former General Electric Co. unit handle some of the banking company’s back-office processing.
The seven-year contract, with Genpact of Delhi, follows a series of announcements this year that Wachovia hopes to cut expenses by up to $1 billion, mainly by outsourcing as many as 4,000 jobs by 2007.
“We think that this will be a significant contributor to” the $1 billion in expense cuts, “but we haven’t set a particular target” for savings from the Genpact contract, said Peter Sidebottom, Wachovia’s director of corporate development and strategic initiatives.
Individual line-of-business managers will decide how many jobs they want to send abroad, and the positions will be eliminated next year, around May or June, Mr. Sidebottom said.
The jobs most likely to be outsourced, he said, would be in “high-transaction volume work that’s been captured in a digital form and can be shipped long distance,” along with specific projects that can also be sent overseas.
Wachovia, of Charlotte, is the first banking company to sign with Genpact, which was partially spun off from GE at the end of 2004 and was previously known as GE Capital International Services (the Fairfield, Conn., company’s financing subsidiary, General Electric Capital Corp., still owns a 40% stake and is its biggest customer). Genpact’s 16 other non-GE customers include some insurance and commercial lending companies, as well as pharmaceutical and auto manufacturing companies.
Tiger Tyagarajan, Genpact’s executive vice president, said that few of the details of the Wachovia deal have been settled, but the main service he expects to provide is back-office processing. Genpact will not handle any call-center work or any other customer-facing work, though it does provide such services.
There is no firm schedule yet for when, or how many positions, Wachovia will shift to his company, Mr. Tyagarajan said.
He said that Genpact’s experience with the Six Sigma statistical analysis methodology helped it land the Wachovia deal.
Six Sigma was originally developed for manufacturing companies, and he said Genpact inherited its expertise from its former parent.
He said the methodology focuses on improving customer service by quantifying how well customer needs are met each day. In 1997, when the company was formed, “we hired our first person and then we launched Six Sigma,” Mr. Tyagarajan said. “We had the opportunity of teaching Six Sigma to almost the first employee we hired.”
In June, Wachovia announced that it was in discussions with three other outsourcers — Infosys Technologies Ltd. of Bangalore, India; International Business Machines Corp. of Armonk, N.Y.; and Cognizant Technology Solutions Corp. of Teaneck, N.J. — to move some work to India. Mr. Sidebottom said that contracts have since been finalized with all three of those companies, and some line-of-business managers have begun targeted outsourcing pilots.
Mr. Sidebottom said that though Wachovia has not adopted the Six Sigma program companywide, it has used it for five or six years in specific areas, and Genpact’s familiarity with Six Sigma gave the vendor an edge. “We want to make sure that any processing we move over there will be managed by Six Sigma,” he said.
Madhavi Mantha, a senior analyst at Celent Communications LLC, said that although the companies did not say how many jobs would go to Genpact, “typically, going through this effort for less than a 250-head-count initiative almost becomes not worth it.”
She said it was harder to estimate an upper limit for the number of jobs that could be outsourced through the Genpact deal, but judging from similar agreements, she said, “it could certainly exceed 1,000.”
