UK insurance giant Aviva has sold its back-office subsidiary in India and Sri Lanka to WNS, a business process outsourcing company in Mumbai.
Aviva sold Aviva Global Services for £115 million and signed a master services contract with WNS to provide offshore services to the Aviva UK, Irish and Canadian businesses for the next eight years and four months.
The sale by Aviva reverses a move last year by the company to absorb about 5,000 staff from Indian contractors and rely more on its Indian subsidiary to deliver back-office services to the company.
Aviva thought it would save money and have better control over operations by having its own subsidiary in India, said Sudin Apte, senior analyst at Forrester Research.
Contractors are, however, better able to hire and retain staff than subsidiaries, benefit from economies of scale and spread costs over a number of customers, according to Apte.
Some contractors have now set up practices with industry-specific expertise and intellectual property that can be leveraged across many clients, he added. Forrester said last year that it is cheaper for multinational companies to turn over software development or business processes to an outsourcer in comparison to setting up a subsidiary in India.
The Aviva sale of its Indian subsidiary to WNS is in line with moves by other multinational companies like British Airways and GE Capital, which spun off their Indian back-office subsidiaries.
This makes sense as service providers in the country become more mature and the need for direct control over the operations is reduced, said Siddharth Pai, a partner at outsourcing consultancy firm Technology Partners International.
Private-equity firms and other investors are also showing interest in the BPO sector, presenting an opportunity for multinational companies to monetise their investments in back-office subsidiaries, while still getting the same quality of service from third-party providers, Pai added.Related stories: