Indian IT companies have struggled to grow banking and financial services revenue, their largest source of business, as their clients have increasingly insourced technology functions. UBS, in particular, has withdrawn contracts from its Indian IT providers such as Cognizant.
Citicorp Services India reported revenue of Rs 3,227 crore in FY18, up 22% a year ago. Headcount has also risen. “The company staff strength increased by 18% i.e. from 8,773 employees as on March 31, 2017 to 10,328 as on March 31, 2018 and is likely to cross 12,000 by end of 2018,” Citicorp said in its annual filing with the registrar of companies.
Goldman Sachs Services saw total revenue rise 20% to Rs 2,963 crore. Wells Fargo EGS India reported a nearly 28% increase in revenue from operations to Rs 2,744 crore.
BA Continuum India, Bank of America’s tech arm, reported a near 15% increase in revenue to Rs 3,651 crore from operations. Morgan Stanley Advantage Services reported an over 17% jump in revenue and other income to 1,729 crore in FY18.
Even European banks such as Barclays and Societe Generale reported a12% and 23% jump in revenue at their India technology arms, respectively. Barclays said it was changing how it manages its headcount. “We are in process of changing our workforce mix as the larger portion will be internal resources,” Barclays Global Service Centre said in its annual filing. As of May 2018, the bank had over 28,000 employees, over 15,500 of whom were internal resources.
IT companies, who either lose current business or the ability to gain more business as customers move work in-house, point out that the creation of global in-house centres tend to follow a cycle, where companies invest and then sell off these centres to third-party providers, During the financial crisis, Citi sold its captive to TCS, while UBS sold its captive to Cognizant.
The rise of digital offering has made technology core to financial firms and companies are focused on building that ability for themselves.
“We are looking for talent in data science and artificial intelligence. We are also keen to attract mathematicians for our risk functions. The talent we are targeting to bring in-house will provide a strategic differentiation for us,” Harald Egger, country head for India at UBS, had told ET in October. He said the company would continue to work with thirdparty providers. UBS’ headcount in India doubled from 750 to 1,500 in 2017; and then doubled again crossing 3,000 full-time employees in September 2018. The company, whose revenue grew 63% to Rs 1,443 crore, began its insourcing push in 2016.
IT experts say a talent crunch and the need to scale up quickly means financial services companies will work with third-party providers even as they scale captives. “Mostly this is a story of lots more of everything in the face of a huge demand to transform,” Peter Bendor Samuel, CEO of IT consultancy Everest Research, said.