Outsourcing Industry to Feel Multinational Firms Belt-Tightening
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The U.S. financial environment still appears to be bleak especially with more sectors coming out in need of bailout. From the banking sector, the world has now witnessed it spread to other industries. Those remaining companies which are merely surviving or will be receiving government aid will naturally restructure themselves to be leaner by selling off their non-core businesses, shutting down non-profitable divisions or transferring operations elsewhere to lower costs. The latter is seen as a good business opportunity for the Philippines to boost its outsourcing industry.
Previously, we have tackled how the outsourcing industry has profited from the banking sector belt-tightening such is the case of Tata Consultancy Services acquiring Citigroup Global Services and signing a $2.5 billion outsourcing contract last month. The Philippine outsourcing sector was also very positive that with JPMorgan Chase & Co.’s acquisition of Washington Mutual Inc. in September, the acquirer would “soon aggressively offshore more back office jobs to the Philippines”.
However, tides seemed to have changed. In a report yesterday from Forbes, it said that Citigroup Chief Executive Vikram Pandit announced in a company town hall meeting in New York that Citigroup Inc. is laying off approximately 53,000 employees in the coming quarters. Together with that, the major bank will be cutting down its expenses by 19 percent in 2009 to $50 billion. The job cut will be worldwide but will be heavily concentrated in New York and London.
Despite the layoff being centered in New York and London, the Philippines might also be affected by this. According to the Philippine Inquirer, Citi spokesperson Richard Tesvich said that the Asia-Pacific will also be able to feel the effects of the global job cut, although he made an assurance that Citigroup remains committed to recruit selectively in the region. Citigroup had a total of 375,000 global workforce since last year and the giant firm expects to bring it down to 300,000 by next year. Citigroup has a very strong presence in the Philippines, being the largest foreign bank in the country and employing over 4,200 staff which gives the country enough reason to feel worried about Citigroup’s planned job cuts.
Also this month, another multinational firm is tightening its belt which can affect the Philippine outsourcing industry. An article from Yugatech said that Accenture has been implementing cost cutting procedures by cutting down on security costs by 50 percent, cancelling and postponing out of the country assignments, stopping free supply of juice and iced tea, and letting go of probationary employees. Accenture operates 8 offices in Metro Manila and 1 in Cebu. According to Yugatech’s informant, new projects seem to come by slow for the Accenture Solutions Division although the Accenture BPO and Call Center Divisions remain strong. Furthermore the article also reported that Accenture Solutions Division’s competitor, “HeadStrong … [will also let go of some of its] consultants and developers starting this November”.
Still on the Information Technology sector, an article from Reuters wrote that Lawson Software Inc will be cutting 5 percent of its workforce which will cost the company $9 to $12 million in severance pay and other benefits, but will generate an annual savings of $40 to $50 million. The business software maker will be letting go off 200 employees and close one office facility. In 2006, Lawson opened Lawson Software’s Philippine Solutions and Services Center (PSSC) with 550 employees which expanded to 600 in 2007 servicing more than 4,000 Lawson customers in 40 countries worldwide. Our sources told us yesterday that 40 to 50 employees were already laid off in the Philippines.
Author: Chris V.
Tags: outsourcing economy, philippine outsourcing
November 25th, 2008 at 1:18 am
Outsourcing as a business model is not perfect, what human-made product is? Like anything, it is undergoing a process of change and growth propelled by external stimuli. Often enough the process is discomfiting, giving much confusiona and fears but when directed right, the process can result to better processes, better regulations and improved relations. This is reason enough to persist in outsourcing. When it can withstand these recent hurdles, it can withstand future ones.
November 29th, 2008 at 7:21 am
The other shoe dropped at Citigroup, and it was a big one. The banking giant said it is cutting another 52,000 jobs, on top of the roughly 23,000 in reductions made earlier this year. In a town hall meeting Monday with employees, however,
November 29th, 2008 at 8:00 am
Citigroup’s layoffs – part of a plan to cut about 53,000 jobs in coming quarters – represent the latest bad news to drop on the financial sector and the economy. The company also plans to cut expenses by 20%. (Read Citigroup’s
November 29th, 2008 at 9:30 am
NEW YORK (Dow Jones) — In the most dramatic round of layoffs seen to date in the battered U.S. financial sector, Citigroup Inc. said Monday that it plans to cut about 50,000 jobs, representing 20% of its global workforce, in an
November 29th, 2008 at 10:21 am
DUBAI, United Arab Emirates - Citigroup ’s chairman is hinting the banking giant will announce more job cuts Monday, and isn’t ruling out the possibility executives will follow peers at Goldman Sachs and forgo bonuses. Various reports
December 2nd, 2008 at 12:31 am
A key to progress ourselves out of this economic slump is to innovation, such as invent new technologies, processes and such. And outsourcing could lead to that, especially knowledge process outsourcing. Research and development requires a lot of work, tapping the world’s brightest and most industrious in human resources might achieve results faster and better.
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