The Massachusetts-based company is paying $16 million cash for a 60% stake in BPO services provider Worldzen Holdings Ltd, which provides low-cost claims processing, data entry and billing services to clients in the US from centers in India.
The deal marks Keane Inc’s first foray into business process outsourcing. It is hoping to follow in the footsteps of IBM Global Services [IBM] and EDS Corp [EDS], which have both announced major contract wins in BPO this year – in their case in human resources outsourcing – despite having relatively little past experience in that area.
Illinois-based Worldzen claims to lower the cost of managing the back-office functions of healthcare and insurance companies by between 30% to 50% largely by using a low-cost workforce based at two centers in India.
It has a billing and collection facility in Gurgaon, and a healthcare and insurance processing center in Noida. Worldzen’s founders, Sandeep Bhargava and Karen Powell, were previously senior vice president and partner respectively within Keane’s consulting group.
Gartner Inc [ITb] estimates that global spending on business process outsourcing services will grow at a compound annual growth rate of 9.6% through 2007 when it will reach $173 billion. Of that figure, some $24.3 billion or 14% is expected to be delivered from an offshore location, a market that Gartner currently values at $1.3 billion.
Western services companies have come alive to this trend in 2003. Perot Systems Corp [PER] said it was paying up to $10 million to buy India-based Vision Healthcare and Vision Healthsource, which provides claims processing and call center services for 25 US-based clients.
London-based IT services firm LogicaCMG Plc [LOG.L]
launched an alliance with financial services processing outfit BACS aimed at providing the technology and services that underpin electronic payment transactions.
Keane Inc made a net profit margin of 2.7% in its third quarter ending September 30.
Worldzen’s services will be combined with Keane’s management consulting and process redesign practice.
Keane already uses an offshore delivery model for applications management and development services, and plans to expand its offshore development facilities by a further 500 people in 2003. The company acquired a presence in the market in February 2002 when it bought US-based Signaltree Solutions for $62 million, which had development centers in Delhi and Hyderabad.
Keane also announced results yesterday for its fiscal third quarter ending September 30. During the quarter, the company’s net profit grew 42% to $5.5 million on revenue that fell 6% to $213.4 million. Applications management and outsourcing services accounted for 69% of total sales during the quarter, and 74% of the company’s $191.4 million contract bookings.
This article was based on material originally published by ComputerWire.
