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Aviva may not absorb vendors' operations

BS Reporter in Mumbai | July 10, 2008 10:15 IST

Aviva [Get Quote], the UK-based insurer may drop plans of absorbing the outsourcing operations from its existing vendors, including WNS Global Services, EXL Services and 24x7 Services, sources who declined to be identified said. The outsourcing deal is valued at $1 billion over a 10-year period.

Aviva's BPO operations are run by Aviva Global Services on a built-operate-transfer (BOT) basis and managed by WNS Global, EXL and 24x7 Services. The insurer had plans to absorb these operations over a period of time.

"We have been reviewing our offshore operations and that review is now coming to a close. We expect to announce our decision shortly and will let you know as soon as we have further information," an Aviva Global Services (AGS) spokesperson said. The executives of WNS and EXL Services declined to comment on the matter.

WNS had earlier said that it would exercise the call option given by Aviva Global Services to extend the date for transfer of the project and operations of its Pune facility to Aviva from January 1, 2008 to April 1, 2008. The call option notice period was reduced from three months to a month.

If the call option was exercised on April 1, 2008, WNS would have to transfer the Pune facility to Aviva on May 1, 2008. The company has not been asked to exercise the call option.

AGS has a total headcount of over 6,000 people, with operations spread across Bangalore, Chennai, Pune, Noida and Colombo.

In 2007, Aviva had taken over 1,600 employees from 24x7 and 300 people from WNS in Colombo under a BOT arrangement, but delayed other contracts after deciding to sell its offshore arm, AGS.

Analysts and bankers are of the opinion that in the current scenario, it makes sense to keep operations with the existing vendors.

"It will be a huge challenge for the vendor and AGS to integrate the operations. Besides, there is pressure from Aviva's operational groups not to transfer from existing players," said Avinash Vashishta, CEO and MD Tholons Advisory.

"The valuations being sought by most of these companies are high and not feasible in the current market scenario. That is one of the reasons for Aviva to continue with the current set of vendors," said a investment banker.

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