Mid-size IT solutions firm Mastek Ltd is in the process of closing down its business process outsourcing practice.
In the last two years, the city-based company had stopped pitching in for renewal of back office contracts and has significantly reduced the number of people in its BPO-specific team.
Process outsourcing does not fit into Mastek's business model of driving non-linear growth (by increasing revenue realised per employee), Mr R.S. Desikan, Group Chief Financial Officer, told Business Line.
"Though our BPO practice is not loss making at all, it is derogatory to our margins. It does not give us the scope to increase average revenues per employee to the level we want to take it to," said Mr Desikan.
Mastek operates on operating margins of 15.94 per cent, according to Google Finance. According to technology analysts, margins in the BPO industry are in the 10 to 12 per cent range. For the fiscal ended March 2008, Mastek generated Rs 916 crore in revenues with around 4,000 employees.
Mastek will be completely out of the BPO business by the end of the current fiscal. "One client has asked us to carry operations for another 3 to 4 months till they transition it another vendor," said Mr Desikan
