Having failed to generate enough revenue, IT solutions firm Mastek Ltd is closing down its business process outsourcing (BPO) practice according to published reports. The company had already begun the exit process and did not pitch for new business or renewal of BPO contracts for the past two years.

The firm has also significantly reduced the number of people in its BPO team. As on September 2008, it employed 20 people in its BPO team as against 142 people in the corresponding quarter two years ago. “Most of the employees of our BPO practice were absorbed into our internal operations. Several employees left on their own,” said RS Desikan, group CFO of Mastek.

Mastek had forayed into the BPO space in May 2003 in partnership with US-based Carreker Corporation.

According to Desikan, BPO did not fit into Mastek’s business model of driving non-linear growth by increasing revenue realised per employee. “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,” he added.

Mastek will completely exit the BPO business by the end of the current financial year. Mastek does back-office work related to cheque truncation and processing. The company’s earnings from its BPO operations have been coming down for several quarters now. According to details available on the company’s Web site, Mastek’s revenues from BPO (as on the quarter ended September 2008) was down by 35.7 per cent to Rs 3.63 crore as against Rs 5.65 crore reported for the corresponding quarter a year ago.