The rise of India continues apace as global IT services provider HCL Technologies, part of the $4.9 billion giant HCL Enterprise, has announced the acquisition of the UK's Liberata Financial Services (LFS) for an undisclosed sum.

The British BPO specialist provides end-to-end administrative and customer services for the life and pensions industry.

LFS' parent company Liberata Ltd. will now focus anew on its public-sector business, where demand for its services is strong and growing, as pressures intensify to cut costs.

Fulfilling predictions from sourcingfocus.com and other industry commentators that the strength of Indian outsourcing would inevitably mean acquisitions in the UK and Europe during the downturn, HCL will acquire four delivery centres in the UK, together with 800 staff who come to HCL with both domain knowledge and technical expertise.

Acknowledging the significance of the deal, Ovum analyst Peter Clarke said: “The logic of the deal is clear. HCL Technologies has the capacity to take forward Liberata's financial services platform, using it to develop its LP&I business.

“Liberata has done well to win business in this space but has constantly faced questions from clients about its ability to sustain its interest in the long term, given its relatively small scale in this highly competitive market.”

HCL’s insurance practice will be strengthened by LFS’s core capability to manage complex transactions, as well as a number of multiyear contracts with its customers which include blue-chip names.

Ranjit Narasimhan, president and CEO of HCL BPO, said: “This strategic acquisition of LFS enhances HCL’s ability to become an end-to-end provider of business process outsourcing services in the financial services space.

“This acquisition will equip HCL with a ready capability across the value chain by providing access to an existing revenue stream of policy management, actuarial and analytics catapulting HCL to become a leading service provider in the UK market for the life and pensions industry.”

It may also, of course, give HCL some leverage with a UK parent business that has embedded connections with many local authorities – as well as the obvious long-term revenue streams from within the more stable end of the financial services market.

For Liberata Ltd, the deal offers some relief from the private sector uncertainties of the Western money markets, while also allowing it to focus on public-sector deals where both local and central government make promising medium-term customers.

Robert Gogel, CEO of LFS' parent Liberata Ltd, confirmed this view, saying: "We are pleased to have found an appropriate buyer for this business, thereby assuring its long-term future development. We have made significant investments in people, platform and service line development which has allowed our clients to benefit from high levels of service excellence.”

Of Liberata's plans for a stronger focus on the public sector, Ovum analyst Peter Clarke said: “Liberata has clearly convinced its private equity parent General Atlantic that this is sound logic.

"Its recent wins at the Local Government Association [the body representing all local authorities in the UK], where Liberata now runs the LGA's whole back office, and at Rushcliffe and Charnwood District Councils, where it won preferred supplier status for a revenues and benefits shared services contract against old rivals Capita, clearly strengthen this argument.

“Liberata recently demonstrated its long-term intentions in the public sector by becoming a Gold Partner with SOLACE, the Society of Local Government Chief Executives.

“If the FSA approves [the HCL] deal, it looks like a win for all concerned and sends some important signals to the market.”

Although LFS' new owner HCL has built a thirty-year business from private-sector areas such as retail, telecoms, and media – along with financial services, of course – the public sector might be a logical next step for it too as it seeks to build a long-term outsourcing base in the UK.

But for now, there is money to be made in the downturn for ambitious Indian outsourcers.