Industry news

A US IT company has been fined for $3.1m after it was found to have illegally outsourced work for a government contact to an offshore company in India.

Focused Technologies, the IT company in question, outsourced a New York State Industries for the Disabled (NYSID) and New York State Division of Criminal Justice Services (DCJS) contract for the digitalisation and indexation of nearly 22 million fingerprint cards to an Indian sub-contractor based in Mumbai back in 2008.

The cards included personal data such as social security numbers, dates of birth and basic physical characteristics for 22 million people. Focused shared the information illegally with the Indian sub-contractor since the latter did not have permission to access the confidential data.

The state of New York requires companies dealing with confidential information to carry out their work inside the state. The information must also be handled by workers who have passed a criminal background check.

US authorities have stressed that the Indian sub-contractor was unaware of the illegal status of the deal.

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Everest Group has published its 2015 Market Vista report, an annual study which looks back at the major developments in the global services industry. Despite recent claims that the decline of offshoring is imminent, the report has found that more offshore delivery centres were set up in 2015 than in 2014, suggesting that “the sky is not falling on offshoring” as some experts claim.

The report reveals that the number of new offshore/nearshore delivery centres (including both global in-house centres (GICs) and those set up by service providers) increased by 32 per cent last year. Everest points to strong investment in areas such as talent maturity and business environment improvement, as well as to the growing adoption of global services by European buyers, as the main causes of the increase.

Unsurprisingly, India has retained its position as the number one offshore and GIC destination, while Romania, the Republic of Ireland and Singapore have seen the greatest increases in delivery centre setups.

The report also identifies locations to look out for in 2016. The UK is featured on the list as an attractive nearshoring destination for its high-quality customer support at competitive rates. China is also present - the forecasted depreciation of the Yuan is likely to have a positive impact on Chinese IT-BPS businesses in the coming year. Other countries expected to fare well in the coming year are India, Brazil, Colombia, the US and the CEE.

According to Everest, the nature of the global services industry is shifting, as the increasing maturity of the global sourcing market impacts on the overall popularity of outsourcing. The number of new outsourcing deals signed between 2013 and 2015 was down 12 per cent when compared to recent years. On the other hand, the proportion of medium-sized and small buyers in the industry has grown by seven per cent in the same period, as smaller companies outside the US increasingly adopt outsourcing as a business model.

Advances in technologies such as service delivery automation have come to disrupt the global services market by decreasing costs of delivery, and increasing quality and compliance through the elimination of the human element, leading to the emergence of new service providers and outsourcing relationships. Disruptive technologies have also contributed to the increase in GICs - new GIC setups and expansions grew by 50 per cent between 2013 and 2015.

Access the full report.

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Related: India, the world’s most attractive outsourcing destination of 2016

The Metropolitan Police has awarded Accenture with a new five-year contract to help increase the use of digital technologies.

The new contract – valued in £86m – includes the management of core information technology applications, the enhancing of core applications and the rationalisation of the application portfolio.

Chris Naylor, digital policing lead at Met Police, said: “The contract is part of the force’s integrated multi-supplier delivery model and would see Accenture deliver a more modern, flexible IT environment that would reduce costs and improve the level of technology available”.

The new deal is expected to create 60 new technology roles at Accenture’s base in Newcastle.

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Related: Accenture secures lengthy contracts with Wipro and RSA

IBM acquired Optevia, the customer relationship management (CRM) system provider, in an attempt to boost its position in the software-as-a-service (SaaS) and digital consultancy market.

Optevia is a part of the government’s G-Cloud, and has partnered with a wide range of public sector entities such as the UK emergency services, Central Government, Local Government and Social Enterprises.

The UK-based firm will become part of IBM Global Business Services. IBM is not the first big name attempting to break into the CRM market. Last year, Accenture bought Salesforce partner Tquila and Cloud Sherpas.

According to Emma McGuigan, UK and Ireland MD at Accenture Technology, “We have seen significant growth in SaaS as more companies adopt the cloud and digital strategies to collaborate better, drive greater operational efficiencies and accelerate the development of new products and services”.

A Gartner report from last year revealed that the global CRM market is worth close to $23bn. The five biggest players in the sector account for more than 50 per cent of the value. Unsurprisingly, Salesforce owns the biggest share.

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The National Association for Female Executives (NAFE) has named Accenture in this year’s list of “Top Companies for Executive Women”, the fifth time Accenture has appeared on the list.

The NAFE highlighted Accenture’s commitment to gender equality, its focus on women in leadership positions, and its initiatives to retain and promote female employees at all levels of the organisation.

Julie Sweet, Accenture’s CEO for North America, said: “Our commitment to inclusion and diversity starts at the top, and we believe strongly that gender equality is an essential element of an inclusive workplace… Accenture is honoured to be recognized for our efforts to develop and advance women.”

Accenture recently released its research report “Getting to Equal: How Digital is Helping Close the Gender Gap at Work”; it’s expected to be a key contribution as groups continue to strive for gender equality in the workplace.

In addition to this, Accenture offers many initiatives and programs to improve gender equality, such as increased parental leave benefits in the United States, which includes the extension of maternity leave to 16 weeks.

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Related: Outsourcing and the gender diversity issue

Despite its current economic struggle, the Chinese outsourcing industry has continued its growth in the early months of 2016.

“[This year] Chinese company-linked service outsourcing contracts raised 7.5 percent compared to last year,” said Shen Danyang, a spokesperson for the Ministry of Commerce (MOC).

“There was also a rising of 28.5 per cent – valued in $11.64 billion - of the offshore service outsourcing contracts in the first two months of this year compared to the last year,” he added.

The majority of the contracts – 51 per cent – were ITO-related. As the second largest service outsourcing provider in the world after India, the Chinese government has described outsourcing as the “new engine for tertiary industry and a boon to increasing employment”.

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Related:Chinese outsourcing sector booms in 2015 despite economic issues

IBM is still fighting hard to retain its $1-billion contract with Vodafone India, which is set to expire in the first week of June 2016.

Back in September 2015 Sourcingfocus reported that Vodafone was preparing to release an RFP for when the current contract expires – the Economic Times of India tipped Wipro, TCS, Infosys and Tech Mahindra as potential contenders.

A source close to the story has since commented: "Even if IBM does retain most of the contract, the renewed deal will come at the cost of margins. They are being forced to fight on price as well.” Another stated that the business Vodafone currently provides IBM with – roughly $200 million a year – is expected to be cut in half in the near future.

Vodafone and IBM have both declined to comment on the speculation.

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A government-commissioned report has backed Network Rail’s proposal to allow for more private investment in British railways.

The new investment plans would see the privatisation of 18 key train stations and power lines, and comes amid criticism of the publicly-owned Network Rail for overrunning costs on a £38.5bn, five-year investment programme.

Nicola Shaw, CEO of High Speed 1 and one of the authors of the report, declared there was “no silver bullet” for Britain’s railways, as the government continues its pursuit of austerity measures announced in yesterday’s budget.

Network Rail wants to devolve power to its nine regional route managers, a decision Ms Shaw supports. The regions should be “empowered to find local sources of funding and financing, including from those such as local businesses or housing developers, who stand to benefit from new or additional rail capacity”, she explained.

The new privatisation plans will mark the third radical overhaul of the British rail system.

Manuel Cortes, of the TSSA union, criticised the report stating that “selling stations is short-sighted as we are foregoing long-term future retail rental income for a quick buck. Selling-off Network Rail’s electric grid means we keep a railway without having control over its strategic power network. You wouldn’t run a child’s train set like that”.

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Related: Is the UK’s public sector outsourcing in decline?

Mitie’s earnings forecast has been lowered in advance of its year-end statement, scheduled for release 24th March 2016.

Jefferies, the investment banking firm, has justified their decision to cut Mitie’s earnings forecast by alluding to the fears of a Brexit and the wider economic outlook for the UK in the coming year.

“It is clear from recent recruiter/outsourcer results that decision-making has paused and project work won’t revive in the second half,” Jefferies declared. The earnings revision comes amid the denunciation of Mitie’s management of an immigration detention centre at Heathrow, which was deemed “insanitary” and “dirty”.

Mitie has also been heavily criticised for its management of elderly and disabled facilities, which inspection firms had assessed as substandard. Both incidents are expected to influence Mitie’s business, making it difficult for the outsourcer to increase the prices charged in future contracts.

Recent NOA research has found that 73% of the UK outsourcing industry wants Britain to remain part of a reformed EU.

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Maturity, the European IT benchmarking company, has published its yearly Strategic IT Agenda – a survey of European IT managers on the hottest topics in the industry.

Unsurprisingly, costs and security are still top concerns for IT managers around Europe. However, this time digitalisation – a new entry – managed to outdo both, appearing in the survey as the number one strategic priority for 2016.

Maturity introduced digital transformation to the survey for the first time this year in response to the growing buzz surrounding the subject in the financial media. IT security was the second-highest priority on the list. IT managers pointed to the growing importance of internet business models for businesses everywhere, as well a string of recent high profile incidents, as the reasons for the increased standing of company security issues. The past year saw an unprecedented number of cyber-attacks - both in terms of scope and scale – take place around the world, from the theft of customer data from Telecoms companies to attacks on banking systems; even the German parliament’s IT was subject to cyber-attack.

Costs dropped to third place on the list of concerns, falling in importance for the third year running. However, the report did highlight that the minimisation of resources is still very much at the heart of company strategies around Europe where the motto “do more with less” still heavily applies.

Maturity also points to a trend of the last few years which has seen “classic” topics (such as optimisation) lose standing in relation to recent entrants such as IT sourcing strategy, which increased in importance by 10 per cent within the last two years. Budgetary concerns are still the main driver for action in IT, followed by business innovation.

According to the survey, outsourcing in IT seems to have come to a standstill over the last year and is expected to continue to stagnate throughout 2016 - more than half of the companies surveyed have no plans to increase the weight of outsourcing in the business, stating that the relative amount of work done in-house will stay the same.

The report mentions both the increasing professionalisation of internal IT personnel and the expansion of cloud usage as the two main factors driving increased user operation of infrastructure as opposed to contracting out of operations.

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