Industry news

Following David Cameron’s announcement that Britain’s referendum on EU membership will be held on 23rd June 2016, the National Outsourcing Association’s chief executive has come out in favour of the nation remaining part of a reformed European Union.

Kerry Hallard, CEO of the NOA, stated: “This isn’t the hokey kokey with an ‘in, out, in, out’ option. If we vote Out, we’re out for the long term, and there will be repercussions for British businesses and likely the country as a whole – though none of us really know the extent – there’s been no dress rehearsals!”

Having said this, Ms Hallard went on to emphasise that the current state of affairs in the EU is far from ideal from a British perspective: “We’re for keeping Britain in a reformed EU, where we can continue to have influence and be seen globally as a key player – exiting would certainly diminish Britain’s appeal on this global stage.

“The outsourcing industry is a significant growth industry for the UK (currently the UK’s second largest employer) and one where we have every chance of taking a global leadership position. Exiting the EU would significantly diminish our role within the very important global business services industry, having negative ramifications on the UK’s financial, legal and consultancy markets, among others. We are however pleased that the referendum is happening so quickly – we need to get through this period of uncertainty as quickly as possible.”

There’s growing concern in the global outsourcing community about the ramifications “Brexit” would hold for Britain as an outsourcing destination. However, those backing the Out campaign have countered that EU policies currently restrict Britain’s trading relationships with countries outside of the Union - such as China and the United States - and argue that leaving the EU would eventually allow Britain to strengthen those ties.

Kerry Hallard weighed in on this: “Last week I was in India and had many conversations on this subject with key Indian players. Their expectation for the UK to stay in the EU was clear.

“There was however another key issue discussed and this was the potential impending caps on migration for Indian workers coming into the UK. It is wrong that the UK is restricting access to the skilled labour we so desperately need access to in order to grow, because we have no control over the mass unskilled migration we are suffering. Cameron needs to develop a better work around on this issue rather the knee-jerk reaction that is currently proposed.”

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Related: NOA implores government to stop hindering UK outsourcing and start helping

According to Emolument’s research published this morning, the UK’s financial sector depends heavily on graduates from abroad to fill certain skills gaps.

Emolument’s research discovered foreign universities source 28 per cent of the current graduates who have been working in finance for less than four years. For data analysis, IT and compliance workers, the proportion of foreign graduates is 18 per cent, 17 per cent and 20 per cent respectively.

The research revealed firms are willing to pay more to source talent from abroad – foreign graduates are making 30 per cent more than their British peers. However, this is related to the fact that the vast majority of foreign graduates work in London – where wages tend to be higher.

Emolument’s research also found that 18 per cent of British graduates go to work abroad.

The UK is seen by many European graduates as the ideal location to kick off their financial careers. Such a flexible market with vibrant technological and entrepreneurial sectors, paired with strong fiscal incentives, makes London the ideal city of opportunity for most.

“Where else can a History degree land you in a finance job?”, said Emolument co-founder and chief operating officer Alice Leguay. “UK employers are keen to bring in highly skilled graduates as they struggle to find appropriately qualified staff in the UK.”

Robert Half, a City recruiter, found that 99 per cent of London finance executive recruiters find it extremely hard to locate the right quality of finance professionals.

In addition, the Society of Motors Manufacturers and Traders and the Royal Institute of Chartered Surveyors have also suggested that a skills shortage might mean a new threat to the car manufacturing and construction sectors, respectively.

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Related: IT talent shortage

Serco has entered the bidding process for an Australian government contract worth £1bn. The contract, scheduled to lasts five years, would see the outsourcing giant run two offshore immigration centres on Manus Island and Nauru from April 2017 onwards.

The deal would be a boost to Serco’s financial position and reputation. The company was hit hard by a series of botched contracts within the last three years. Most prominently, Serco was accused by the Serious Fraud Office of overcharging for the electronic tagging of prisoners on behalf of the UK government.

The outsourcing giant joins Broadspectrum in bidding for the contract - the current provider of offshore prison services at Manus Island and Nauru. It has just seen its contract renewed until March 2017 while the Australian government reviews the scope of the tender.

Serco already has a lengthy relationship with the Australian government; over the years Serco has become one of its best clients. The company runs 11 onshore detention facilities for the public authority, as well as another on Christmas Island for the Canberra government.

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Related: Serco presses on with strategic realignment towards the public sector

Accenture has signed a six-year contract to provide back office services for British insurer RSA, just a week after securing a seven-year deal with Wipro.

The global professional services company will handle development, implementation and ongoing maintenance services for RSA IT applications, and manage Wipro’s IT infrastructure across Europe.

According to ISG, the average value of an outsourcing contract across the global industry has dropped by 20 per cent since 2012 and currently stands at 3.5 years. This trend is expected to continue as outsourcing buyers seek more flexibility in a business world where advances in technology are coming thick and fast. Both of Accenture’s new contracts are significantly longer than this average, making these significant long term deals for the company.

RSA’s COO for the UK has gone on record saying the insurer was pleased to sign the new contract after Accenture delivered “significant cost reductions” and “enhanced operations” for them in other areas.

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Related: Surprise as Cognizant tops list of IT leaders

The BPO business analytics market report provided by market research company Technavio has found that the global BPO business analytics market will grow in size by 37 per cent over the next four years, and exceed $22 billion in value by the year 2020.

The report claims this makes BPO analytics one of the fastest growing markets in the BPO industry. These findings are backed up by the National Outsourcing Association’s Outsourcing in 2020 research, which found that the popularity of data analytics in outsourcing will increase massively over the coming years.

Amit Sharma, lead research analyst at Technavio, commented: “Business analytics BPO services help organisations leverage data assets, and improve their key profit and loss drivers such as reduced cost, increased revenue, optimised supply chain, improved return on investment. They can also manage risk and ensure regulatory compliance.”

Read Technavio’s summary of the report.

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Related: Big data expert claims death of IT outsourcing is imminent

The IAOP has published its “Global Outsourcing 100” for 2016, a list of what the organisation considers to be the world’s 100 best outsourcing service providers, accompanied by the best 20 outsourcing advisors for this year.

Plenty of familiar names made the top 100 including Accenture, CGI, Firstsource, Intetics and Teleperformance. Notable names left out included Capgemini, G4S and Serco. Deloitte, EY and KPMG all featured in the top 20 advisories list.

Debi Hamill, CEO of IAOP, commented: “Choosing the right partners is more important than ever. Companies that outsource, not only in the traditional sense but also through the wide array of the ever-changing collaborative business models, are scrutinising their providers very closely."

Access the full list.

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Related: Surprise as Cognizant tops list of IT leaders

Transport for London (TfL) CIO Steve Townsend has condoned the SIAM tower model approach to outsourcing and claimed that it works well for TfL, in an interview with Computing published yesterday.

However, Townsend added that plenty of organisations have struggled with tower-based strategies – particularly those within the government – often because they’ve “chosen to totally insource their towers” or have “gone fully outsourced with an integration services third party in charge of delivering technical services”.

Tower-based outsourcing involves the use of multiple service providers for the delivery of various functions, such as finance and accounts or customer service, where each function constitutes a tower, and each service provider is responsible for a separate tower.

Townsend attributed TfL’s own success with tower-based outsourcing to its step-by-step approach and its focus on “how services should be delivered back to the organisation to solve problems”.

Computing also highlighted the confusion surrounding the government’s current policy on using the tower model: the Department of Work and Pensions plans to abandon this approach altogether, while the Ministry of Justice appears to still have plans to transition to this model. Last year deputy director of Government Digital Services Alex Holmes slammed tower-based outsourcing claiming it “combines outsourcing with multi-sourcing but loses the benefits of either”.

High profile industry advisors, such as KPMG, have predicted the end of tower-based strategies over the next few years as many contracts come up for renewal and clients choose transition to as-a-service operations.

Are you involved with public sector outsourcing? The NOA's Public Sector conference in April will showcase how outsourcing and new technology can be used to delivery "more for less" in the public sector in the face of government cuts. Find out more.

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Related: TfL appoints Sopra Steria, Capita and Deloitte for IT solutions framework

Wipro has signed a definitive agreement to acquire HealthPlan Services for $460 million, in a bid to expand its offering to the US health insurance market.

Healthplan Services currently boasts 2,000 employed associates, market-leading technology platforms and a fully integrated business-process-as-a-service (BPaaS) solution, used to service buyers of outsourcing in individual, group and ancillary markets.

The introduction of Obamacare has dramatically altered the health insurance industry in the US – a market that is already responsible for 90 per cent of all healthcare-related contracts. ITO firms operating in the US are anticipating an increase in the amount of business available, due to states needing to upgrade their healthcare programmes.

Wipro’s latest acquisition expands their offering in this area, and will provide the company with a more “customer-centric” operating model.

Jeffery Heenan Jalil, senior vice president and head of healthcare life sciences at Wipro, commented:

“The partnership with HealthPlan Services positions Wipro to participate in the shift of the US health insurance industry towards a consumer-centric business model. HealthPlan Services strengthens Wipro’s position in the health insurance exchange market while offering synergies with Wipro’s presence in the managed Medicare and commercial group insurance markets.

“The addition of HealthPlan Services’ capabilities complements Wipro’s strengths in claims processing and back office services. This is a strategic move for us, as it advances Wipro’s vision of leveraging unique insights into customer buying behavior and applying this across the healthcare value chain. This will help us lower the cost of healthcare and transform the quality of the member experience.”

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Related: Cognizant gains more new business in 2015 than Wipro, TCS and Infosys combined

This week, Everest Group published its latest ranking of top IT service providers. Contrary to what might have been expected, IT powerhouses such as IBM and HP did not top the list. Instead, New Jersey-based Cognizant took the crown followed by Accenture and, coming in third place, IBM.

In the ranking, companies are evaluated on 26 different categories such as key business lines, geographies and technology. For each of the 26, Everest Group ranks service providers on a scale from aspirants to leaders. These individual category scores are then weighted and consolidated into an overall score.

The Group’s practice director declared that the results came as something of a surprise to Everest. According to Abhishek Singh, the consultancy had believed Accenture to be 2015’s IT leader followed by IBM at number two.

“But as we began to consolidate and analyse the data, it was clear that Cognizant had upped their game by way of year-on-year growth. That’s what landed them on top. Cognizant had a star performer rating in five areas,” Mr Singh revealed.

Top 10 IT Service Providers of the Year

1. Cognizant

2. Accenture

3. IBM

4. TCS

5. Wipro

6. HCL

7. Dell

8. Infosys

9. Capgemini (& IGATE)

10. CSC

This year, Everest changed its scoring methodology to increase the emphasis placed on innovation, intellectual property and emerging technology capabilities.

The ranking also relies on market success measures such as revenue growth, deals won and renewed, and margins generated.

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Related: Cognizant gains more new business in 2015 than Wipro, TCS and Infosys combined

The purpose of global trade management (GTM) is to manage the entire supply chain, from procurement and product development to distribution, efficiently and in compliance with all relevant rules and regulations. This includes all tasks for planning and controlling as well as trade relations.

AEB’s Global Trade Management Agenda is an annual study in partnership with the DHBW University in Stuttgart, Germany, that identifies key challenges in the year ahead. The 2016 study features responses from over 300 supply chain management experts in companies of various sizes and across a range of industry sectors – mainly based in the United Kingdom, Germany, Austria, Ireland, Singapore and Switzerland. The objective of the online survey was to find out which tasks companies that engage in international business consider of particular importance for 2016.

The main challenge identified for 2016 is reducing time to delivery and overall lead times. Of those surveyed, three-quarters are currently focusing on this, and 27% consider it a “very important issue”. The trendsetters are business-to-consumer (B2C) ecommerce businesses, which dominate not only development but also media coverage by offering same day delivery, drone delivery, as well as anticipatory shipping. These developments in the B2C sector also raise business customers’ expectations.

Another challenge identified by this years’ survey was ‘complying with embargo requirements’, which 60% of participants consider either “important” or “very important”. “Ensuring legal protection” is still regarded with the same importance as in last year’s survey (66.5%), but has been overtaken by other challenges such as “recruiting and training employees” and “implementing changes to customs laws”. Dr. Ulrich Lison, a global trade expert at AEB and one of the authors of the study, explains:

“The increasing professionalisation in the business of global trade has led to a shortage of personnel. Plus, the impact of the Union Customs Code, which takes effect on 1st May 2016, can already be felt, as businesses are expecting a few changes and know they’ll have to make preparations.”

In addition to assessing the key challenges for the year ahead, the study also explores how well businesses are equipped to face them. While the majority of respondents think they are well prepared, over one-third see potential for reducing lead times and time to delivery in their businesses. Only 3.1% concede “major shortcomings” in this area.

Most respondents also have a good idea of how to manage risks in their supply chains. Changes to customs laws don’t seem to be a problem – over three-quarters of those surveyed consider themselves as efficient or very efficient on this front.

However, when it comes to personnel management, over half of businesses see a need for action, and 8.6% admit to ‘major shortcomings’ in this area. Compared with last year’s survey, this issue has gained importance and occupies fourth spot among the greatest challenges for 2016.

More findings are available in the full Global Trade Management Agenda 2016. It is available at www.aeb.com/gtm-survey.

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