Industry news

Wipro recognized as a winner of the Global, Asian and Indian MAKE (Most Admired Knowledge Enterprise) Awards for 2013.

This is the ninth time Wipro has been recognized as a leading Indian organization.

The MAKE Awards are administered by Teleos, an independent research firm based in the United Kingdom. A panel of Global Fortune 500 senior executives and leading experts selected the winners, in each category.

Rory Chase, Managing Director of Teleos said: “Wipro Limited consistently ranks in the top tier of global knowledge-driven companies. The firm excels at managing its intellectual capital - especially human capital - and is noted for its intense customer focus. Wipro is using its entire enterprise knowledge to gain the competitive edge."

Indian IT market expands off exports

New research has placed the UK as one of the world’s leading user of multi-sourced outsourcing contracts, adopting the outsourcing approach at nearly four times the rate than the US.

The research by the Information Services Group (ISG) found that nearly 44 per cent of all outsourced functions in the UK are divided between at least five service providers, compared with 36 per cent of outsourced contracts in Australia and New Zealand, while in the US only 12 per cent of contracts were found to involve five or more providers.

The research revealed that only 6 per cent of UK based outsourcing contracts were solely single source.

While the UK’s uptake of multi-sourced outsourcing outperformed uptake in the US and the two pacific countries, European countries including Spain, Portugal and Italy were also found to be stong advocates, with multi-sourcing appearing in 56 per cent of outsourced contracts, multi-sourcing was also found to be employed within 65 per cent of all outsourced contracts in Nordic counties.

President of ISG North Europe, John Keppel, said: “More mature markets, like the US, have previously embraced multi-sourcing but realized it can be difficult to manage the numerous supplier relationships and have swung back towards a model with fewer providers. However, the UK is still clearly in the honeymoon phase and is employing more sophisticated management models, such as the Service Integration and Management (SIAM) method to maximize efficiency.”

ISG outsourcing index sees outsourcing contract value soar by 89%

UK public sector outsourcing slows

BAE Systems shares have fallen by 9 per cent after the defence giant recorded a net profit drop of 82 per cent.

The company recorded profit after tax of £176 million over 2013, compared to £948 million the year previously following western defence cuts, with business particularly affected in the U.S.

BAE said: "As certain areas of spending were protected from these reductions, such as military personnel accounts, the budgets funding much of the US defence industrial base are likely to be disproportionately impacted”.

BAE warned that it expected further profit drops for it pre-tax earnings in 2014 of around 7.5 per cent.

The profit fall comes despite a major deal with Saudi Arabia for Typhoon aircraft valued at £18.18 billion.

BAE awarded $7 million contract as it moves to consolidate systems

BAE secures $780 million U.S. Army contract

BAE pointed to the continuation of “challenging market conditions” from reduced government spending and increased financing costs.

Only 10 per cent of SMEs have optimised websites for mobile usage according to a new survey, with £77 billion being lost in annual revenue from a failure to upgrade website infrastructure.

The survey carried out by Impact Research on the behalf of digital marketing firm hibu revealed that 45 per cent of the total 900 SME respondents do not have a website despite an understanding that such a capability had significant sales and growth potential.

The research concluded that: “the opportunity for SMEs and mobile is huge and we hope it will spur many into action. A simple change to their digital presence could unlock significant new revenue.”

Matt Anderson, chief digital officer at hibu, said: ““Local businesses need a site that renders well on phones and tablets, or they are missing out on dramatic growth because ‘on-the-go’ people around them can’t see their website well.”

Small businesses routinely paid late by large firms

Francis Maude announces SME purchasing plan

Although some may consider the business adage, “You can’t manage what you don’t measure,” a cliché, this doesn’t make it any less true. It is a lot more difficult to judge whether something has been a success or a failure when there are not clear benchmarks to judge against.

While many in the outsourcing world would think this has nothing to do with them, believing that everything is covered in the service level agreements (SLAs), this is not really the case. Our State of Relations in Outsourcing report exposed many gaps in reporting between outsourcers and their clients and the need to improve the management skills in outsourcing relationships.

As touched on in a previous blog the move towards service integration and management (SIAM) is throwing up new challenges for those managing outsourcing processes. While our research found 75 per cent of organisations manage the SIAM process internally, only 11 per cent feel extremely confident that their organisation has the skills to do so effectively. SIAM sees many different suppliers collaborating to deliver services to a client and effective dialogue with and between the suppliers is essential to success. Each must be familiar with the others’ commitments to ensure collaborative support is received.

As well as this, the management layer in SIAM needs to receive and consolidate timely information and to run an analysis against SLAs and key performance indicators (KPIs). They will need to compare performance levels and, crucially, understand the cause and impact of the diverse dependencies that now exist.

Our research also found that while cost-reduction was the most popular original business motivation for outsourcing (65 per cent), this doesn’t really paint the whole picture of what clients are looking for. When asked to identify which was the most critical task outsourcers were involved with in the organisation, cost-reduction was considered the most critical by only 17 per cent, with the most popular area being strategic alignment, on 26 per cent. It’s clear that clients are looking for more than a box ticking exercise; they want their supplier to really work with them to generate the best business outcomes. To get the most value from an outsourcing relationship they need to move beyond simply having clients on one side and suppliers on the other, and instead become a collaborative partnership.

To move to a collaborative partnership there needs to be an ability to deliver a transparent business 'flight deck' that becomes a single lens for everyone involved. This allows teams across on each side to review performance, understand the impact of transition and transformation and allow for effective communications that will support and encourage innovation to ensure all parties benefit from the relationship. Decision-makers both side of the fence having access to the same timely information will greatly improve the relationship and outcomes for both sides.

The move to multi-supplier delivery

If the game has changed, who you gonna call?

Sometimes, the need for up-scaling capacity is part of a long term strategy, the talk of the boardroom for years before the wheels of growth are set in motion. Other times, the need for extra capacity arrives suddenly, only half-expectedly, like bloated charcoal rainclouds or a thief in the night…

We’ll get onto how outsourcing can quickly solve the flooding insurance crisis in a moment. But a major problem with thieves in the night: all too often it’s the same bloke. A Google search for “reoffending rates” reveals, of the top four pages, three are news stories headlined thus:

Nov 2010: Guardian: Reoffending Rates Top 70% in some prisons

May 2012: BBC News: Reoffending Rates Reach Record Level

Jan 2013: Independent: Reoffending Rate Increases

Granted, that’s a very quick and dirty assessment, but it sure paints a sorry picture…no wonder the private sector has been drafted in to have a crack at re-aligning recidivists with the straight and narrow. Privatising probation services might not cut reoffending, but even flattening out the reoffending growth rate would help us rest easier in our beds, and adding capacity to ensure lags who served short sentences also take part in probation schemes is a good idea - those guys should be easier to reform, surely?

Of course, it’s a wider issue than the probation service can tackle alone. What happens in jail, in terms of education and reducing drug dependency and alcohol abuse is vital. Society’s acceptance of rehabilitated offenders needs considerable work too. But if any option is equipped to take an objective, proactive look into an underperforming system, improve accountability, collect the right data and find ways to improve skills and processes, it’s outsourcing. So hats off to the government for daring to explore other avenues towards righting a serious societal problem.

The other big problem at the moment where the government needs an outsourced helping hand is flooding. There needs to be serious infrastructure investment, because we are calamitously under prepared every time rivers swell up. And in the meantime, for all those people anxiously waiting on insurance claims, how about a bit of plug-and-play BPO support, to build capacity and broaden the bottlenecks?

Tell the insurance companies that Mr Cameron, when you sit down to critique their sluggishness in getting compensation to those in desperate need.

The third news item that screams “Outsourcing to the Rescue” is one from Australia, where Sensis, the company that produces the Yellow Pages, has shed 800 jobs as it restructures to be more suited to a digital world. Because capacity doesn’t just expand or recede - it morphs and shape-shifts to adapt to customer needs. And if business leaders are in fear of ‘doing a Woolworths’, their antiquated offering getting consigned to a bygone era, then rightsizing and skilling-up by offshoring work to The Philippines and India shouldn’t be seen 800 jobs gone, but 2000 Australian jobs saved. And with unemployment on the rise in Oz, daring decisions that protect jobs should be respected, not decried.

Moving with the times, rolling with the punches and finding innovative ways to satisfy your customers are often something an organisation doesn’t feel equipped to go it alone. At times like these, outsourcing can step in and be the hero.

The Business Processing Outsourcing (BPO) back office has been through significant changes in recent years, including the push and pull of offshoring and onshoring. As the UK economy enters a more positive growth phase, what’s next for the back office?

Business intelligence

Real time workforce management technology, which provides detailed business intelligence, is set to revolutionise the back office and the relationship between outsourcing providers and their clients.

Using workforce management technology that gathers data from the back office shows BPO companies precisely how many minutes each task takes to administrate and in turn, provides senior management with access to a bird’s-eye view of their business. This accurate and timely view of real cost-of-service provision is critical to an outsourcer maintaining profitability and knowing when not to take on new business at an unprofitable level.

In an industry with such tight profit margins, this is invaluable business intelligence that can help BPOs recognise which books of business are most profitable and which areas of the business are most efficient, therefore enabling them to better predict the performance of their business in the future.

A new way of working

Back office employees are working away, but does the operations director really know exactly where time is being spent? The right tools can show them where a special focus is needed to administrate certain products, to meet Service Level Agreements, and where additional skills are needed to deliver on a specific task, as well as who has the right training to complete these tasks to a high-level standard.

By distinguishing where each individual back office employee’s skills are being used, workforce management systems can allocate tasks automatically and identify from Quality Assurance systems where the correct level of training and development is necessary. This level of granularity can make the back office more productive and efficient, leading to a behavioural and cultural shift in the company so that administration agent and management time and investment is utilised in the most effective way possible. As an example, adopting this ‘factory floor’ approach to task allocation has led to a 15 per cent increase in the number of transactions processed per person at insurance outsourcer HCL IBS.

A linchpin for the whole business

Workforce management software has the power – both as a business intelligence tool for more accurate costing, and as an operational tool for more efficient processing – to improve productivity and spark a real cultural change in outsourcing organisations.

Having greater governance not only provides companies with real-time information about their business, but also enables a more cohesive, linear handling of work allocation, which will ultimately result in better return on investment (ROI). Workforce management acts as a linchpin between outsourcers’ front and back offices – both off and onshore – to provide better products and services for their clients.

Once again I shall be attending and chairing the next NOA Special Interest Group on Innovation. This time the event is being held on 6th March 2014 in London. The objective of the SIG is to bring together people from all three groups of NOA members – users of sourcing services, suppliers (or strategic partners as I like to think of us!) and third parties like advisers and legal firms – with a special interest in making innovation work in a collaborative sourcing environment.

In preparing for the session I have been reviewing the discussions we had last time. The focus from all three groups seemed to be on challenges positioning procurement functions to encourage and foster joint innovation rather than stifling it. So I hope we have some procurement professionals attend this time to defend themselves.

One of the things I have been personally thinking about recently are the three letter N’s in “innovation”. I think they stand for Nature, Nurture and Nourishment – specifically…

NATURE – The supplier needs to imbed an innovation culture into its client facing teams - including use of an entrepreneurial spirit at times – to understand that in addition to absolute focus on delivering the core service, they need to continually seek out ways to deliver service improvement for the client and pro-actively look for opportunities beyond the core service to drive wider value through innovation with the client. This is equally true for the client's team of course. And I see a growing number of forward thinking clients seek to develop an innovation culture in their own teams - and by extension into their suppliers.

NURTURE – Once an innovation opportunity is identified, the supplier needs to be able to call upon a range of mechanisms, capabilities and resources to develop and deliver the innovation for and/or with the client. One size does not fit all. There needs to be a level of agility to do things quickly and a level of empowerment to move forward or equally to be able agree with the client to stop before too much energy and resource is expended.

NOURISHMENT - Both supplier and client teams need to know that if they spot an innovation opportunity and develop a real business case with sponsorship, they will be supported in the delivery of it by their wider organizations. Joint innovation needs investment and funding models – and successful joint innovation needs joint rewards in terms of real business outcomes for the client. And – let’s be honest and not forget it - real incentives for the supplier

Thinking back to the procurement point above, I believe that procurement functions need to support and foster innovation. Perhaps this will again be the focus of the discussion in the coming SIG. It would be great if you can attend and let us know what you think.

Tony Morgan

NOA Advisory Council and Special Interest Group for Innovation

Chief Innovation Officer, IBM Strategic Outsourcing UK and Ireland

Wolverhampton council is hoping to achieve savings of £769,000 from its ICT budget, through the renegotiation of existing contracts and through reducing staff numbers.

The move is part on an ongoing strategy to achieve savings of £123 million over the next five years, in line with public sector cuts.

In total 20 ICT positions will go as part of cuts, as technological efficiencies are used to reduce the necessary manpower. The renegotiation of existing contracts in order to create savings is becoming an increasingly common practice for councils as they seek to cope with funding cuts.

Last week saw Birmingham City Council move to review its existing outsourced services contracts with Capita in order to identify savings and efficiencies.

Birmingham council carry out Capita contract review

Council procurement overhaul saves over £20 million

A new survey has revealed that businesses are failing to see signs of improvement in the commercial skills used in public procurement.

The survey of CBI members revealed that one in five respondents had seen deterioration in the commercial skills employed by public sector procurement sector, while 60 per cent of respondents said that they had not seen any overall signs of improvement in commercial skills.

The survey said that an inconsistency across government departments, a focus on selecting the lowest bidder and failures to plan for long term relationships in favour of short-term contracts also raised concerns for the surveyed businesses.

CBI’s head of public services, Jim Bligh, said: “The Crown Commercial Service must complete its radical overhaul of the process and tackle inconsistency and poor standards”.

A spokesperson from the Cabinet Office while detailing continued progress agreed “that more needs to be done."

Local authorities failing to collaborate on procurement

MPs criticise civil service