Industry news

A MPs’ transport committee pointed to the Department for Transport and the civil service for a catalogue of “major failures” and “irresponsible decisions”.

The failure has been estimated to have cost taxpayers around £50 million with no outcome. The West Coast procurement failure and findings of the committee are embarrassing to the government at a time when the public sector is trying to develop internal procurement capabilities and in turn publicly criticises the private sector for lesser failings.

Louise Ellman, chairwoman of the committee, said: “This episode revealed substantial problems of governance, assurance, policy and resources inside the Department for Transport”, adding “This was compounded by major failures by civil servants, some of whom misled ministers."

Shares have fallen by 4 percent at AstraZeneca after the drug giant posted a fall in sales.

Sales dropped in the last three months by 16 percent from a combination of expired drug patents, few new drug releases and rising operating costs.

"Our performance in 2012 reflects a period of significant patent expiry and tough market conditions globally", said CEO, Pascal Soriot said in a statement.

The company has predicted that 2013 will see reduced earnings as operating costs are predicted to continue to rise.

Businesses including BT, Capgemini, Cisco, HP, John Lewis, the Metropolitan Police, Microsoft, Morrisons, O2, Royal Mail and UBS have joined together under the title of the Tech Skills Partnership to bid for public skills funding.

The creation of the partnership, with the backing of the UK’s skills council, is seeking to gain funding from a pot of £340 million, from the Employer Ownership of Skills Pilot.

The funding is designed to promote industry skills and develop economic growth with industry support. Previous examples of industry support can be seen in the expertise that the ICT industry brought to the creation of the UK’s new ICT curriculum.

IBM is seeking to differentiate their offering from Amazon by providing a high-end premium service aimed at enterprise level rather than the self-service Amazon cloud.

IBM faces the obstacle of remote cloud uncertainty at enterprise level and reversing the appeal of hosting vital applications in-house, compared to the attractiveness of AWS to SMEs.

The new service will provide greater support, cloud management tools and sets itself apart from its competitors by offering software support. In a press release IBM said: “Many organisations eager for the economic advantages of cloud computing hesitate to run critical applications on the cloud.”

IBM has also moved to expand the clouds global availability, with the service now in countries including China, Australia and Brazil.

Every time we sit with clients and South Africa is mentioned, our eyes light up. Having worked there, we find it difficult to understand why the country so rarely makes it onto their short list of preferred sourcing destinations, especially as the advantages of established locations begin to wane.

South Africa has a welcoming, service-orientated culture, good infrastructure, decent European language skills and a strong pipeline of graduates, school leavers and other qualified staff. It’s in the same time zone as mainland Europe and, compared to established European locations, is cost competitive. So why is the country falling behind in the race to become a leading outsourcing destination?

The devil as always is in the detail. In this case, it lies in fear of the unknown and uncertainty, both of which cloud the lens through which businesses assess the country’s credentials.

Many studies point to crime as the major roadblock. It’s true that the crime rate is high but, equally, press coverage of this problem is sometimes exaggerated. However, add recent political uncertainty and strikes to the mix and the picture starts looking bleak to the uninitiated.

Getting access to the right range of skills also throws up another challenge. While the country enjoys a decent skill base at junior levels and attrition is relatively low, a lot more needs to be done to develop the middle-management skills so crucial to running a sustainable operation.

High unemployment means the government is understandably wary of opening up its labour market to foreign nationals but foreign investment that creates local jobs is another matter, surely? Sectors such as IT that require strong technical and managerial skills, and have the capability to generate high levels of employment for locals in the long run, need to be treated differently. Our view is that the government must design its policies around the needs of the sourcing sector, review its work permits processes and timelines, and relax norms to make it easier for companies to set up and operate out of the country.

So where does this leave your business?

The African story is certainly taking shape – and South Africa is a gateway to doing business in the African continent. The country’s economy is growing, attracting investment from both the East and the West, and has been showing the way to other African countries.

If Africa features in your business plans, then it is certainly time to consider South Africa as a potential sourcing destination. If you are a service provider keen to hedge your bets, then South Africa is certainly worth looking at. And if you are an end user and already have a presence in South Africa, the captive sourcing opportunity is worth exploring.

However, if the African continent doesn’t feature in your company strategy, then South Africa has some more work to do before it emerges as a true contender. It cannot compete effectively on junior-level skills and infrastructure alone.

Nobody can deny one thing though. It’s just about time for Africa. Oh – and did we mention the fantastic weather?

Much has been written in recent years on the subject of a shortfall in the availability of skilled IT professionals to meet increasing demands. While it may be the case, I would argue that the real problem is not a lack of available talent but a poor and ineffective use of IT skills across the majority of IT departments.

To reinforce that opinion, IPsoft recently conducted some research amongst UK IT decision makers which identified a worrying trend. It seems that in many cases IT professionals are spending almost a third of their time on low level IT tasks for which they are over-qualified, and which could be far more effectively managed. The research recognised clear neglect of critical, often expensively-gained, skills and expertise, with those surveyed admitting that on a regular basis their staff only use about half (47%) of their applicable qualifications. With overqualified staff delivering simple, often mundane tasks, valuable skills are quickly lost through underuse, motivation levels drop rapidly, and the potential for error creep up.

While IT managers expressed concern about this situation (74% of those surveyed revealed a major frustration with the level of time dedicated to low level IT tasks) they did not necessarily understand how to address the challenge. A significant and recurring outcome was the availability of staff to support innovation and change initiatives. For many IT departments, too much time spent on “run the business” activities hampers their ability to drive “change the business” initiatives, many of which are aimed as using IT as a business differentiator and are thus infinitely more valuable to a business than the engine room of keeping systems and services running.

Perhaps the most alarming fact to come out of our research was that 88% of respondents felt resigned to the fact that wastage of skills is a necessary inconvenience. They accepted that to make progress in an enterprise IT environment, IT operations staff will have to perform day-to-day tasks for which they are over-qualified. That’s worrying, because it simply needn’t be the case.

Today, for example, expert systems are capable of automating on average over 50% of IT support incidents. Not just discrete tasks, or steps in a process, but end to end activities from the detection of an event or the receipt of a request, through the evaluation and diagnosis of the requirement, the execution of a remediation, the validation of success, and the notification or escalation as appropriate. IT leaders who embrace the potential of automation will find that they have at their disposal a greater pool of skilled staff, better motivated, more engaged, and fundamentally better equipped to use their talents to drive innovation and change.

NOA HRO roundtable

Human resource outsourcing is becoming increasingly popular within organisations. Businesses are moving away from HR services which once used to exist as internal departments. Recent figures, including the TPI Index, show an increasing trend for HRO services, as recruitment, learning and back office services replace ITO in popularity. The HRO roundtable event was held to receive expert opinion on the changing face of HRO in a series of briefings. The event included discussion between attendees and speakers, focusing on case studies, with an exchange of views over the latest legislation, strategies and emerging trends in HRO. The session was opened by NOA speaker Paul O'Hare, representative for NOA Legal Members.

Sarah Seabury, director, ISG, HR Outsourcing, Transformation and Change Management Advisor, provided a wealth of experience from over 8 years in the sourcing industry. She described that from an advisory position see was seeing a renewed HRO focus in both European and North American markets. The European position takes a delayed lead from the US, following trends in HRO with a delay of 6 to 7 months after their establishment across the pond. Sarah described HRO markets in the Pacific regions, which are new in themselves, as moving to copy the European example and in turn US market developments.

ISG had seen increased renewals for HRO service contracts, revealing that the HR outsourcing trend is still being maintained. Renewals are being particularly focused upon within US as the country continues to lead the way in HR outsourcing. New markets in South America, Europe India and South Africa are increasingly creating interest in the potential of HRO markets.

Developing HRO markets:

RPO- having already seen uptake in the US, accounting for a market value of $1.4 billion in 2012, recruitment process outsourcing is growing in Europe, with contracts moving into their second and third generations as the market develops in flexibility and scope

Workforce Analytics- while coming into the HRO market, at present not enough information exists around the service to see mass market uptake, continued uptake and future developments in infrastructure mark this as one to watch

SaaS HRO- becoming increasingly popular as SMEs drive the benefits of agile service as cloud infrastructure develops

The market has become increasingly competitive as SMEs seek increased flexibility and agility. HRO contracts are moving away from macro deals to multi-sourced contracts, based on the increase of specialist suppliers who are able to deliver key services.

In recent outsourced HR contracts, the value of IT to the delivery of the service is becoming increasingly important. A strong IT HR platform is becoming a stand out difference between a successful HRO service and a failed one. HRO contracts are now reaching on average three to five years in length, a reduction from the very large contracts of the past. Three years remains at the short end of contract lengths, with anything less becoming difficult to establish an accurate contract price. Sarah commented that ISG would always advise on pushing on a five year contract, adding that she had, “seen many walkaways from small deals.”

Harry Parker of TLT, discussed from a legal perspective, the developing regulation surrounding HRO, and its impact on suppliers and users. Prior to 2006 there was uncertainty within HRO however Transfer of Undertakings (Protection of Employment) Regulations or TUPE helped to clarify market regulation. Uncertainty within the UK has now returned due to newly established legal precedents.

Harry provided recent case studies demonstrating a significant legal test for TUPE, regarding the use and migration of dedicated workforces. This has had the effect of calling UK employment regulation into question. In one case haulage company Eddie Stobart, was ruled against by a UK employment tribunal over the migration of staff between contracts. This went against past practices regarding a use of dedicated workforces. The result of the ground-mark ruling found suppliers now finding it necessary to look at exit costs and the exact contract specification surrounding staff migration.

Basic HRO services such as the outsourcing of payroll are open to increased risk from the precedent set by such rulings, with increased risk driving costs for users. Not every HRO service faced the issues posed by the employment tribunal rulings, with for significant impact restricted to large single contracts. The lesson that both suppliers and users of HRO should take, not just in workforce migration, but in general HRO regulation, is that legislation can vary dramatically and is often country specific.

The overly bureaucratic nature and ‘gold plating’ of TUPE within the UK has now been recognised as being of concern to UK businesses. The government is now consulting on the reform of TUPE, stating that, "If the consultation supports change" the UK’s enforcement of TUPE will be changed. The consolation will run until April 11th.

HRO can be complex when coordinated across multiple nations. The economic squeeze of the global recessions has pushed some companies to inshore HRO services, at the same time reduced funds have also helped push other companies to move in the opposite direction and outsource HR.

Challenges affecting users in employing HRO include retaining control and visibility. HR services such as payroll do not lend themselves to single systems, with models varying from country to country. The lack of a single system presents a major challenge in the application of HRO when seeking to ensure regulation compliance. The specific challenges of global payroll represent a critical component in helping multi-nationals achieve their HRO strategic objectives.

HRO is particularly vulnerable to leakage, this can include broken processes, including instances of fraud. Effective governance is necessary to identify and minimalize such vulnerabilities. Best practice in HRO to reduce the opportunity for leakage includes the clear segregation between HR departments and other departments, with Sarah, ISG, acknowledging that: “one of the issues is governance, which we’re not very good at doing in HR.”

The employment of a dedicated service team is also becoming increasingly popular in restricting security vulnerabilities. This is particularly true when the HRO service concerns high level functions. This is commonly due to users wanting to restrict HR teams from working with competition while promoting confidentiality.

Ashley Carter, Director, Global Outsourcing, BDO LLP, detailed the findings of a global trends survey of multi-nationals, with more than 50 percent looking to expand and employ some element of shared services. Nearly 60 percent of respondents outsource services with the main primarily driver being cost reduction. The survey also revealed that a large percentage of respondents are not planning for change, whether outsourcing HRO or bringing services back in-house. Many enterprises are simply maintaining current service practices.

End of session roundtable questions included a series of discussions regarding the challenges of employing an offshore workforce. This included the complications and potential obstacles posed by cultural differences, and how the identification and recruitment of staff while nurturing development is vital to HRO. A reaction to offshore complications is an increasing trend of inshoring HRO functions back to the UK from destinations such as India, due to the attraction of close proximity to the service providers, along with cultural fit, the avoidance of language barriers and issues of negative feedback.

As HRO becomes increasingly popular in a variety of markets the NOA’s HRO roundtable shows that suppliers and users must keep abreast of the constantly changing regulation to ensure compliance. At the same time governments need to inform themselves of the risks of over bureaucracy and the obstacle it can pose to market growth. While HRO is on the up there is a worrying amount of indifference at enterprise level regarding new regulation and the potential of developing innovation, users need to become aware, or risk losing the full capabilities of HRO.

Speakers:

Paul O'Hare , representative for NOA Legal Members

Sarah Seabury, Director at Information Services Group, HR Outsourcing, Transformation and Change Management Advisor

Harry Parker, Senior Associate, TLT

Ashley Carter, Director, Global Outsourcing, BDO LLP

The Outsourcing Yearbook is a trusted compendium of trends, analysis and guidance from the heart of the sourcing industry.

Please click here to access the Outsourcing Yearbook 2013 e-books

In side the Outsourcing Yearbook 2013 you will find:

- In-depth case studies proving the business value of outsourcing

- Best practice guides on relationship management, governance, marketing process outsourcing, sourcing strategies, communications, benchmarking and innovation

- Insightful features including 2012 Review and 2013 Predictions

- Articles on: Views from the Top, Ones to Watch and Global Business Services Outlook

- Suppliers Directory: a listing of all the main suppliers in the UK and overseas

The Outsourcing Works Yearbook 2013 offers unprecedented reach to outsourcing decision makers, in the UK and globally. It will also form a key aspect of the learning materials for the NOA’s newly launched Public Sector Skills Academy, as such infiltrating the public sector. This will be our biggest edition yet, with a target to reach 30,000 readers!

To revive a complimentary hard copy please contact Brooke England Lee on brooke.englandlee@buffalo.co.uk

A public service network worth £20 million is set to go ahead after the signing of a joint contract between East Sussex and Brighton councils.

The network, provided by MDNX, will include the two councils and other public sector bodies including schools, police, fire and rescue services.

The PSN is also expected to create cost savings by providing the infrastructure for future shared service contracts and make better use of future cloud services.

The service is expected to be delivered by the end of August to around 270 public sector bodies across the two councils.

G4S took another body blow yesterday, as Bedfordshire, Cambridgeshire and Hertfordshire police revealed they were shelving plans to outsource services such as HR and IT.

A joint statement said that the potential contract did not deliver what they needed. It is expected that they will explore shared services arrangements to make cost savings and simultaneously protect frontline services.

Despite the Olympic fiasco, G4 had continued to pick up public sector contracts at home and abroad, with rumours that it would be blacklisted from so far proving unfounded.