Industry news

Google has increased spending in order to compete against Amazon in offering cloud services. Google will be playing catch up against Amazon Web Services with its high user-base in over 190 countries since its beginnings six years ago.

Google has placed focus on cloud-services as a means to move revenue away from dependence on online advertising which currently contributes 96 percent of Googles income. Google has recently increased the numbers of marketing, customer support and engineering roles as it looks to promote its web services.

Adam Selipsky, vice president of Amazon Web Services, said: “We’ve actually maintained and, in many cases, extended that early lead.” Amit Singh, vice president of enterprise at Mountain View, California-based Google, admitted that “We missed it,” in gaining an early lead.

Indian IT company Infosys has moved to create 100 apprenticeships within the UK in partnerships with the National Apprenticeship Scheme (NAS) in a five year scheme.

Infosys employs 150,000 people globally in a industry that has seen criticism for the employment of lower cost Indian workers in IT services at the expense of UK employees.

The apprenticeship will be created in marketing and human resources and comes on the back of a similar scheme earlier this year from Wipro which offered IT training internships to UK students.

French outsourcing firm Atos, tendered £24 million worth of contracts from the Department for Work and Pensions in 2011 it has been revealed in Parliament.

The sum comes from four contracts last year including online identity checking service, a bereavement declaration service, occupational health services and medical services.

Atos will continue to tend the contracts in the coming years with contyatcts such as online identity service worth £47 million set to continue up until 2014.

UK IT salaries have risen by 4.3 percent on average over the last year, according to IT recruitment firm ReThink, almost double the national average of 2.3 percent.

According to the Office of National Statistics the average wage in the IT industry has risen from £38,500 in 2010 to £40,140 in 2011. ReThink surveyed IT directors and discovered that 54 percent of directors had increased staff pay last year.

Director at ReThink, Michael Bennett, said: "Salaries for many IT staff have actually fallen in real terms over the last year. However when compared with the average UK worker IT staff salaries are still ahead of the game.”

Sainsbury’s looks to increase efficiency while investing in support for growing online platforms. The companies online services currently represent the fastest growing online UK grocery business.

The supermarket chain currently makes around £800 million in annual turnover from its online platform. This year the company invested £163 million, up from £121 million last year.

Sainsbury, commented: “we have recently introduced new warehouse technology, which enables colleagues to work more efficiently, help improve product availability and reduce waste.”

The National Outsourcing Association (NOA) has entered into a strategic alliance with the National Business Awards (NBA) in a campaign to find the UK’s Business Enabler of the year.

The award is designed to highlight outsourcing organisations in public, private and third sectors that have made a significant contribution to economic and business growth within the UK.

Martyn Hart, Chairman of the NOA and a Shortlist Judge for the Business Enabler of the Year award said: “The Business Enabler of the Year award highlights the important contribution of the outsourcing industry to the British economy, and demonstrates how outsourcing has evolved to enable enterprise.

The rise of web based software has seen a race for the market share of cloud technology. At the forefront sits Amazon, who have capitalised on their early lead in creating a set of easy to use online programs, however the market place is fiercely competitive and Google moving to end Amazon's lead.

Behind Amazon lies Google which is playing catch up after failing to invest early in the new market, beginning development a full two years behind Amazon. Google entered the cloud market in 2008 but only began competitively marketing in 2011.

The cloud market has rapidly grown, with value expectations of $10.5 billion by 2014 from $3.7 billion in 2011, according to Gartner. Research commissioned by VMware indicates the European enterprises intend to spend nearly one-third of their IT budgets on web-based computing over the next 18 months. Microsoft, IBM and HP have all entered into the Cloud market beside Google, while Amazon have continued to maintain a strong lead with the biggest share of the cloud market.

Amazon has taken the early lead with its portfolio of web based tools including mobile applications, server renting and data storage at a highly competitive price. Amazon Web Services has attracted many companies as users and is currently used within 190 companies. Amazon’s business is rapidly approaching $1 billion in revenue.

Google boosts cloud spending to contest with Amazon

Google have been quick to recognise there mistake and reverse its position as the company ramps up employment of engineers and marketing staff as it rolls out web-based new features. Google has already begun to narrow the gap as cloud customer numbers have so far increased by over 10 percent each month of this year.

Google despite focusing heavily on their web-based services have a long way to go in order to end Amazon’s dominance of the market. Amazon’s services are set to expand yet further with Forrester research pointing to 44 percent of companies looking to employ the service in 2012. Google on the other hand saw a 23 percent reduction of their App Engine software in 2011 from 2010.

Google’s web based services have failed to provide the same levels of flexibility and support delivered by Amazon software which has proven to be so appealing to businesses, with Google offering fewer languages or the ability to deploy customer servers. In predicting increased spending on cloud computing VMware said that organisations looked to greater flexibility that cloud services could provide.

While Google have the requisite systems and technology to provide quality cloud software they have failed to attract users away from the long established, flexible and user friendly services provided by Amazon.

Statistics have been released this week, highlighting the number of local councils that have significantly downsized their in house IT departments. In some instances the reductions were incredibly substantial. West Sussex County Council recorded a 90% reduction in IT employees between 2008-09 and January 2012 and the trend looks set to continue. Public sector intelligence specialists Kable predict that spending on IT staff within local government is set to fall further, with research suggesting costs will drop 7% over four years, from £785m in 2012-13 to £739m in 2016-17.

While the outsourcing of local government IT may seem like a move likely to induce socio-economic ramifications, there are several benefits of ITO that should not be overlooked. Cost-cutting will be the core goal of any outsourcing contract, and within the public sector it is important to note that any financial efficiencies gained can be reinvested in other areas that will benefit most.

Neither should it be assumed that this cost-cutting will derive from laying off workers to source cheaper labour. Often it is the case that when a public sector outsourcing contract is negotiated, it is a priority to keep current staff in work. For instance, in the West Sussex County Council case, the number of IT council employees fell from 138 to 12 over a four year period. However the majority of staff involved were part of TUPE transfers that took place in 2010 and 2011, with the employees that once worked for the council transferred to suppliers, providing them with the background knowledge required for the projects.

Inviting private companies to tender for public sector contracts can also attract innovation and productivity improvements, leading to financial rewards. Suppliers are likely to use innovation as a USP in a competitive tender process, and an outsourcer is inherently more likely to provide innovation than an in house department. This is due to a number of reasons. Providing a financial incentive for innovation in the contract is best practice, something which an in house IT department is unlikely to have and therefore less likely to possess the motivation for implementation.

When innovation is a priority for a local government the financial clout required to implement the changes may mean that an outsourcer is also required. The vendor is likely to have the finances up front to implement large innovative changes, whereas local government have to deal with budgetary restraints. The investment can then be paid back over a longer period of time.

It soon becomes apparent that outsourcers have the capability to make real innovative changes and implement them in order to save money for the public sector. They have the capability and resources to think outside the box and create efficiencies that otherwise may not have been realised. While many may assume that outsourcing takes money out of the public sector, the long term benefits of outsourcing mean that local authorities can save considerable amounts and reinvest in the areas that really require it.

Learning to share: best practice for the implementation of shared services

Mathew Wells, Managing Consultant at ICT consultancy Hudson & Yorke, discusses what companies need to consider when opting for shared services

‘Shared services’ typically refers to the provision of a shared business function by a single team where it was previously handled by parallel teams in separate organisations, or separate teams within one organisation. For example, under the shared services model, one department provides a service for multiple organisations, or business units within a single organisation. The theory behind shared services makes logical sense – by pooling expertise together, businesses or local authorities can share the benefits of a wider skills base that would previously have been run separately and reduce cost at the same time. However, such cost savings sometimes take years to be recognised, and implementation isn’t always straightforward.

Perhaps the best known advocates of shared services are local authorities, which are well suited to the model due to their non-competitive relationships and the need to cut costs in recent years. In some cases a host council will provide the service for a fee, and in others a private company will take on a contract from a number of councils which then share the cost of the service. The advent of the PSN (Public Sector Network) looks set to further encourage a sharing approach, because one of the barriers in local authorities has been the cost of setting up a secure network infrastructure between the parties to an agreement. The PSN could therefore play a role in transforming collaboration in the public sector.

Whilst much attention is focused on local authorities, shared services have also been popular among financial institutions for years, and particularly so within large universal banks. Working within Hudson & Yorke’s financial services practice, I have seen various universal banks invest in shared services. The model can work well within large organisations because the entire philosophy of shared services lies in utilising economies of scale. Larger firms are naturally more able to benefit from this, but whilst the principle of shared services is easy to comprehend, in practice it can be a minefield. Financial services companies frequently make mistakes during the planning stages – we are aware of examples where firms have not taken the time to properly understand their business and the challenges which they want to solve through shared services. Running headfirst into a shared services model will almost always end in failure without proper planning and understanding. Similarly with governance – companies can sometimes be so fixated with planning and strategy, that they forget how the service needs to be run and managed in subsequent years. Many firms see the signing of a shared services agreement as the end of the process when in fact, it’s just the beginning.

Thankfully there are plenty of examples of best practice within financial services. One such project took place in a large universal bank, which was split into retail, investment, wealth and various other departments. The bank created a shared service centre for its ICT and back-office functions, such as HR, payroll and admin, cutting down on the repetition of these activities to deliver better efficiency at a cheaper cost.

Cost saving is often cited as the main reason that an organisation will opt for shared services, as funding and resourcing of the service is typically shared. The key is in sharing: not only does it reduce costs, but standardises and centralises the whole process. It can make running the back-office functions more efficient, delivering higher quality services to customers at a lower cost.

However, to reach this point a shared services model will require time and investment. In the current austere times we live in, companies are looking to demonstrate immediate cost savings. Shared services will typically take five years to create this cost reduction, with upfront costs such as purchasing of new technology, building and staff only adding to the bill.

When considering implementing a shared services model, strategy is everything. Developing a stakeholder consultation plan and understanding the current and future ICT needs of the organisation is vital. It is important to remember that what may benefit one part of the company may not necessarily benefit another, so consulting with stakeholders to define needs should be the first step. There is no point employing an infrastructure that only one part of an organisation can use – to get the most benefit a shared service should apply to all business units.

Secondly, companies should develop a robust business case. Cost reduction may be one of the main benefits of shared services, but cost savings may not always be clear initially. The principal impetus should be the delivery of real business benefits, specifically accountability.

Finally, companies should be wary of regulation, particularly in the financial services sector. Retail bank ring-fencing for example could lead to banks being wary of implementing a shared services model, only to be forced into a U-turn at some point in the future when regulation demands separation.

The bottom line is that shared services can offer very real benefits, but these won’t appear overnight. A clear strategy and thorough planning are necessary to realise the true potential of a shared services agreement, and once the agreement is in place proper governance is necessary to unlock maximum returns. Clearly there are many aspects to consider, but here are ten top tips for companies thinking about implementing a shared services model:

- Consider whether a shared services model is right for your business. Shared services generally only works for large companies, or organisations with fragmented business units.

- Plan well ahead of time. It normally takes 2-3 years to implement a shared services model successfully.

- Ensure proper governance. The work doesn’t end when a shared services approach is implemented.

- Develop a robust business case that takes into consideration alternative benefits to just cost savings. While cost-reduction will come in time, business benefits need to come first.

- Construct a stakeholder plan. All stakeholders need to have their say on whether shared services will benefit them.

- Ensure that planning doesn’t result in distrust. Remember that some departments within an organisation may have been responsible for certain functions for years – changing this could result in hostility. Communication with key stakeholders throughout the process will ensure sufficient buy-in across all business functions.

- Be aware of regulation and outside influences that could affect how shared services would run in the future.

- Know that centralisation isn’t appropriate for every single function within an organisation. In general, companies shouldn’t centralise core competencies that involve customer contact.

- Ensure that you look through a long-term lens. Don’t expect benefits to be apparent straight away because of the length of time it takes to change adapt and implement, but in the long run shared services can really deliver.

- Ensure that you have the right technology in place to enable shared services. Secure systems that allow joint working are key.

Business process outsourcing (BPO) has grown rapidly over recent years. As technology continues to develop and businesses continue to seek out faster, cheaper and more efficient ways of doing things, so outsourcing providers evolve their offering to match.

One current trend is the increase in on-shoring. In the past organisations have outsourced some of their processes abroad, but with businesses perhaps now more mindful of data protection and confidentiality issues, many more businesses are choosing UK based companies to undertake these processes. This promotes confidence that the company being used, has to comply with the same rules and regulations as the business placing the business. This is particularly important for the legal sector where tight regulations leave little room for error, with the outsourcer responsible for any breaches made by the service provider.

One growing trend that is gaining traction amongst businesses looking to outsource is the move away from retainer-led or minimum usage services to pay-as-you-go. Although this ad hoc approach may be thought to be more expensive than traditional contract rates, the flexibility is proving popular as it allows organisations to only pay for what they need, when they need it. Indeed, the leading firms operate a pay-as-you-go approach which is no more expensive than the businesses that insist on contracts.

Requirements for out-of-hours services are also more in demand, thanks to new technology all but eliminating the traditional 9 to 5 day. Many people, especially within professional services, now work longer hours, often late into the night or at weekends. If a tight deadline requires you to work around the clock, but the necessary admin or IT support staff don't work the same hours, then unnecessary delays can be introduced. With 24/7 support now offered by a growing number of UK outsourcing service providers, it means you can call upon much needed assistance as and when you need it.

Linked to the trend of out of hours support is the growth in mobile technology that allows people to take their work everywhere. In the past the productivity of many individuals was constrained by the working hours of their support staff, but the rise of mobile apps., now allows people to communicate directly with service providers at all hours of the day and night. Of course whether that's a good thing or a bad thing is a moot point.

The introduction of mobile apps is particularly relevant to transcription service providers as it offers the client the flexibility to be able to record their notes or thoughts whilst on the move, with the transcribed file often waiting for them on their return to the office.

DictateNow provides fast, reliable and confidential digital dictation and transcription services. With over 300 experienced typists all based in the UK, they serve a wide variety of sectors, including legal services, accountancy, medical, property and the public sector.