Industry news

Following our last blog, on the subject of contracting for Agile software development, this week we visit another hot topic: innovation. Innovation can mean many different things, but in an outsourcing context it can generally be thought of as new ideas or ways of working to drive efficiency, commercial gain and/or competitive advantage. But what can be done to stimulate innovation within an outsourcing relationship in a way which is aligned to the customer's needs? We believe that a contractual structure which is aimed at driving innovation can be a significant advantage. At the same time such a framework can rarely move a supplier to innovate where innovation is not within its DNA. For best results, customers should aim for a combination of evidenced supplier commitment to innovation and a contractual framework that keeps both parties on track. Here are our top ingredients for success:

Track record

Favour a supplier with a track record of thinking outside of the box, with multiple innovation successes.

Joint leadership

Both parties take a lead role and each appoints a named leader for innovation- the biggest challenge facing innovation is tomorrow's deadline.

Innovation plan Have an enterprise-wide innovation plan that defines purpose, objectives and timeframes; and importantly has buy-in from key stakeholders.

Common understanding Define what innovation means, and ensure an alignment of understanding with your supplier.

Fostering trust

"Trust is the key, detailed contracts are unimportant".

This is too extreme a view, but building a trusted relationship with your partner through thoughtful communication and collaboration will reap rewards.

The importance of contract design

There is an inverse relationship between innovation and certainty. The greater and more radical the level of innovation sought, the less certain and more incomplete is the contract. The result – contract design will be a priority.

Innovation lifecycle phase 1: Idea generation

Regular market testing and well-managed brainstorming on the latest trends, processes and technologies will aid thinking as to what can be achieved. What your supplier is doing for its other clients is a good starting place.

Innovation lifecycle phase 2: Contract flexibility

Once an idea has been selected for implementation and a business case approved, project terms will need to be agreed with your supplier, including roles and responsibilities, deliverables, timeframes. Anticipating this, the challenge at the outset is to build a contractual framework which guides the parties to agreement.

Shared funding

This is particularly important the more radical the change you are looking for. First, it will be important to get agreement between the parties to fund failure – innovation does not come without failure and the customer must accept that failure does not mean the process isn't working. Second, this is the customer putting its money where its mouth is.

Your supplier to share in the upside

Consider performance based pricing, such as gainshare. The true win/win: greater customer value (through innovation) and increased supplier profitability. The incentive for your supplier to perform.

Early involvement of technical community in contract design

Ineffectual contract design is usually to do with a lack of involvement early enough by the engineers on matters of technical specificity, e.g. task descriptions, contingency plans and communication protocols. Get specialists involved early.

Competition

Competition between suppliers in your ecosystem can drive valuable innovation, particularly where the reward is more profitable opportunities. Consider suitable frameworks such as multi-sourcing.

As the Olympics’ draws nearer, people all across the UK are starting to prepare for the festivities and the upheaval that comes with hosting a major sporting event. Whilst certain businesses look forward to the extra revenue that the visiting spectators will bring, others need to safeguard their devices during the two month period.

According to a Freedom of Information Act request to Transport for London over 4,500 mobile devices were lost during the summer period last year alone. This means as over 5.5million extra visitors flock to the capital to watch the games, the need to secure mobile devices such as mobile phones becomes crucial.

Results show that as the number of visitors grow, there is a risk that a further 2,840 mobiles, 231 USBs and 121 laptops will be lost. This means that countless amounts of data will be lost as well, which could potentially cost businesses and consumers a fortune and create long lasting issues.

For this reason, device owners should take specific steps to protect their assets and implement remote access solutions that can manage and resolve this risk. Good examples of this would be to utilise centrally managed solutions such as MobilIron’s Mobile Device Management or Vmware’s Horizon Mobile platform, as each gives IT access and control to the corporate data & IP on a remote device, which if necessary can be locked down or remotely wiped if compromised.

By implementing such security and back-up solutions, any lost device is simply that, a lost device. Through taking action now, the potential threat of over 3,000 additional lost devices full of data turning up in the Transport for London’s lost property box or worse a stranger’s pocket will be eliminated.

Without doubt the Olympics will bring disruption to the capital this summer, however whilst people can’t do anything about the millions of extra visitors and congestion, simple measures can be taken to ensure everyday life isn’t disrupted and devices are more secure, so they aren’t left feeling the consequences after the final ceremony on the 9th September.

Humperdinck is currently back in vogue thanks to his forthcoming appearance representing the UK at the Eurovision song contest. And the words from his 1967 hit, “Please Release Me”, are now being heard in more than one board room as companies question once again whether their outsourcing contracts are a help or a hindrance. Yet with contract values worth hundreds of millions of pounds, changing them is expensive and some exit costs can be completely prohibitive. Added to that there is the time and effort needed to deliver change, and the management distraction from current business needs. That means it can be hard to find a viable alternative to simply sticking with the current situation.

For the purposes of this discussion, let’s assume that bringing the services back in house has been explored and the board has ruled it out as an option. So the debate is about how to change the current outsourced arrangements. The extreme, and bold, option is to terminate the whole agreement. And sometimes the position has become so untenable that this can seem like the only sensible course. But before going down this route, the company needs to be sure that simply changing providers – particularly if it’s a straight replacement – will really make a difference to delivery.

This means taking a hard look at whether there are aspects of the services that the current outsourcing provider delivers well. This could then create an option of setting up a new and profitable extended arrangement for these services, but handing over the less successful parts to alternative providers. Customers often think this won’t appeal to providers but they may well be willing to scale back agreements, if they can deliver successfully and make money. The problem can be that the sales team, with their focus on short term targets, won’t be enthusiastic - but conversations with the senior executive team can often lead to agreement on alternative options. They can be particularly receptive to this approach if it is an alternative to some form of termination. Ending a contract often gets into the public domain and can be embarrassing for all concerned, and avoiding reputational damage can be a powerful motivator.

The other critical consideration is to assess the performance of the team with responsibility for working with the current provider. Managing big outsourcing providers is a complex discipline and talented people in this area are in short supply. Getting a detailed understanding of what interventions have been made to help the team deliver effectively is a sound investment before changing providers. That means checking everything from how they build relationships through to how to avoid micro managing performance. It is not uncommon to find organisations that have changed providers and then discover that many of the underlying problems were in their own team.

If companies do carry out this careful analysis, they might find that they can replace “Please Release Me” as the outsourcing theme tune with Engelbert’s EuroVision song, “Love Will Set You Free”. And even if customers cannot quite learn to love their contractors, if they can understand them a little better, they will both benefit from a new way of thinking about how to change major outsourcing relationships.

Google has announced they are building a service to that will allow big data analysis in the cloud. BigQuery will allow organisations to analyse their data anywhere, without the need to build infrastructure. The service was launched by Google after developing similar infrastructure for in-house use.

Google product manager Ju-Kay Kwek, speaking at the GigaOm Structure Data conference, said: “The time to insight on Big Query can be as short as a day or less because we take care of the data structuring and making it available so teams can focus on querying the data.”

Users will upload data and stream updates as they become available. Google’s algorithms then allow the user to analyse the data. The service offers a number of benefits, notably it eliminated the need for large data storage facilities.

The service is currently being tested by trial users.

Cumbria Council’s IT outsourcing contract with Computacenter has fallen through less than two weeks before the proposed switch over.

It was announced yesterday that the five-year deal would no longer go ahead after the council announced "following extensive discussions with Computacenter, it has not proved possible for the two parties to conclude the finalisation of the proposed contract".

Cumbria Council announced in January that Computacenter was their preferred bidder, winning the contract that was due to be worth £33 million in total. A Computacenter spokesperson said “We can’t discuss the specifics of contract negotiations, however, we can confirm that we haven’t been able to agree terms agreeable to both parties.”

Agilsys will continue to provide services for the council until a new provider is found.

BT Global services have won an £8.3 million contract with The Northern Grid for Learning. The deal involves BT delivering a regional wide area network (WAN) to schools and local authorities.

Northern Grid is a non-profit, regional broadband consortium that is owned by several local authorities in the North East of England.

The current contract with Northern Grid expires in July 2012, and BT are expected to deliver an improved and more cost effective service. The London Grid signed a similar deal with Virgin which plans to move 2,000 schools in the capital onto to a new, fibre optic network.

John Lewis has announced it will be hiring over 50 new IT specialists in 2012. The UK retailers have made the investment in a move to improve in multi-channel customer service offerings.

Some of the roles created will include project managers, systems analysts and business analysts, and will join John Lewis’ 280-strong IT team.

Owen Roberts, John Lewis’ recruitment manager said: ““Technology has been identified as one of the most important drivers of business growth. We are now looking for talented IT professionals to join our team and help us take multi-channel retail to the next level, cementing our reputation as an industry leader.”

The new recruitments follow the three-fold investment increase in IT John Lewis has experienced in recent years.

T-mobile is to slash 1,900 jobs by closing seven of its 24 call centers in the USA in an effort to reduce costs and remain competitive.

T-mobile plans to consolidate its work force and an extra 1,400 jobs at the remaining call centers. However, around 3,300 employees will be laid off as around 5% of their US work force will be cut.

Philipp Humm, CEO and president of T-Mobile, said: "Concentrating call centers is an important step to achieve competitive cost structures to successfully compete in the wireless market. These are not easy steps to take, but they are necessary to realize efficiency in order to invest for growth."

The government is planning to outsource control of emergency call centres to the private sector. The move is being spearheaded by Capita who are to supply a modernized 999 control system in a 10 year contract. The deal is aimed to save over £5million during the lifetime of the contract.

The emergency call centre is run nationally by BT and Cable and Wireless, the London brigade contact will see around 120 current staff, including office support staff and control officers move to Capita.

Councillor Brian Norman, chairman of the London Fire and Emergency Planning Authority, said: “Outsourcing the Brigade's 999 control centre will mean people in the capital benefit from a new, high-tech system that will mobilise our firefighters to incidents even more quickly and this will be done at less cost."

Atos has signed a £100m deal to provide EDF with datacentre services over 10 years. The deal is set to consolidate EDF datacentres, and reduce costs by over 20 percent over the next decade.

Atos will provide EDF Energy with the ability to meet demand through greater datacentre capacity, while increasing service resilience. The contract will cover the move of more than 100 employees from EDF to Atos.

Nigel Pettifer, datacentre head at EDF, said: "The new solution will enable us to run our business more cost-effectively while improving the resilience and flexibility of our IT infrastructure.”