Industry news

Large cuts to the supplier base make headline news. In November last year, support services and construction company Carillion, announced that it was cutting its supplier base from 25,000 companies to just 5,000. In February this year, Balfour Beatty’s construction services UK division set out its plans to reduce the number of suppliers it uses from 27,000 to 10,000.

Initiatives along these lines are met with great enthusiasm in the City as expectations rise for significant cost savings. For Carillion the slimming of the supply base is part of a drive to save £140m a year by 2013.

Such radical rationalisation of the supply base sends shock waves down the supply chain, and perhaps, to some extent, that is the intention. Keener pricing on contracts are achieved through a combination of a desire on the part of the supplier to retain business and the opportunity to discount on larger scale contracts. A smaller supply base also allows for closer collaboration between supplier and buyer, with all the potential for efficiency gains this affords.

Consolidating the supply base may deliver cost savings, but what does it do to a buying organisation’s exposure to supplier risk? Does increasing your dependency on a smaller group of suppliers work for or against your long-term aims? And, if the strategy is sound, how do you go about reducing supplier numbers?

In many respects, it is easier to manage supply chain risk when you have a fewer number of suppliers. A clear focus can be applied to a more refined list, risk analysis is easier to conduct and closer checks can be carried out to verify data on higher risk suppliers. Costs for managing a smaller supplier base should also be lower as there are fewer reviews and audits to conduct.

However, a prerequisite for both managing supplier risk and rationalising a supplier base is to have access to accurate, clean data that reflects the current status of regular suppliers.

For many corporates the large number of suppliers they have on their database may be misleading. There can be significant numbers of duplicated records, with the same supplier being entered onto the database several times due to misspellings or inaccuracies in address details etc. Cleansing a list to remove duplication, errors and one-time purchases is essential to understanding your supply base. It is quite common to see lists of suppliers come down by 50 per cent through this process.

Equally important, records need to be regularly checked and updated to ensure accuracy is maintained. The problem is, most companies do not allocate the necessary resources to maintaining and updating their supplier information – the result being that purchase orders end up in the wrong place or that failings occur. Further issues arise when it comes to spend analysis. Often when people raise purchase orders they are in a rush and so assign a purchase to an inappropriate category. Then when it comes to conducting a spend analysis an incomplete picture results.

Consistency in the approach taken to record keeping is critical to managing and maintaining a supplier database. Companies that have grown through acquisition may struggle with having a single, well thought out process for gathering and storing supplier data. Legacy systems and disparate pools of information create a fragmented view of the supply chain and result in mismatches of supplier data which cause confusion, create errors and work against the benefits that come from a common view of the supply base. For instance, benchmarking suppliers only becomes possible through having consistent and accurate data.

If organisations are to make important decisions on their supply base they need to address these issues by centralising supplier information and introducing processes that create consistency of data across the entire enterprise. Time and effort must be spent on ensuring that the right questions are asked of the supplier, the correct depth of data gathered, appropriate to the risk presented by the supplier, and that the information is, where necessary, backed up by methods that verify that data.

Only by having complete visibility of your supply base can supplier numbers be rationalised and risks properly assessed and mitigated. Driving these efficiencies in the supply chain and making the savings that boost investor confidence starts with healthy supplier information.

Capgemini will acquire a 100% stake in Beijing-based Praxis Technology, a provider of IT and consulting services to the Chinese utility market.

This acquisition should help Capgemini improve its position in the Chinese market, where it already has 1800 professionals in major cities including Beijing, Guangzhou, Shenzhen and Hong Kong.

Capgemini head of New Businesses Gilles Taldu confirmed that the buyout will strengthen their capability in the utility sector, helping meet the needs of China's largest utilities.

"We look forward to working with the Praxis Technology team to bring the latest SAP technologies to our utility clients in China," Taldu said.

In a move that appears to be contradictory to government SME policy, government departments are cancelling freelance IT contractors supplied via SMEs and handing their interim staff business to Capita - under orders from the Cabinet Office's Efficiency and Reform Group (ERG).

The Ministry of Justice cancelled all such SME contracts and moved them to Capita's £123m Cipher contract on 31 March, just one day after the publication of an ICT strategy promising to end the "ICT oligopoly" – of which Capita is a substantial part – and do more business with SMEs.

Martin Tucker, managing partner of interim executive agency Gatenby Sanderson, said: "The majority of government departments have signed up to Cipher and that means Capita manage the hiring of interims."

"IT in particular is hit by this," said an IT SME, who requested not to be named. "It might save some money in the short term but it will cost a lot more in the long term because you are just reducing competition. When you create a monopoly supply situation, service goes down and cost goes up; simple as that."

Sprint is to offer new managed telepresence servives for enterprise customers as a result of a new partnership with Tata Communcataions.

Tata will provide managed telepresence technology for HD video conferencing with “superior audio, video and environmental qualities”

Not only does Sprint bring their stronger brand recognition to the table, they provide the Global MPLS network that will power these managed telepresence features.

Although these services will never quite match up to face-to-face meetings, teleprescense is constantly improving and is becoming ever more important to enterprise, especially given its contribution to saving on emissions from car and air travel.

Swiss banking giant UBS is to cut 500 jobs from its worldwide operation.

As part of a cost cutting drive, around 180 jobs will be lost in Switzerland, 90 in the USA and the remainder from the UK and Asia-Pacific. The total represents marginally less than 6% of UBS' 8,700-strong total IT workforce.

A spokesperson for the bank stated that some of the job cuts relate to its arrangement with Indian IT offshore outsourcing provider Cognizant.

40 employees are said to have opted for early retirement, and some positions may be relocated, but redundancies will definitely take place.

Nokia will outsource Symbian software development and support activities to Accenture, in a deal due to be finalised in October. It is expected Nokia will transfer approximately 2,800 employees currently located in China, Finland, India, the UK and the US.

Accenture will retrain and redeploy transferred employees, developing their capabilities to provide mobility software, business and operational services for the Windows Phone platform.

Nokia’s executive VP for Smart Devices Jo Harlow stated that joining forces with Accenture allows them to meet their continued commitment to supporting their Symbian smartphone customers.

"As we move our primary smartphone platform to Windows Phone, we will look to explore potential opportunities to tap this talent pool as they develop and expand their knowledge and capabilities beyond Symbian."

The Police National Database (PND) was launched officially on Wednesday. Now police forces nationwide are able to share intelligence on crime. The PND has been tested over recent months, and focuses on information relevant to crimes, not victim and witness details.

The database was developed with Logica, costing £75.6m.

National Policing Improvement Agency chief executive Nick Gargan stated that the PND would allow police investigators to see the full intelligence picture. "We know that child abusers, drug dealers and terrorists don't respect force boundaries, but in many cases forces have been conducting their investigations in isolation, unable to see everything the police service knows about a suspect and unable to make fully informed decision. Until now this information had to be shared manually, a fallible and sometimes bureaucratic process dependent on the right staff being able to access and share the relevant files, which could take up to two weeks,"

The PND was developed in accordance with the recommendations of Lord Bichard's inquiry following the Soham murders in 2002.

BP’s partner in the Deepwater Horizon disaster has blamed them for the majority of the failures that preceding the oil spill.

Now estranged from BP, it was Transoceant that owned the rig, also supplying most of the personnel. The lawsuit brought by BP is valued $40 billion (£24.8 billion).

After holding its own internal investigation, Transocean decided to plug the well using cementing techniques that are not approved in the USA. It claims that BP misinterpreted critical pressure tests for the well, and missed vital warning signs of a possible blowout. Their report states that the force of the gushing oil stopped the blowout preventer from sealing the well. BP stands accused of using a faulty well design.

BP said yesterday that the Transocean report “fails to acknowledge the significance of Transocean’s role in the event.”

On 20th June, the European outsourcing community gathered in Madrid to debate the latest trends and learn from each other’s experiences. Now in its 2nd year, the European Outsourcing Association Summit & Awards also rewarded the preeminent projects, providers, innovations and locations for best practice in pan-European outsourcing.

“We come together to learn from each other” said Juan Luis Rodriguez Sanchez Del Alamo, of Repsol, during a rousing opening speech that set the tone for the whole event. Indeed, a prodigious amount of knowledge came forth from the lectern, as the masterminds of Europe’s premier projects took to the stage, magnanimously giving the inside track on their successes and challenges in the past year.

First up was Duncan Aitchison, Partner & President of TPI, whose presentation “What’s in store for the sourcing industry?” was optimistic for 2011/12, explaining that “after a period of financial turmoil, demand never comes back in the same way it left” before going on to detail how “there is a lot more scope coming to market. Things that haven’t been outsourced before are being sent out.”

Outsourcing has become more prevalent due to the current times of austerity with the public sector as an example, outsourcing more tax paying services than ever before.

One of the most intricately detailed and deeply insightful presentations of the day came from Santiago Uriel Arias, of Confederación Espanola de Cajas de Ahorro who heads up the collaboration between all savings banks in Spain. This gives him a uniquely omniscient perspective as he speaks about efficiencies brought about by technology and BPO-sharing. “Size does not equal efficiency – it is the sourcing model that is the key,” he said, while demonstrating his theories graphically.

Chris Halward, of the NOA, presented on NOA Pathway - the Middlesex University-accredited qualification for Outsourcing Professionals - before giving way to Jon Burbanks, of Capital One, a highly experienced outsourcing contract negotiator, who is currently working the Pathway. He is undoubtedly a star student - the audience were enraptured by his self-chosen project: “Why did deals work better than others? Why did some need more work than others?”

The afternoon session was themed around transition – specifically renegotiation, renewal and exit. Presentations from Heather Rodgers of the NOA, Juan Carlos Ferrer of Everis, and Wolfgang Fritzmeyer of EOA/ Baker & McKenzie were full of practical recommendations about change management, building flexibility into contracts and how to avoid the need for litigation. Juan Carlos focused on increasing productivity and cost efficiency by “becoming more ‘lean’ in outsourcing contracts,” while Wolfgang covered what to do in various scenarios of exit management. “Lawyers always come last; sometimes they even come a bit late,” he quipped.

Then came then the whisky! Scottish Development International (SDI) provided a fine selection of single malts to a thirsty mob gathered around their stand, and Douglas McCheyne, Senior Executive of International Marketing, was delighted how the event was “helping to keep Scotland at front of mind when investment decisions are made.”

The EOA Awards took place in the historic Casino De Madrid. Speaking before the awards, Andy Rogers, EOA board representative for corporate users said “The submissions this year were of an exceptionally high standard and the record number of submissions – more than double that of last year – shows that the EOA Awards are becoming the de facto standard of quality for the European outsourcing community.”

After a delectable dinner, and copious vino tinto, the award winners were announced. Outsourcing Service Provider/Advisory of the Year was Luxoft, who were also instrumental in the Ukraine’s successful bid to be Offshoring Destination Of The Year. BPO Contract of the Year and IT Outsourcing Project of the Year were Centrica PLC & Ferrovial S.A. respectively. Outsourcing End-User of the Year went to Telefonica Germany while Business Integration Partners and Prisa walked away with the Award for Innovation In Outsourcing. A hard-fought tussle, too close for the judges to call, resulted in CSC – Orange (France Telecom) and Indra being declared joint winners of the Award for Corporate Social Responsibility.

CSC’s Director of Customer Experience Mike Plummer was “delighted and proud to have won. It reflects great team work with the client,” he said, referring to the joint project with Orange regarding incentivising customers’ recycling of mobile phones.

The celebrations continued into the night… one bleary-eyed delegate – who asked not to be named – told how he was on the town til 4am!

The high standard of presentations continued the next day, particularly from the charismatic Carlos Flores Ramirez, of NIIT Technologies, whose engaging presentation was laden with thought provoking analogies – he stimulated debate by comparing outsourcing contracts to arranged marriages and tango dancing.

In a joint presentation Valueshore and PromoMadrid highlighted the credibility of Spain as an ITO and BPO nearshoring destination, presentations that fellow sponsors Invest In Spain would have definitely approved of. Valueshore’s Daniel Naoum spoke of the support that they can offer making inroads into Spain, finding “the right companies, the right contracts, the right contacts.”

The nearshoring vs. offshoring debate continued during a panel discussion featuring Valueshore and Stefanini TechTeam – who are truly global, have a presence in 27 countries worldwide – whose representatives, Rik Demeulemeester and Liveen Van Brackell had earlier given a presentation entitled ‘How To Break The Offshore / Nearshore Dilemma.’

After presenting on innovation, and how to address the disconnect between what suppliers are doing and what end users want, via metrics, structures and governance, KPMG’s Lee Ayling said of the conference and awards “absolutely fantastic – really diverse, drawn from all of the chapters. The quality just gets better and better.”

Jaco de Vries, of OmNext, said: - “the success of European Outsourcing Association Summit & Awards proves outsourcing is growing, getting more professional, leading to more collaboration, more partnership.”

For further information on the EOA summit and awards, visit www.eoasummit.com

Metro Bank, the first new high street bank in the UK for over 130 years, has agreed to outsource its recruitment function to RPO specialist, Consort Group, for a further three years. The deal follows on from an initial agreement to outsource recruitment to Consort concluded in March 2009.

Consort Group is targeted with bringing the total number of Metro Bank employees to 400 by the end of the year as part of a drive to expand the bank’s existing Store network to a target of 200 sites by 2020.

“Our focus is on our customers,” says Metro Bank CEO, Craig Donaldson, “and to make sure that we provide them with the best possible service, we have taken the view that we should partner with the experts in process areas such as recruitment and IT, the best of breed who can provide us with flexibility and scalability. We’ve chosen to work with Consort Group because getting recruitment right is incredibly important to Metro Bank – our people and the service they provide are the key points that set us apart from the competition. Consort have shown they have the passion, the commitment and the expertise to deliver exactly the sort of people this organisation needs.”

“The relationship between Metro Bank and Consort Group works so well because we are both highly entrepreneurial businesses with a total focus on customer service,” says Consort Group director, Julie Bullock. “Working with Metro Bank is a fantastic opportunity to create and build a state of the art recruitment function which can identify, attract and deliver the type of individual who will make the bank’s ambitious growth plans happen.”