Industry news

Tuesday 24th May 2011

Seminar Summary

This seminar focussed on the future aspects of BPO and involved views from Siemens, TPI and Hogan Levells on how delivery engagements will evolve, particularly in the light of the emergence of enabling Cloud technologies, business services and cloud legal issues.

The importance of focusing on business values was emphasied along with the need to drive effective process transformation rather than adopting generic technology approaches to bring efficiency to existing processes.

By following a more ‘Cloud’ centric approach to BPO delivery, offering elasticity of provision within a shared, best of breed delivery model, businesses can reduce delivery capacity risk and improve process value. This combined with low cost of entry and flexible contract terms creates a new paradigm for BPO services. Moving towards a ‘pay as you go’ model is highly attractive where demand predictability is uncertain and capital expenditure is constrained.

Traditional BPO methods will no doubt remain for some time but managing the business transformation journey to Service Orientated delivery is as important for Business Processes as it is for core IT Infrastructure.

This seminar was opened by Adrian Quayle of the NOA who welcomed all attendees and explained the role of the NOA in promoting outsourcing best practice.

‘How delivery engagements will evolve, particularly in the light of the emergence of enabling Cloud technologies’.

John Hall – Siemens’ IT Solutions and Services

The forces shaping the cloud are cost pressures, need for agility, generation Y, data explosion, alternative devices, web 2.0, sustainability and connectivity.

What has happened?

• Cloud computing is an accepted concept and interest is moving from “What to How?”

• Technology is developing rapidly and there are many providers and enablers in the market.

• Significant investments are being made by established outsourcers and emerging providers.

• Most cloud propositions remain technology focused (infrastructure and application)

 Virtualisation

 Point solutions

 Commodity applications

The need to think differently

• Cost is a key driver for adopting cloud services, but it’s not the only consideration.

• Disaggregation of services to the cloud could increase complexity, destroy business value and increase costs.

• There is no “one size fits all” model. Cloud operating models must be driven by business needs.

The traditional outsourcing role will evolve into one of service orchestration and optimisation.

The cloud transformational journey is one which begins with a cloud adoption roadmap leading to dynamic computing and modular business change.

When managing complexity, the role of the outsourcer needs to move to one that securely and “seamlessly” bundles and orchestrates both cloud and legacy services.

BPU could be seen as "business process outsourcing as a service" or "business process outsourcing on demand.” Source: Gartner Hype Cycle

Business Services and the Cloud

Martin Stockton, TPI

Cloud computing is Internet (“cloud”) based development and use of computer technology systems in which automatically scalable and virtualized resources are provided as a standardized, on-demand service over the Internet. Users need not have knowledge of, expertise in, or control over the technology infrastructure “in the cloud” that supports them.

The concept relies on the Internet for satisfying the computing needs of its customers; common business applications are accessed through a front-end interface (such as a web browser) on a personal computer or PDA while the software and data are stored on servers. Software stacks of operating systems, databases, Web servers, storage, and networking are managed as virtual servers. Transparency, reliability, and security are the keys to cloud computing having a successful future in information technology.

TPI believe there are two concepts to the Cloud: Traditional and IT Cloud

Traditional Model

• Each business maintains its own IT infrastructure (1:1 relationship)

• Customised software

IT Cloud Model

• Many businesses receive IT services from one cloud of hosted servers and scalable resources IT resources (many: 1 relationship)

• Development and maintenance outsourced

• Standard software

Key factors of IT Cloud

• IT cost saving opportunities for non-IT functions are small

• The value drivers offered through the Cloud are lower costs through economies of scale, a higher utilisation of resources and a more efficient use of expert knowledge. As organisations have looked to cut their IT costs, they have increasingly turned to external providers that can host standard applications on their behalf. The impact on other support functions to date is limited.

• With an IT cost base for support functions of around 10-20%, the potential cost saving is too small to incentivise support functions to move away from their customised applications to less convenient standard software

Most companies expect to incorporate cloud computing into their portfolios in the next few years yet readily admit that they have not completed their cloud strategy and need help to do so. TPI found that there is considerable uncertainty about cloud computing models and use cases, but there is also consensus that the cloud is the future. There is a strong opportunity for outsourcing service providers to help clients develop cloud strategy and to guide adoption, but there are also some obstacles to becoming the cloud provider of choice.

Legal Issues with Cloud Solutions

Mark Taylor, Hogan Lovells

Written vs. electronic (click-wrap) contracts

• Standardisation and cost reduction are key drivers for cloud IT

– supplier contracts range from the very brief to lengthy & complex documents

– often embedded links to additional terms

– cloud IT customers may have to choose between the supplier’s contract and not proceeding

• Form of contract for cloud BPO?

– regulatory implications

– importance of risk assessment and mitigation

Due diligence enquiries

• All customers should do due diligence on cloud suppliers:

– financial stability

– disaster recovery/business continuity plans

– privacy and data security policies

– data backup and storage procedures

– satisfaction of provider’s other customers

• For each risk identified

– address in contract?

– manage or mitigate outside the contract?

– accept as is?

• Risk profile will differ for cloud BPO and cloud IT

– level of reliance on supplier

Services and service levels

• Clarity over service scope – what is / isn’t included

• Service (and IT) upgrades

– mandatory or optional?

– lockstep issues

• What service levels apply?

– more bespoking for cloud BPO?

– a double-edged sword? – attractive to customers but costly to provider

– which factors are within supplier’s control, and which are not?

– balance customer's desire for high degree of customisation vs supplier’s desire for standardisation

– capacity constraints

• Calculation of service credits

Termination and Exit Assistance

• Particular points to assess for cloud BPO:

– how much notice is required?

– how much exit assistance is required?

• provision of data / other information

• how service cutover will be effected

– for how long?

– application and consequences of TUPE

• Other (usual) concerns:

– termination triggers

– financial consequences

Data Protection

• UK customers need to comply with Data Protection Act

– customer = “data controller”; cloud supplier = “data processor”

– what personal data is involved?

• 7th principle

– written contract with defined, appropriate security measures

– services are audited and contract is enforced

• 8th principle

– is data being “transferred” outside the EEA?

– does customer know where its data is?

– does jurisdiction provide an adequate level of protection?

– approved Model Contract Clauses

NB fair and lawful processing

Business Continuity

• Comprehensive cloud offering should have alternative infrastructures available at a remote location

• Recovery times and recovery point

• Customer right to audit and test these facilities?

• Interface with customer’s own arrangements

• Inter-relationship with force majeure clause

Liability and risk

• From a legal perspective, the issues are the same ...

• included and excluded losses

• level of any caps

• interaction with service credits

... but the cloud BPO risk profile will be different

• Understanding the nature of the services and the impact if they are not performed is key

– use a risk and liability workshop to drive this

Innovation Day - Wednesday 8th June 2011

The NOA is running an Innovation Day led by Lee Ayling, NOA Board Member for Innovation. This interactive event will feature the latest information and advice on how to implement innovation in your outsourcing deals. During the Innovation Day the NOA will be announcing the results of their research, carried out in association with KPMG, “Driving Innovation Through Collaboration”.

For more information on upcoming NOA events and booking details – please visit www.noa.co.uk or alternatively call the NOA events team on 0207 292 8692.

The eruption of Iceland’s Eyjafjallajökull volcano in April 2010 led to some 100,000 flights being cancelled last year after the corrosive ash cloud grounded European flights. Unable to attend crucial meetings in person, Europe’s business people turned to videoconferencing. Across Europe, workspace provider Regus saw a 180 % month-on-month increase in video communication enquiries in April and May 2010.

One year later, Regus is still seeing a level of video communication enquiries far above pre-cloud levels, averaging a 75% increase on the previous year across the UK, following the latest Grimsvotn volcano. Many expected that it would be business as usual once Europe’s aviation authorities allowed planes to fly at higher ash densities in May 2010, and airlines resumed normal service. However, the continued raised interest in Regus’ video communication facilities suggests businesses now see virtual meetings as a viable alternative to face-to-face meetings.

“The worldwide disruption caused by the volcanic ash cloud of 2010 had a beneficial consequence,“ remarked Celia Donne, Regus’ regional director, “it taught businesses that video communication can replace time-consuming and costly air travel. At a time when companies of all sizes want to cut travel costs and shrink their carbon footprint, why spend money on flights abroad when they can achieve the same results at a nearby video communication studio?”

The effect has not been confined to Northern Europe however with interest in video communication also increasing in parts of the globe not directly affected by the ash cloud. The aviation chaos of April and May 2010 persuaded many companies in Asia and Europe that they no longer need to cross continents to hold effective meetings.

However, Joshua Norrid, VP of travel and leisure at Progress Software, believes that operational efficiency is the key to dealing with this latest event:

“It’s difficult to imagine an industry currently under more pressure than the airline business. It has faced a myriad of challenges – the rise of the low-cost airline, high oil prices, environmental concerns leading to higher taxes and restrictions in airport growth, tightened security, industrial unrest and, now, unforeseen events such as the latest ash cloud.

“This Grimsvotn volcano eruption could create immense pressure upon carriers, which could lead the industry as a whole facing further losses. It seems hard to understand that an industry that moves 2.5 billion people per year and is so intrinsic to the global economy can have such grave economic difficulties.

“Operational efficiency, or trying to “squeeze more out of less”, is one area that airlines have concentrated on to try and maintain their viability. Despite lots of attention in this area there is still enormous work to do. One key area is in the use of IT to become more operationally responsive to the complex environment that airlines operate in. At the moment, operational managers in airlines don’t have the information they need to make effective decisions in time.”

ITC Infotech, a global IT services and solutions company and a fully owned subsidiary of ITC Ltd., has announced a strategic partnership with SAP India Pvt. Ltd to become a solution reseller for SAP® Business ByDesign™. With this partnership, ITC Infotech is now entitled to market, sell and deploy SAP Business ByDesign as well as offer additional services.

Commenting on the partnership, Dr. Sanku Bose, Vice President, ITC Infotech said, “We believe the SAP Business ByDesign platform will further enhance our value proposition among customers. There is a huge traction for such on-demand solutions in the market, and this partnership will help us in addressing customer needs better.” He further added, “We are recognized for our best-in-class competency in SAP services by prominent global industry and analyst forums.”

Speaking on the occasion, Rohit Madhur, Director – SAP Business ByDesign, SAP India said, “We are pleased to have ITC Infotech as a new SAP Business ByDesign solution reseller. Their reputation in the industry and proven track record of success speaks for itself. We look forward to a long and mutually profitable relationship.”

The number of private sector businesses in the UK at the start of 2010 increased by 48,000 (1.1 per cent) since the start of 2009, statistics from the Department for Business, Innovation and Skills (BIS) today reveal.

At the beginning of 2010, there were an estimated 4.5 million private sector enterprises in the UK. These 4.5 million businesses employed an estimated 22.5 million people and had an estimated combined annual turnover of £3,200 billion.

Business and Enterprise Minister Mark Prisk said:

“Private sector enterprises will create growth in our economy so it is encouraging to see that the number of businesses at the start of 2010 had increased. This was a difficult period, and these figures show the resilience of British business.

“I am determined that the Government will do everything it can to create the right environment for these businesses to now expand and grow, and also to encourage more people to set up on their own.”

Symantec Corp. has announced it has signed a definitive agreement to acquire privately-held Clearwell Systems, Inc., a recognized leader in the eDiscovery market.

Under the terms of the agreement, Symantec will acquire Clearwell for a purchase price of approximately $390 million, net of Clearwell’s existing cash balance of approximately $20 million. The agreement is subject to customary closing conditions, including regulatory approval, and is expected to close in the September quarter.

“As information continues to grow at unprecedented rates, the biggest challenge for customers is to protect, manage and backup this information as well as have the ability to categorize and discover it efficiently,” said Deepak Mohan, senior vice president, Information Management Group, Symantec. “The acquisition of Clearwell’s market leading electronic discovery solution will further increase Symantec’s ability to get the right information, to the right people, at the right time, while reducing overall legal review costs and limiting risk.”

Lincolnshire Police Authority are looking to outsource a range of back office services over the next 10 years, a contract worth around £200 million.

The contract for the Lincolnshire Authority and Force involves the widest range of services offered in a single contract by any police authority in the country.

The Police Authority was searching for potential strategic partners since March, after budget cuts of over £20 million over the next four years were announced.

Five companies are already shortlisted for the contract negotiations:

■Capita Bluelight Alliance

■Serco and Logica

■Steria with Reliance

■Northgate Information Solutions

■G4S

Birmingham City Council has revealed plans to offshore up to 100 back-office IT jobs by the end of this year, as part of its money-saving outsourcing deal with Capita Business Services.

The joint venture aims to save the council approximately £35m over the next four years.

“We are looking to offshore a number of back-office roles throughout this year,” said a spokesperson for Service Birmingham.

“Plans are underway at the moment for the first tranche of roles to be offshored; a second tranche will take place over the summer”.

The first two tranches will place approximately 55 roles overseas.

Although Service Birmingham only has “detailed plans” for the initial 55 roles, it will have the option to offshore a further 45 jobs by the end of the year.

Capgemini, one of the world’s foremost consulting technology, and outsourcing service providers has been awarded a five-year contract by the Hilti Corporation, one of the world’s leading technology suppliers for the construction industry. Capgemini Procurement Services, a new division of Capgemini Business Process Outsourcing unit, now provides the complete suite of electronic solutions for Hilti’s Procurement Indirect Materials, leveraging its IBX on-demand technology platform.

The project with Hilti is now live with the first phase in Germany. More than 3,000 end-users are guided to an electronic ordering process with a full scope of call-off methods including catalogues, web-shops, vendor forms and free text orders. Hilti will channel all suitable indirect spend via one channel through the “IBX on demand platform”. Hilti and Capgemini further plan to introduce Contract Management, automatic Invoice Matching and Electronic Sourcing with Online RFPs (Request for Proposals). Hilti was one of first companies to give one single provider the opportunity to deliver all the above processes.

Capgemini will work with Hilti to reduce complexity and to increase transparency in the procurement process for indirect materials. The target is to increase efficiency, contract compliance and spend under management while achieving cost savings.

Jürgen Friederici, Senior VP Procurement Indirect Materials, from Hilti said “We chose Capgemini above competitors because they were offering smart customer relationship management and best industry practice with realistic and measurable goals. Their offering focused on quality and a partnership built on honesty and trust. Capgemini’s eProcurement solutions and content management system with full integration into our ERP was unequalled. We look forward to working with them over the next five years.”

Aegon, the life insurance and pensions firm, has announced plans to cut 213 UK jobs, including those in IT, in a bid to meet its cost savings target.

The posts in IT, marketing and support will be cut from the company’s headquarters in Edinburgh, and its offices in Lancashire.

Aegon will also outsource 106 jobs in the area of the business that manages inbound and outbound documents to specialist document managing company Océ.

“This is a challenging time for our people and our business but achieving a lower cost base is essential to ensure Aegon remains a strong and successful business in the years ahead,” said Aegon UK chief executive Adrian Grace.

A new IBM study of more than 3,000 global CIOs shows that 60 percent of organizations are ready to embrace cloud computing over the next five years as a means of growing their businesses and achieving competitive advantage. The figure nearly doubles the number of CIOs who said they would utilize cloud in IBM's 2009 CIO study, and is one of dozens of new insights and trends learned from CIOs worldwide in businesses of all sizes.

As demand for ever-growing amounts of information continues to increase, companies are seeking simple and direct access to data and applications that cloud computing delivers in a cost-efficient, always-available manner. The use of cloud, which began in supporting deployments mainly inside companies, has now also grown common between organizations and their partners and customers. In IBM's 2009 CIO study, only a third of CIOs said they planned to pursue cloud to gain a competitive advantage. T

Thi study by IBM shows a dramatic increase in the focus on cloud, particularly in media and entertainment, which rose to 73 percent, automotive (70 percent) and telecommunications (69 percent).