Industry news

For India's top outsourcing companies looking to hire more local staff in the US, allegations of visa misuse and age discrimination in recruitment is the latest form of backlash to deal with.

Over the past few weeks, two individual lawsuits alleging H1B misuse and age discrimination in local hiring have been filed against Infosys, the country's second biggest tech firm that counts JP Morgan among its top customers.

While Infosys is the only company to have faced individual lawsuits, tougher visa regulations are affecting business for India's $60-billion software exports industry. For instance, US visa rejection rates for Indian techies have doubled from around 4% to over 8% over the past nine months.

"We're still quite young in this game. We'll need to learn from how companies like Toyota dealt with such issues many years ago," said a senior official at one of the leading Indian technology firms with operations in the US. He requested anonymity because he's not authorised to comment on this issue. "We are making sincere efforts to hire more locally and even engage with policymakers, such lawsuits against big outsourcing brands are opportunistic," he added.

Until last year, Infosys, Wipro and Tata Consultancy Services had to deal with new legislations and proposals that increased fee for work permits and even made it tougher for them to send Indian techies to the US for delivering projects locally. Now that the political rhetoric against outsourcing companies seems to have slowed down, these lawsuits are beginning to raise concerns about a new face of anti-offshoring backlash.

In the age discrimination suit filed by 58-year-old Ralph DeVito of New Jersey against Infosys, he has alleged that the company rejected his application filed through job portal Monster.com despite having adequate experience. According to the complaint, Infosys had set the maximum experience as 25 years, which DeVito had while applying in August 2009.

"The maximum experience requirements constituted a limitation, specification or discrimination as to age i.e. a de facto age limit because they were more likely to eliminate applicants for the Infosys positions who were age forty or older," DeVito said in his complaint, a copy of which is with ET.

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The King’s Fund has called for entire care pathways to be outsourced to external providers including private companies, claiming GPs do not have the time to make the required service re-design in primary care demanded by the NHS reforms.

The influential think tank says GP consortia should look to devolve responsibility under proposals which would see external providers offered financial rewards and take on the financial risks for developing NHS services.

It comes after Pulse revealed earlier this month that the Department of Health is backing plans for huge tranches of the health service to be put out for tender, with GP providers set to be pitted against private firms to take on care pathways, including services such as care for the frail and elderly, musculoskeletal services and respiratory care.

Dr Nick Goodwin, a senior fellow at the King’s Fund, told a meeting of key NHS figures in Westminster that the task facing GP consortia in developing services in primary care was so huge it would be impossible for them to take on without outsourcing huge areas of care.

He said if busy GPs attempted to re-design pathways the job could account for ‘five per cent of the budget and 50% of the time’.

‘They will have to devolve responsibility to groups at a more regional level and they may well be external groups including private companies,' he said.

‘GPs can set the standards but consortia will ultimately want to commission organisations to take on the risk.’

Mr Goodwin admitted the proposals were ‘controversial’ but said GPs would have no option but to look to external providers as the Government draws up plans for a 'series of rewards and penalties' to provide the financial incentive to consortia to reduce the cost and increase the quality of NHS care.

Earlier this week a major investigation by the King's Fund described the GP profession as a ‘cottage industry in need of modernisation’.

It said a change in mindset and culture was needed amongst GPs to encourage them to embrace change, with a shift from the role of gatekeeper to that of 'navigator' in the new world of GP commissioning.

Pulse reported earlier this month that NHS East of England is developing plans to put a raft of care pathways out to tender under the Government’s any willing provider policy, while other areas, including NHS Oldham, are also planning competitive tenders which would be open to private firms to compete to take on primary care services.

A series of GP pathfinders and NHS Surrey are already working with a private company, Integrated Health Partners, on plans for a risk-sharing model whcih would see private firms take on service re-design and practice performance management in return for receiving financial incentives.

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Serving police officers are being taken out of frontline roles and moved to cover the "back-office" functions of civilian staff who have been made redundant, according to leaked memos which show the perverse side-effects of budget cuts.

The decision by Warwickshire police authority – one of the smaller forces in England and Wales with 1,800 officers and staff – to draft up to 150 frontline officers into civilian desk jobs is expected to be followed by other forces grappling with a 20% cut in their Whitehall funding.

Police officers are Crown-appointed warrant holders and cannot be made redundant. They can only be "compulsorily retired" through an obscure regulation after more than 30 years' service, but civilian support staff do not enjoy such job security.

The leak comes as a second survey of police authority intentions carried out by Labour confirms that the police are heading for 27,500 job losses, including 12,500 police officers, over the next four years. Ministers have vowed to protect frontline policing from the impact of the cuts and a report by Her Majesty's Inspector of Constabulary to be published on Wednesday is expected to clear up the confusion over where the "frontline" can be drawn in the battle against crime.

The shadow home secretary, Yvette Cooper, said the Warwickshire situation showed that chief constables had been put in an impossible position: "It is now clear that when there is not the staff to help plan, co-ordinate or forensically investigate the fight against crime, then police officers will have to be taken off the streets to do this work.

"The government needs to take responsibility and recognise that the loss of 12,500 police officers and 15,000 police staff across the country is taking risks with public safety and the progress on crime and antisocial behaviour that was made over the last decade."

The decision by Warwickshire to redeploy frontline officers to roles such as staffing inquiry offices and control rooms and conducting routine visits to crime scenes was disclosed in a leaked memo by Richard Elkin, the force's human resources director.

He has written to all 860 back-office staff inviting those with more than two years' service to apply for voluntary redundancy: "Whilst the force manages the required reductions in the number of police officers, it has been agreed that some will be temporarily posted into police staff posts which are currently vacant, or which will become vacant following voluntary redundancy," says the memo.

The Warwickshire force faces losing 450 jobs out of its 1,800 strength to find savings of £23m in its £100m budget by 2015. The home secretary, Theresa May, and the police minister, Nick Herbert, have repeatedly said it is possible for savings to be found through cutting bureaucracy and back-office functions without hitting the frontline.

Ian Francis, chairman of Warwickshire police authority, has said that there are too many police officers in the county force for the new model of policing which is being implemented. "We don't like it, they [Warwickshire police federation] don't like it, I don't think the public like it, but at the end of the day we have no option," Francis has said.

Francis has predicted that other forces are also likely to draft frontline officers into support roles: "The simple matter is yes, we are going to lose policemen from the front line."

Simon Reed, vice-chairman of the Police Federation, said Warwickshire's example would be followed by other forces: "What is happening in Warwickshire will happen elsewhere simply because of the sheer amount of money being cut from budgets.

"When we lose staff in inquiry offices, control rooms or going to scenes of crime then this will happen."

Reed said the cuts would reverse a 10- year process of getting uniformed officers back into mainstream police roles: "It is a question of teamwork. We all depend on each other. The frontline depends on the back-office function."

But a Home Office spokeswoman insisted savings could be achieved without cutting the frontline. "We believe that police forces can make the necessary savings while protecting frontline services and prioritising the visibility and availability of policing," she said.

"Forces must focus on driving out wasteful spending, and increasing efficiency in the back-office. The effectiveness of a police force does not depend primarily on the number of staff it has, but rather on the way they are deployed."

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French IT services giant Atos Origin has been given clearance by the European Commission to proceed with the acquisition of Siemens IT Solutions and Services, which was originally announced on 1 February.

The transaction has also been approved by the US anti-trust authorities.

The acquisition is expected to close by July, subject to the completion of the remaining condition that the Atos Origin shareholders give their approval at an Extraordinary Shareholders Meeting.

Atos Origin will pay €850m (£725m) for the division.

The IT services company that will result from the acqusition will bring in annual revenue of about €8.7bn, and employ 78,500 staff worldwide.

Atos effectively cherry picked the best part of what has always been a loss-making division, by purchasing only 90 per cent. Siemens agreed to retain the remaining 10 per cent.

When the deal was announced, Tim Daniels, TMT strategist at Olivetree Securities, described it as "a steal".

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Southwark Council has lost a £700,000 legal battle against IBM over a problematic master data management system implementation.

The system was put in place in 2006, and after a review in July 2007, the council argued that it was unfit for purpose and of unsatisfactory quality.

Southwark found problems with the user interface, messaging integration, matching strategy, and a lack of reporting capability.

However the judge ruled that Southwark Council had fully understood the capabilities of the system, and decided to plough ahead with installation despite it being an inappropriate choice.

"An analogy is the potential car purchaser who might want an off-road vehicle but, having looked at the brochure for an on-road vehicle, says to the salesman 'That's what I want' and buys that vehicle," the judge said.

"There will be no cause of action against the garage for the car being no good off the road. The salesman will reply, with justification: 'You got exactly what you asked for'. That is essentially what has happened in Southwark's case."

The council said it will not appeal the case, and is now going to assess its current system and look to other vendors for implementation.

"This case refers to the acquisition of software back in 2006 which, in our view, was not fit for purpose," a council spokesperson said.

"We're disappointed with the judgment but we took this action because we believed we had been missold a product. Our duty is to have IT systems that work and that save the council and the council tax payer money.

"We will not appeal. We will now have an internal review to make sure we get the software we need so that we are able to cut running costs for the organisation and we will look for suitable partners to help us deliver this."

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Accenture has entered into a multi-year contract in which it will provide the Netherlands-based global logistics company CEVA with finance and accounting (F&A) business process outsourcing (BPO), and management consulting services. The financial terms of the contract were not disclosed.

The F&A BPO services Accenture will provide include accounts payable, accounts receivable, month end close, balance sheet reconciliations and reporting. Accenture will ultimately provide these F&A services to CEVA through the Accenture Global Delivery Network using delivery centers in India, Romania and Argentina.

The management consulting services Accenture will provide focus on the harmonization and redesign of a number of CEVA’s operational processes. The bundling of the management consulting services alongside F&A BPO will allow CEVA to accelerate the transformation of its finance function across both the outsourced and retained organisation by focusing on the end to end business processes.

Through these services, Accenture will help CEVA to exhibit greater control over cost management, minimize revenue leakage and create more consistency in business processes throughout the logistics and shipment lifecycle. By leveraging its deep industry skills and knowledge, Accenture will help CEVA to streamline its back-office operations while allowing the logistics company to concentrate on client relations and the development of better services.

“With its strong background in business transformation and BPO, Accenture was an obvious partner for CEVA,” said Rubin McDougal, CFO, CEVA. “Accenture already has a strong working knowledge of our operations which is helping the transformation process.”

“The bundling of our different capabilities will enable us to deliver a cost-efficient, seamless and enhanced service,” said Jan-Coen Smit, at Accenture. “And it will allow the logistics company to keep its focus on delivering quality and innovation to its customers and achieving high performance.”

Accenture has been providing a range of services to CEVA for more than three years and this agreement will bring the relationship between these companies to a new level of collaboration on a range of management consulting and technology projects.

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While faster growth looks good for investors, customers are more concerned about what a vendor can offer beyond pure cost savings.

"It's unlikely that faster growth in the past two years help these companies win a lot of new clients. A 5% or 10% difference in growth rates does not make such a big difference to the client. What a client looks at is the capability, the domain expertise and the pricing," said Amneet Singh, vice-president, global sourcing, Everest Group.

For HCL Technologies, the strategy has been about gaining more business by going for total outsourcing contracts - an area where profitability can get affected, according to analysts.

HCL's strategy of focusing on market share gain has yielded good results over the past 18 months as HCL has grown revenues ahead of peers.

"That said, the concomitant deterioration in margins and cash-flows has meant that there isn't enough in the plate at the cash profit level for investors. While we do not think having a lower margin is necessarily a bad thing, it needs to be accompanied by solid revenue growth over an extended period of time (which Cognizant has demonstrated)," CLSA analysts Nimish Joshi, Bhavtosh Vajpayee and Arati Mishra said in their February report to investors.

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Building on 25-plus years of experience working with more than 1,000 clients, IBM is officially unveiling a ‘pre-engineered technology services model’ that can cut deployment time by more than 60 percent, and slash costs by up to 50 percent. Big Blue’s new services capabilities are based on a set of server, storage, networking and help desk services ‘assets’ that integrate process, software, industry expertise and IBM research to create reusable building blocks. The company says that by ‘baking’ its expertise, software capabilities, experience and best practices into its services offerings in a standardized, systematic way, it can speed up the time it takes to build the basics.

IBM says that most IT organizations have been dealing with massive growth and less-than-ideal results over the last few years. The challenge was to come up with how to dramatically increase its outsourcing business in a way that would enable future growth for their clients, sort of “a gift that keeps on giving”.

While each customer engagement tends to be unique, IBM says that they tend to involve 80 percent standard solutions and 20 percent customization. The company started putting the concept together about two years ago, and a year later used itself as a test bed, deploying its entire storage infrastructure using the standardized asset-based approach, which is expected to lower its storage costs by nearly 50 percent.

According to the InformationWeek Analytics 2010 Business of Outsourcing Survey, nearly six of 10 IT shops outsource some critical function–management, engineering, or development; almost one-fourth keep executive and management functions in-house but look to outsource everything else. However, 29 percent of the 530 business technology professionals surveyed have fired a vendor within the last 12 months.

Last year HP launched its Cloud Start service, which includes everything for a cloud deployment such as application and virtual machine sizing tools, deployment scripts, processes and work flows to new, on-board applications and training for HP’s Cloud Service Automation software. The offering was based on taking a standardized approach to the company’s consulting and build-out services, and offering a quicker turnaround.

Bill Martorelli, principal analyst, sourcing and vendor management, Forrester Research, thinks that IBM’s new offering, as well as cloud service initiative’s like HP’s, are in line with the trends he’s following in the outsourcing market. “I think it is broadly consistent with the trend in this market that is focusing on services that are more packaged, more bound up as building blocks as opposed to custom one-offs.” This market has tended to be characterized by a lot of customization, he says, and this is an attempt to bring in more standardized, pre-engineered solutions.

There is growing commoditization in the outsourcing market, as well as an increase in the number of companies competing with IBM, says Martorelli. It’s been a very competitive market which finally looks like it’s growing again. He expects that the move to cloud services will become more prevalent and that IBM’s latest announcement is a step in that direction.

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Sri Lanka’s information technology and business process outsourcing sector is positioning itself as a niche player targeting finance and accounting, telco, travel and aviation sectors, an official said.

“We will focus on SMEs (small and medium enterprises), more that 90 percent of us are working with SMEs in other countries,” Dinesh Saparamadu, head of Sri Lanka Association of Software and Service Companies (SLASSCOM).

“We want to be known for quality and ethics, which will be the differentiator.”

SLASSCOM has 120 members who account for 90 percent of the exports.

Saparamadu said IT was now the country’s fifth largest export and the industry wanted to push revenues to a billion dollars by 2015.

SLASSCOM was working with universities and higher education institutes to expand capacity and was also increasing awareness is schools with students and parents about opportunities available in the sector.

Saparamadu said the association has engaged a public relations firm in the UK to build international awareness about the country.

Recently a sector report on financial and accounting services outsourcing had been released which potential investors who want to set up shop can use.

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Thames Water, the largest water company in the UK, has signed a five-year contract with procurement specialists Efficio to manage £500m worth of spend a year.

The deal, which takes effect on April 6th, will mean Efficio providing a full procurement managed service taking responsibility for sourcing and contract management of all Reading-based Thames Water’s direct and indirect spend.

Thames Water head of supply chain Ian Bolger said: “We are confident Efficio will build on our existing staff expertise to take us to a higher level of procurement effectiveness.”

The London-based consultancy had previously led an 18-month procurement transformation project with Thames Water to improve efficiencies and generate savings in both capital and operational expenditure.

Efficio chief executive Jens Pedersen said: “We are delighted to have won this contract with a major UK company and look forward to delivering excellent results for Thames Water.

“Having worked with Thames Water in the past we know they understand the contribution we can make to their continuing success.”

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