Industry news

The Philippines has emerged as the world leader in business process outsourcing (BPO), supplanting India in terms of total number of workers employed. Two studies, one by IBM's Global Locations Trend report, another by consulting firm Everest Group, show a shift at the top of the still strong global cost-cutting trend.

With average annual growth of 46% since 2006, BPO has been one of the few bright spots in the otherwise moribund Philippine economy. The sector, almost non-existent a decade ago, has zipped from US$350 million in revenues in 2001 to over $9 billion last year. Analysts predict industry revenues will exceed $10 billion this year.

BPO has evolved into a $150 billion global industry, driven largely by Western banking, insurance and technology companies thathave outsourced parts of their IT operations to lower cost, English-speaking developing countries. The boom in the Philippines has been led by call centers, where Filipinos handle sales, customer service and technical support calls.

The Philippine boom has been led by call centers, which make up for nearly 70% of the local BPO industry, according to the Contact Center Association of the Philippines. Contracts from multinational companies Convergys, Accenture and IBM lead the way.

Even Indian BPO companies are shifting work to the Philippines. India's Tata Consultancy Services, which opened its first BPO center in Southeast Asia last December at Taguig City, projected that Philippine outsourcing will grow into a $25 billion industry by 2016, providing work for some 1.3 million people. The number of call centers in India has fallen by half over the past three years.

An estimated 120 BPO firms employed over 600,000 Filipinos last year, according to the Business Processing Association of the Philippines, a trade group. BPO company employees now earn on average 53% more than workers of the same age in other industries, according to International Labor Organization statistics.

Key to the Philippines' success has been its huge pool of English language-proficient workers. Now, US outsourcing clients are drawing a distinction between the Philippines and India, with a preference for Filipino workers' American accents and grasp of US culture.

Filipino BPO workers are often cited for their comparative ability to solve complex problems.

One industry executive estimated that it takes on average only one to two calls to solve a problem in the Philippines that in comparison would take six or seven in India. Indian BPO entrepreneur Deepak Patel recently noted that "Indians have not been able to handle irate customers" as well as Filipinos can.

The Institute for Development and Econometric Analysis Inc, a local think-tank, estimates that the fewer number of calls required to solve a BPO-related problem has contributed to the Philippines cost competitiveness vis-a-vis competitors in India.

While Philippine average salaries are higher than in India, US companies are increasingly willing to pay for the difference. Filipino call center agents earn around $3,600 annually, still considerably less than the $30,000 excluding fringe benefits required to hire an average US worker. Attrition rates are also much lower in the Philippines than in India, a crucial measure of quality control.

Generous tax incentives for BPO-related investments, including income tax holidays of six to eight years, have also given the Philippines an edge. The World Bank's latest Philippine Quarterly Report points out that during the tax holiday period, industry net margins rate were between 11-21% in the Philippines compared with 13-16% in India. After the income tax holiday period, the two countries were roughly on par, the research found.

Shortages ahead

Still, there are several questions hanging over the industry's long-term sustainability. Other lower cost countries, including China, Sri Lanka, Vietnam and several Eastern European states, are aggressively trying to lure more BPO investments. Electricity rates in the Philippines are among the highest in Asia and are driving up the cost of BPO operations. A recent rise in office rental rates is also undermining the Philippines' comparative cost advantages.

A bigger concern over the medium term is a projected shortage of qualified English-speaking workers. Industry leaders have noted a sharp deterioration of English language capabilities among new graduates, a result of a new government emphasis on teaching the local language in schools and a general decline in the quality of the country's education system.

The Commission on Information and Communications Technology (CICT) recently concluded that only seven out of every 100 graduates have the skills required by BPOs.

Meanwhile, the industry will need an estimated 160,000 new workers annually by 2016. The lack of talent is driving up salaries, especially at the higher-end service segment of the industry. As a result, companies are increasingly relying on more English-language proficient retirees to fill job vacancies, industry leaders say.

There is an even bigger danger that if the Philippines fails to move into higher value-added production services, such as software development, engineering, medical record services, accountancy and game development, growth will start to stagnate. That risk will rise with rising global competition for the basic voice-oriented services Philippine BPO companies now dominate but over the medium term won't be able to sustain high growth.

Demand for higher-end BPO services that require more technical knowledge is expected to grow faster than voice-based customer services in the years ahead. It's a segment where India, where entry level IT professionals earn around $5,400 compared to $7,000 in the Philippines, has a clear market lead.

Konstantinos Boukis, owner of Philippine BPO firm Helicon Technology Corp, believes the industry will be able to sustain fast growth over the next five to six years. After that there is a broad concern that growth will be restrained by the lack of linkages formed between BPO companies and local industries that have moved up the value-added ladder.

A recent Philippine congressional report noted that the BPO industry has very little interaction with the rest of the economy, mainly because 92% of its output is exported as services to other countries. Call centers, in particular, were characterized as the lowest rung on the global outsourcing ladder. Unless the BPO sector can upgrade itself and contribute to greater efficiencies and competitiveness across other industries, the Philippines leadership position will likely be short-lived.

Source: http://www.atimes.com/atimes/Southeast_Asia/MC09Ae01.html

Intelenet will provide a spectrum of services, covering back-office processes and customer support functions, within the F&A BPO domain.

Intelenet Global Services Private Limited has signed a five-year outsourcing partnership with Tata Teleservices Limited, one of India‘s leading private telecom service providers. This partnership elevates Intelenet’s position and makes the Company the first player to offer Finance & Accounting processes in the telecom vertical.

Intelenet will provide a spectrum of services, covering back-office processes and customer support functions, within the F&A BPO domain. Intelenet will provide account payable services pan-India for all the 22 circles of Tata Teleservices from its existing delivery centers. With a successful track record of partnering with leading global and local telecom players, Intelenet has a strong foothold and an established play in the telecom vertical. It has also built a strong presence and repute in the F&A services sector, having witnessed 25 per cent growth last year.

“We are delighted to partner with a dynamic brand leader like Tata Teleservices and be the first player to innovate with F&A offerings in the telecom space,” Mr Susir Kumar, Managing Director and Chief Executive Officer of Intelenet Global Services, said. “Having successfully built our expertise herein, we offer seamless delivery of end-to-end F&A services, coupled with a strong delivery footprint. In keeping with our strengths, we are confident of providing tangible value, reduced risks and complete customer satisfaction,” he added.

Speaking on the partnership with Intelenet, N Srinath , Managing Director,Tata Teleservices Limited, said, “As we expand our telecom offerings, we need the expertise to manage some of our back end operations. The domain expertise and depth of Intelenet’s offerings will help Tata Teleservices focus on its core business offerings and imperatives.”

Source: http://www.indiainfoline.com/Markets/News/Intelenet-Global-signs-5-year-outsourcing-partnership-with-Tata-Teleservices/5100187708

Government cuts will claim 28,000 police jobs, the Association of Chief Police Officers (Acpo) has said.

The Acpo estimate for England and Wales has been made in a confidential memo to ministers published in the Guardian.

Acpo predicts the jobs of 12,000 police officers and 16,000 civilian staff will be lost as a result of spending cuts.

Meanwhile, the Winsor review of police pay and conditions to be unveiled on Tuesday is expected to recommend cutting £180m in annual bonuses.

Greater Manchester Chief Constable Peter Fahy confirmed the job loss forecast - representing a reduction of about 12% of posts - to the Guardian.

He said: "We will have fewer staff, the same or more demands, and will need to incentivise staff to produce higher quality."

Pay structure

The government is planning to cut its funding for the police by 20% by 2014-15.

The 43 forces in England and Wales currently employ about 244,000 people, comprising 143,000 police officers and 101,000 civilians.

The review of police pay by former rail regulator Tom Winsor is set to suggest scrapping a series of allowances and bonus payments, and reducing the amount of overtime.

It is also expected to consider areas such as police housing, travel allowances and shift patterns, in an attempt to modernise working practices and make the service more cost-effective.

Acpo said overtime was needed to allow forces "to respond flexibly to any event or crime at any time whether it be a flood, a major murder investigation or public order incident".

BBC home affairs correspondent Danny Shaw says the Acpo figures are the latest and most reliable figures on police job cuts since Chancellor George Osborne's Spending Review last October.

Paul McKeever, chairman of the Police Federation of England and Wales, said the proposed cuts come after a two-year pay freeze for officers.

He told the BBC Radio 4 Today programme: "For many officers it is going to mean them losing their homes or not being able to put the heating on.

"That is the reality for people out there and they are very angry and upset about a government that is out of touch and doesn't understand policing."

Mr McKeever said there was "spin and negative stories coming from Home Office advisers" who used "isolated examples" to suggest officers were regularly claiming excessive and unjustified overtime.

Home Secretary Theresa May has warned that reductions in police pay are "unavoidable" in order to minimise front-line job losses.

Speaking at the weekend, she said: "We are working with police forces to identify savings that actually go beyond the reduction on the central policing grant in the next four years.

"I know that some will reject in principle the very idea of reviewing pay and conditions, but I remind them that those savings will save the jobs of thousands of police men and women.

"Nobody is pretending decisions like these will be easy."

'Blind arrogance'

Shadow home secretary Yvette Cooper said the figures were the "latest nail in the coffin for the prime minister's claim that he would protect the front line at all costs".

"Chief constables are being put in an impossible position by a government that seems happy to ride roughshod over public safety and the morale of the police force," she said.

"The government is cutting too far and too fast with 20% frontloaded cuts.

"The home secretary and her ministers have a blind arrogance in their dealings with the police.

"Rather than working with them, they are bludgeoning police numbers, their budgets and their operational capacity."

Blair Gibbs, from the right-leaning think tank Policy Exchange, said the review was "long overdue" as current working arrangements were "outdated".

"We need pay and conditions that reflect the white collar workforce... that we want policing in the 21st Century to be with many more graduates, many more women, more civilian trained staff supporting the police, and that means, ultimately, modern working conditions."

The former deputy assistant commissioner of the Metropolitan Police, Brian Paddick, suggested forces should save money by changing rules on overtime to bring them in line with the private sector.

He told the BBC: "Policing is a very unpredictable business, you never know when you're going to have a major incident for example. But the regulations about overtime are antiquated."

Source: http://www.bbc.co.uk/news/uk-12672329

The UK economy will grow by less than expected in 2011 but growth in 2012 will be better than predicted, the British Chambers of Commerce forecasts.

The group downgraded its forecast for UK GDP growth in 2011 to 1.4% from a December forecast of 1.9%.

The BCC said the downward revision was due to an unexpected fall in 2010's fourth quarter GDP.

Interest rates

In its forecast, the BCC increased its estimate for unemployment for early 2012 to 2.65 million, up from 2.6 million.

However, the business group raised its prediction for growth in 2012 to 2.3% from 2.1% in December.

At the weekend, David Cameron gave a speech at the Conservative Party spring conference in Cardiff highlighting the importance of the private sector to the UK's economy.

He pledged to stand behind entrepreneurs and stand against what he called the "enemies of enterprise".

"While we support efforts to reduce the UK's deficit, these measures alone will not deliver a sustainable recovery," he added.

The BCC said it believed that the Bank of England would raise interest rates in May from the current historical low of 0.5%.

But the group warned that such a move could be premature at this stage of the economic cycle.

'Difficult task'

Separately, financial services firm PricewaterhouseCoopers (PwC) issued a report suggesting that the monetary policy committee (MPC) of the Bank of England should not raise interest rates before the economic recovery is secure, despite concerns over inflation.

"The MPC faces a difficult task in balancing upside risks to inflation against downside risks to growth," said John Hawksworth, PwC's chief economist.

"Our own judgement, however, is that the MPC should not be increasing rates until it is clear that the recovery is secure," he added.

"We do not believe that it needs to increase interest rates immediately to meet its target of a 2% CPI inflation rate in two years time."

Source: http://www.bbc.co.uk/news/business-12672276

Some 40 per cent of public sector organisations will use shared services in 2011, according to a study by CIO research forum K2advisory.

The study surveyed 106 senior managers and directors in the public sector in January 2011.

Of this 40 per cent, nine per cent said the coalition's programme of public sector cuts detailed in its Comprehensive Spending Review (CSR) had spurred them to opt for shared services.

"The CSR is absolutely driving this growth," said Sarah Burnett, lead analyst at Ovum for the public sector.

"This fact that you can generate economies of scale through joint procurement and joint running of services, means that growth is just going to continue throughout 2011," she added.

K2advisory's research indicates that there are enough strategically focused public sector CIOs for shared services projects to work without requiring external leadership.

However, it also suggests that once completed, it is unlikely that a CIO will become "head of shared services", unless he or she has management experience outside of the IT department.

K2advisory believes this holds true even when IT is the sole shared service.

Burnett suggested that shared services programmes require a leader who primarily is not focused on keeping the different bodies involved happy.

"These projects require long-term commitment, and they need strong leadership," said Burnett.

"These leaders need decisions to be made for the better of the shared services, not to keep individual managers happy," she added.

"There is no point in having a head of shared services who has to consult with separate bodies – they need to have decision-making power."

Source: http://www.computing.co.uk/ctg/news/2031800/public-sector-bodies-shared-services-2011#ixzz1G0FckRFl

Fujitsu announced it will support Virgin Media in its residential and business installations and help provide engineering services. The multi-year contract begins this month, with Fujitsu's Transition Team ensuring a seamless integration of Fujitsu services over the coming weeks.

Fujitsu is playing an integral part in Virgin Media’s commitment to a great customer experience throughout the join journey and beyond. Fujitsu technicians will work in partnership with Virgin Media to deliver an outstanding installation experience to customers in Scotland, North East England and Northern Ireland. Fujitsu will also help Virgin Media to streamline its post-install operational processes by providing residential and network engineering support

The new contract further deepens Fujitsu’s current successful relationship with Virgin Media, having already supplied residential and network engineering and business installation services as well as providing cabinet and business Customer Premises Equipment (CPE) solutions.

Andy Stevenson, chief executive officer, Fujitsu Telecommunications Europe Limited, said “Fujitsu is delighted to have been able to respond to Virgin Media's requirements with a compelling and competitive proposal. We have a proven track record with Virgin Media, providing innovative and efficient solutions, and this further strengthens our relationship. With the signing of this contract we are looking forward to developing our partnership by delivering this service platform more effectively and efficiently for the benefit of Virgin Media’s customers.”

Paul Buttery, chief customer and networks officer at Virgin Media, said “This is one of the largest operational transformations we’ve undertaken with our field partners and we’re looking forward to Fujitsu’s support in delivering an outstanding customer experience. We’re continually improving our services and our field partners help us deliver a great experience by contributing core expertise and a real understanding of the Virgin Media brand.”

Salmat this afternoon confirmed 742 full-time equivalent staff located in Sydney and regional Australia will be laid off by May, unless a new contract is landed by the company.

“Salmat has been notified by Telstra that Telstra no longer requires the provision of certain call centre services from Salmat,” the company said. “The notification covers the bulk of the call centres services Salmat currently provides to Telstra.”

The company said 330 positions will be cut in Sydney's Surry Hills by April 30, with another 107 cut in Bundaberg, Queensland, and 142 in Wagga Wagga, NSW, in the same period. There will also be 163 positions affected in Geelong by May 31.

The company said nearly all of the staff are tied to the Telstra contract.

Its shares were down 25 cents, or 6.1 per cent, at $3.87 in afternoon trade.

Salmat said earlier its earnings before interest, tax and amortisation would drop by between $4 million and $5 million in the second half of the financial year. Its full year EBITA guidance had been cut by $5 million to between $87 million and $92 million.

The company said it maintained a close relationship with Telstra, with Salmat continuing to provide the telco with customer communication services and Telstra providing it with telephone services.

Telstra said the tender process for the new contract would not be completed for a few weeks.

"Calls handled by unsuccessful participants in this competitive process will be gradually wound down before moving to another specialist call centre provider," said a spokeswoman for Telstra.

"Telstra uses a mix of call centers, both here and overseas, and will continue to use partners in Australia, once the process is complete."

Source: http://www.theage.com.au/business/700-jobs-lost-after-telstra-axes-contract-20110307-1bkf2.html?from=age_sb

Meredith joined SJ Berwin from Kemp Little in 2007, when the City firm set up a bespoke outsourcing practice as part of its ­commercial group.

Although his exit will bring the experiment to an end, head of ­commerce and technology Jeremy Schrire insists that the firm will retain its outsourcing expertise.

“It was a standalone [practice] doing significant projects for our clients,” said Schrire. “We’ll continue to do it, but as part of a suite of offerings that we have for all commercial clients, not as a standalone practice.”

Meredith will be joined at his new firm by legal director Andrew Sutherland, who also arrives from SJ Berwin.

In the latest in a string of large outsourcing deals by energy companies, the UK division of French utilities company EDF has announced a £100 million IT support deal with IT services supplier Capgemini.

Under the contract, Capgemini will provide IT support and desktop services to 15,000 EDF users. The contract is guaranteed for three years, with an option to extend it by a further two.

The work is a new contract win for Capgemini, which replaces EDF's existing supplier Computacenter. But Capgemini has worked with EDF for a decade on other systems including CRM applications, e-procurement tools and the software it uses to monitor and maintain its nuclear generation facilities.

A number of European energy suppliers have announced large outsourcing deals recently. Earlier this week, British Gas' parent company Centrica signed a £250 million deal with Hewlett-Packard, which has also won big contracts from E.ON and BP.

Last month, Dutch oil giant Shell entered into a €300 million contract with Logica, which will operate its fuel card loyalty scheme for businesses.

So why is the energy sector rushing to outsource? It is not for want of profit, which doubled for both Centrica and Shell in 2010.

A spokesperson for Centrica told Information Age earlier this week that its deal with HP had been motivated in part by the uncertainty facing the company and the industry. It had selected to procure utility computing services and a private cloud environment from the IT giant to allow it to scale resources according to fluctuating demand.

Besides the continued economic uncertainty facing all businesses, the energy sector has also yet to see the long term impact of world government's energy efficiency initiatives. IT outsourcing is one way to mitigate the risk associated with that ambiguity, by sharing the burden of IT investment with a third party.

"The energy world is facing unprecedented uncertainty", said Nobuo Tanaka, executive director of the International Energy Agency at an event in London in November 2010.

"It is hard to overstate the growing importance of China in global energy," he added. "How the country responds to the threats to global energy security and climate posed by rising fossil fuel use will have far reaching consequences for the rest of the world."

Source: http://www.information-age.com/channels/it-services/news/1606513/energy-sectors-outsource-spree-goes-on-with-edf--capgemini-deal.thtml

The City of London Corporation has signed a deal with Accenture worth up to £12.5m to deliver a new procurement shared service centre.

The service will undertake procurement and procure-to-pay functions across all divisions of the City of London.

The deal should save the City of London more than £30m over five years, according to Mark Lyons, Accenture's UK and Ireland managing director for health and public service, who added that the company's fee would be tied to savings made.

Chris Bilsland, the City of London Corporation's financial director, said the more the corporation saves, the more Accenture will be paid.

"If Accenture hits all their targets and provide both transformational savings, and quality, then we will pay them somewhere in the region of £12.5m," he said.

"We are looking to save money, and we think we can drive better bargains. The new system will help us do this. Also, by making procurement more streamlined we hope to become more customer efficient," added Bilsland.

It is hoped that this unified procurement function will help the City better execute the latest techniques, such as category and demand management, as well as improved cost management.

Accenture said change management will be essential to the transformation programme, and it will provide training to both the City staff involved with the project, and those who will be running it once implemented.

City of London will have 40 people working on the project alongside 20 from Accenture.

"As an organisation, we employee 3,500, and it is expected that this new system will be used by each and every one of them at some point or other," said Bilsland.

Source: http://www.computing.co.uk/ctg/news/2031399/city-london-signs-accenture-centralise-procurement#ixzz1G0EayflZ