Industry news

We’ve also seen a lot of M&A activity, which has resulted in fundamental organisational change in the industry. This too has affected decision makers in these organisations, many of whom have either moved up, on or out. This trend is particularly prominent in the UK life insurance industry.

However, most financial services companies are now aware that they need to start moving forward and offering new products and services – the worst of the crunch is (hopefully) over and it’s time to embrace change and rebuild market share. This will be a good thing for outsourcers.

For instance, the demand for OPAL’s services has been steadily increasing – particularly because of our ability to help financial services companies launch products quickly. We see this as part of a wider realisation within the industry that outsourcers can share the risk of implementing solutions. Once the period of hiatus caused by the stalling economy settles down over the next 12-18 months we predict a surge of new products and services.

Outsourcing certainly seems to have moved to the top of the agenda for decision makers whereas, in the past, it had been regarded as a last resort when organisations wanted to give a problem to someone else. Now, financial services’ decision makers are taking it seriously as a strategic option.

The impact of the crisis and downturn upon providers, in terms of their offerings to their existing financial services clients, was mainly surrounding ‘business retention’. This has always been a buzzword used in the industry but very few FS organisations had taken it seriously enough. However, business retention is now considered an economic necessity and companies are focusing on their client bases and trying to figure out how to retain customers and offer new products and services to them.

The industry is much more aware of regulation and its impact and it is becoming far more ingrained in what they do. Outsourcers are becoming more compliance-savvy as well. As such, the crisis is likely to provoke an improvement in customer experience over the longer term. It is harder in this climate to recruit new customers and so retention of current customers is vital.

With new technologies available, a savvier consumer base and new players such as Tesco and Virgin coming into FS with a clean slate and not hampered by legacy systems, the old dinosaurs are now going to have to wake up. These new players are able to create financial services offerings from scratch, looking at the industry from a much stronger retail perspective. Outsourcing will have a huge role to play in this, as these new players are unlikely to want to build expensive, cumbersome back offices from scratch.

As things pick up, we will see a much more competitive market – which is good news for the customer. At some point the industry will need to wake up to social media and find a way to engage with it. Regarding outsourcing, large FS institutions are going to ask themselves if they still want to have vast empires of resources or look to specialist outsourcers who are able to help them to meet these new challenges.

Tony Collins, CEO, OPAL, the financial outsourcing company www.opal-uk.com

Hosting company Rackspace is hoping to allay customer concerns about where their data is held with the launch of a UK-based cloud infrastructure.

With businesses subject to strict regulations about where data is held and how it is moved, cloud computing has been off the agenda for many organisations because most services are hosted outside the UK.

Rackspace has operated European-based datacentres for their hosting services for some time but has lacked cloud capabilities based in the region. The company has more than 100,000 customers using its cloud services globally.

By locating cloud infrastructure in the UK, Rackspace will provide cloud-based storage and processing to customers without data leaving the country, something analysts believe is an important move.

"Geographical location of data is important. A lot of the US vendors don't appreciate that having a cloud-based infrastructure that's located geographically in the US means that almost all European countries have data that they can't possibly shift there legally," Freeform Dynamics analyst Tony Lock told silicon.com.

Lock added that the UK-based cloud infrastructure is "an essential first step" for Rackspace if it is to attract more customers from within the European Union.

"It makes it easier to get over some of the inhibitors that people put up there. It's definitely good from that point of view. There are lots of inhibitors to cloud adoption - this removes one of them for UK-based organisations," he said.

Quocirca analyst and director Bob Tarzey agrees that the launch is important for Rackspace, as it will give it an advantage over rivals.

"Rackspace is positioning itself as a global cloud service provider. To do this effectively, it needs to have global infrastructure and offer service-level agreements that data will be managed and stored within certain geographic limits. Its ability to do this will give it another value-add over the wholesale cloud infrastructure vendors, like Amazon and Google," he told silicon.com.

However, Tarzey added that Rackspace will face stiff competition from local hosting providers, such as Attenda and Savvis, which already have proven cloud-based systems in the UK.

The services available in Rackspace's UK cloud infrastructure include the Cloud Files storage service and Cloud Server computer processing technology, which can support Windows and a number of Linux distributions.

With management an important element in cloud computing, Rackspace has integrated the Cloudkick infrastructure-management dashboard technology into these cloud services, allowing customers to...

"Our UK offering allows companies to avoid offshore data issues and weighty upfront capital investments, which helps them become more strategically agile from a business perspective," Rackspace president and CEO Lanham Napier said in a statement.

He added that the UK-based cloud infrastructure will reduce latency for European companies using Rackspace cloud services compared with when the services were hosted in the US.

However, Rackspace and other cloud providers still have issues to overcome to drive uptake of cloud services.

Freeform Dynamics' Lock cited the need for businesses to know if data stays in Europe in the event of the UK-based cloud infrastructure's failure, and whether it could be released as part of the Patriot Act, to which Rackspace would be subject as a US-based company.

The company will also need to inform customers about how they can extract data from cloud services if they decide to move to another provider or bring the data back inhouse.

"Getting into cloud is easy; getting out of cloud could be difficult. Therefore Rackspace has got to show people that it's got a way to move off if you want to. People want to know, 'If I move to a particular supplier, how do I move out again if I want to change?'" Lock said.

Another potential improvement is for the service-level agreements for cloud services to be brought up to the same standard as hosted services, which would build business confidence in the reliability of cloud computing.

Source: http://www.silicon.com/technology/software/2011/01/21/rackspace-uk-cloud-aims-to-allay-data-concerns-39746849/1/

Serco Group Plc, a provider of outsourcing services, said it’s not in talks over any “major transaction” after a newspaper reported the company had offered $2 billion to buy SRA International Inc.

Serco Group, based in Hook, England, “is not in any discussions regarding any major transaction at this time,” it said an e-mailed statement today.

The Sunday Telegraph said earlier, without citing anyone, that Serco had bid for SRA International in a deal that would make it the biggest foreign provider of services to the U.S. government. The newspaper said Serco, advised by UBS AG, was improving the offer after the initial approach was rejected.

Source: http://www.bloomberg.com/news/2011-01-23/serco-says-it-s-not-discussing-any-major-transaction-correct-.html

Wipro Ltd., India’s third-largest software exporter, replaced the co-heads of the company’s main computer-services business after posting sales that missed analysts’ estimates.

T.K. Kurien will take over as the chief executive officer of the information technology business, Wipro’s largest, from next month after Girish Paranjpe, 52, and Suresh Vaswani, 51, resigned as joint CEOs, the company said in a statement today. Billionaire Azim Premji remains chairman and managing director.

Premji promoted Paranjpe and Vaswani less than three years ago to lead Wipro through the global financial crisis. Their resignation may hurt client relationships and “disturb” Wipro’s growth momentum, said Rahul Jain, an analyst with Dolat Capital Market Ltd. in Mumbai.

“Both the CEOs quitting is a bit of a negative surprise for Wipro,” said Sandeep Muthangi, an analyst at India Infoline Ltd. in Mumbai. “Senior-management attrition has been fairly high at Wipro, and this could be a precursor for another round of high-level attrition. It also seems very abrupt to me.”

Third-quarter revenue increased 12 percent to 78.3 billion rupees ($1.7 billion), the Bangalore-based company reported today, missing the 80.5 billion rupee average of 47 analyst estimates compiled by Bloomberg. Profit rose 10 percent to 13.2 billion rupees, in line with estimates.

Shares Fall

Wipro slumped as much as 4.4 percent, the biggest intraday drop since Nov. 19, to 456.55 rupees as the company joined Infosys Technologies Ltd. in indicating that a weaker global economic recovery may undermine growth in India’s software- services market.

The stock changed hands at 460.50 rupees, or down 3.6 percent, at 10:53 a.m. in Mumbai.

Vaswani worked at Wipro for more than 25 years, serving at different times as chief executive officer of Wipro’s joint venture with Acer Inc. and president of Wipro Infotech.

Paranjpe joined Wipro more than 20 years ago. He and Vaswani were promoted to joint CEOs of Wipro’s IT business in 2008. The two are also resigning from their positions on the company’s board of directors.

“It hurts the company,” said Jain, an analyst with Dolat in Mumbai. “What’s important is who replaces them. The immediate momentum has been disturbed.”

Wipro engaged two CEOs for the IT business to get “diversity in thinking” during the “uncertain environment” in 2008, Chief Financial Officer Suresh Senapaty told reporters in Bangalore.

‘New Environment’

“Now if you go into the new environment there’s a unanimous view that there is growth, there is an uptick in IT spend and outsourcing,” he said. “From that point of view, all you need to do is drive growth, and therefore it was thought appropriate by the company that we need to have one CEO.”

The operating profit margin for the main IT division was “flat” in the quarter, Senapaty said. Wipro’s 10 percent growth in third-quarter profit was slower Infosys’s 14 percent increase and market leader Tata Consultancy’s 30 percent.

“Wipro is lacking in terms of growth,” said Jigar Shah, a Mumbai-based analyst at Kim Eng Securities India Pvt. “The company is doing well, but not as well as its peers.”

Source: http://www.bloomberg.com/news/2011-01-21/wipro-third-quarter-profit-increases-10-sales-miss-analysts-estimates.html

Carlsberg has signed a five-year contract with Accenture for application services for its European brewery operations.

Accenture will support a range of application services in a co-sourcing agreement managed by Carlsberg. The services will support the brewer's business standardisation programme.

Application services will be delivered in areas such as incident management and problem management. Accenture will support service validation, test management and request fulfillment.

The supplier was chosen based on its experience in delivering similar services in the consumer products industry, said Kenneth Egelund Schmidt, vice-president and CIO at Carlsberg.

In April 2009, Carlsberg signed a contract with Accenture for SAP and Microsoft software implementations in Europe, and the delivery of a common enterprise resource planning platform.

HP Enterprise Services today announced FCC, a Spain-based multinational public services company, has signed a seven-year technology services agreement with Hewlett-Packard Servicios España, S.L.

The agreement is intended to transform FCC’s technology infrastructure to advance the company’s ability to compete internationally; it is valued in excess of $300 million in revenue for HP.

With this agreement, HP will provide data center services and end-user workplace management for the entire FCC organization, which has a presence in 54 countries. FCC’s core businesses are environmental services and water management, construction of large infrastructure, cement production and renewable energy production.

“FCC has grown twofold over the last four years, and we want to increase our competitiveness on an international scale by improving our efficiency and practices,” said Antonio Gómez Ciria, general manager, Administration and IT, FCC. “HP’s innovative, industry-leading infrastructure services will ensure our IT systems meet our critical business requirements as we expand into additional global markets.”

The agreement is part of a broader initiative by FCC to reengineer its management systems to better allocate resources to strategic tasks. Citizen Services Group, FCC’s parent company, intends to apply these same efficiency improvements to all of its international businesses.

HP will provide centralized data center services and consolidate FCC’s distributed data centers into two locations in Madrid, Spain, operated by HP. Through consolidation and standardization, FCC can increase agility, improve visibility over its international operations and lower its operating costs.

HP also will provide workplace services, including delivering service desk services in nine languages to support FCC’s 20,000 worldwide employees. Onsite support and managed print services will keep systems running and users productive. HP’s workplace solutions are based on industry best practices that create consistent, well-integrated and scalable processes and tools to deliver a more agile end-user computing environment.

“To capitalize on its many growth opportunities, FCC needs a technology infrastructure that is available, enables collaboration and adapts easily to change,” said Mike Nefkens, senior vice president and general manager, HP Enterprise Services, EMEA. “Drawing on our extensive expertise in managing technology environments for large global companies, the HP team will help FCC on its journey to become an Instant-On Enterprise.”

CSC have announced that the U.S. Air Force awarded the company a task order to provide analytical and technical support to its 24th Air Force Cyber Command, located in San Antonio, Texas. Awarded during CSC’s fiscal 2011 second quarter, the task order has a one-year base period and four one-year options. The order was issued under the Information Technology Enterprise Solutions-2 Services contract, which CSC won in 2006.

Under the terms of the order, CSC will provide technical and analytical support in areas relating to command and control, planning, implementing, and executing the Air Force cyberspace mission. CSC will support the development and implementation of tools and procedures for network defense and warfare operations, as well as related integration of network support and exploitation capabilities and functions. Work on this task order will be performed at Lackland Air Force Base in San Antonio, Texas, under the direction of Wiley Hill, CSC’s local lead executive.

“As a trusted leader in providing global cybersecurity solutions, CSC is honored to support the evolution of the Network Warfare Operations mission to a cyberspace capability for the 24th Air Force,” said Harold C. Smith, vice president and general manager of the Intelligence Group for CSC’s North American Public Sector. “Our mission is to ensure the Air Force’s cyber command is confident in the integrated processes, procedures, data, and systems to support its air, space and electromagnetic spectrum operations.”

In the first of four articles, Tim Palmer, expert in HR Transformation and the Co-Chair of the European HR Outsourcing Association at PA Consulting Group, outlines how HR Directors should consider their options for sourcing HR services, and not blindly succumb to commonly-held beliefs about HR outsourcing.

HR cannot be immune to the pressures that today apply to every other part of an organisation, and there is a need to find the right way to deliver the required services for the best value for money. The reality is that if HR doesn’t assess its own options, in this climate, someone else will probably do it for them. Rather than having a sourcing strategy forced upon the HR department from elsewhere, it is better for HR directors to proactively assess alternative strategies, from the creation of internal shared services to outsourcing. HR can get ahead of the game and present its own strong opinion on the best way forward.

Key to success is to have clear goals

This might sound as if outsourcing is being advocated for use in all situations; in fact the opposite is true. Outsourcing is not something that should be done lightly. Do it well, and it is a great way to achieve strategic goals that might not be otherwise available. Do it badly, and it has the potential to cost you more money and more grief than you ever thought possible.

Being realistic, outsourcing will not solve all the issues facing an HR organisation; and it is rarely possible to achieve every requirement in one outsourcing solution. Outsourcing cannot deliver lower costs and better service and new systems and lower risk; but, done well, it can deliver one or two of these goals and provide quantifiable value to the organisation. Good outsourcing involves trade-offs, and HR directors need to be honest about their true objectives, so that they can understand what they have to play with.

So how to move forward? The outsourcing market is awash with ‘bumper sticker’ advice about the pros and cons of various approaches. From impossibly over-optimistic return on investment figures to dire warnings about loss of control, these simplistic and ill-founded myths are adding unnecessary confusion.

In fact, despite the perceived complexity, HR outsourcing is a relatively simple thing. The HR director has to determine the strategic goals; and the organisation must decide whether or not it is prepared to have a third party working to support the delivery of those goals. Taking the outsourcing route is not a software selection exercise or something to be worn as a badge of honour. Deciding whether or not to outsource HR should be a sound, sensible decision taken with all of the necessary facts at your disposal.

Next week, Tim Palmer examines the first two specific myths about HR outsourcing, and why they are not to be believed.

For more information visit www.paconsulting.com/sourcing

How can you measure the value of outsourcing key elements of talent management such as recruitment if you don’t clearly understand what you are trying to achieve through it?

Traditionally businesses have seen outsourcing and, in particular, recruitment outsourcing in relatively simple terms, often bound up with a focus on reducing costs and boosting procedural efficiency. However, over the past few years we’ve seen more and more HR directors understanding the case for using outsourcing in a more strategic way and accepting its value throughout the whole of the talent management chain. Effective implementation of this approach calls for the strategic planning of workforce management to ensure that the management of talent aligns directly with a company’s business goals. But how can this be executed in practice?

The key seems to be a challenging, but nevertheless essential, combination of the ‘big picture’ with a detailed road-map. And realising the big picture means looking at the context the organisation operates in now, and perhaps more importantly, will operate in over the coming years.

Markets change more rapidly today than perhaps at any other time in human history. And that means most businesses need to be re-evaluating their offerings on a continuous basis with obvious consequences for the composition of the workforce. Look for example at Telefónica O2 diversifying into such areas as healthcare and financial services, parts of GE developing consultancy expertise or, at a more extreme level, Nandan Nilekani of Infosys claiming that his company’s role now is not to produce technology but to ‘redefine the boundaries of the possible’. And all this means that the skills-sets which made companies successful in the past may be redundant in the bright new future.

Of course predicting the future is not an easy matter. Anyone who watched the BBC programme ‘Tomorrows World’ in the 1960s or 70s may still be wondering what happened to the robots, routine space travel and three hour working days. But the need to at least make an educated guess at future business direction and what capabilities your workforce will need to make it happen is not something that any serious enterprise can afford to ignore.

Defining the nature of the likely ‘next’ workforce will allow organisations and their outsourcing partners to work out the best ways to reach out to the individuals who will make it up. This will almost certainly mean more imaginative methodologies than traditional advertising or use of recruitment agencies. Instead it will mean careful development of the employer brand and the building of communities through social media to build pipelines of talent that can be drawn upon as specific roles become available.

The challenge for HR professionals and outsourcers alike will be to create plans and structures that are both detailed yet flexible enough to adapt to constantly changing needs. A daunting challenge perhaps, but one that simply must be met.

Paul Daley, director at recruitment outsourcing and talent management specialist, Ochre House. www.ochrehouse.com

Towards the end of last year, FusionExperience ran a series of interactive webinars providing insight and guidance into important issues relevant to operations and outsourcing.

In the first webinar we set out the importance of having a good operations strategy and gave detailed guidance on the level of resources to be devoted to developing and updating one. When considering operating model strategy, two questions are clearly prominent on the participants’ minds, namely why to have one in the first place, and why or when should it be reviewed. Answering these will identify the key elements that a good operations model must contain. Examining what happens if you don’t have an operating strategy can start to answer this, namely sub-optimisation, urgency winning over importance and inefficient allocation of resources.

The second webinar looked at the importance of managing the outsource suppliers that are an increasingly large part of most asset management operations. Outsourced service provision is central to the operation of almost all asset management firms. The basic rationale for outsourcing across all industries is that the benefits of scale outweigh the additional management costs of acquiring services from suppliers.

The third webinar looked at important techniques for Managing Major Change, focusing on techniques for achieving momentum and coherence at the fuzzy front end of projects. Change in asset management is constant and pervasive; new products must be launched to respond to changes in customer preference, service features must be added in line with demand for more tailored service and service levels need to be continually upgraded to keep pace with customer expectations, at ever lower costs.

However the change process can fail if some basic tenets are not followed; requirements must be properly understood, scope must be fully defined and accurate estimates of the resources required must be produced. Moreover stakeholders must be fully engaged and the acceptance criteria defined.

Our final webinar entitled ‘Managing Operations’ covered measures companies can take to improve operations. It is through operations that companies deliver services and brand. Good operations will deliver to expectation, are flexible and allow for the rapid launch of new products and new services. By contrast, poor operations will undermine a brand, will consume management resources dealing with failure, and will divert financial resources away from other areas of the business.

Operations consist of a company’s people, its technology, and its process. If operations are important it therefore follows that they should be managed. In the webinar we looked at a framework for process management described by the Capability Maturity Model Integration for Services (CMMI). This is a model used globally by many large organisations to drive cost reduction and improvement in services delivery. The CMMI model is a progressive model, with each level describing in detail the process goals to be achieved, and the practices required to improve them.

Whilst the webinar targeted the asset management sector, the issues raised were sector agnostic. The reason we held these webinars was to impart some of the knowledge at FusionExperience have garnered over many years and hear from other back office professionals who shared their opinions and asked some often challenging questions. We have written up the findings of the webinars, which can be accessed at Sourcingfocus.com, our media partner’s website. These can be viewed at http://www.sourcingfocus.com/index.php/search/results/8c749bd8a1c7bae36e39218ebd80920d/

Gordon Easden, Financial Services practice head.