Industry news

The NOA “Reputation of Outsourcing” Seminar: the year that was and the road ahead

Thursday 9th December

As the year comes to a close, the NOA’s “reputation of outsourcing” seminar was held with the aim of discussing outsourcing’s media presence over 2010, identifying key themes and topics of the past year and looking at predictions for 2011.

Will Arnold, Research Director, Apollo Research, was the first speaker at the event and provided an insightful presentation on the media’s influence and presence over the past year.

Will said: “This has obviously been a very eventful year for outsourcing. We were commissioned by the National Outsourcing Association to look at outsourcing growth in the media, understand its influence and research the perceived concerns over the past year. In order to do this we looked at over 13,000 stories in the press across nationals, regionals, industry titles and general business media.”

It was no surprise that outsourcing as a topic has seen rapid growth in 2010. Its growth in coverage was up 117% in the latest quarter compared with the first quarter through blanket coverage of business and general audiences.

The increase in outsourcing media coverage was attributed to:

• Public sector

• Various suppliers

• Outsourcing as a concept

• Cloud

• China

• Shared Services

• Cost-savings

• Agility / Scalability

• Efficiency

• Security

Cost savings were the main reason for positive coverage in the media and fears over job losses attracted the most negative coverage.

Will said: “The public sector, cloud and a focus on winners and losers will be the hot topics of 2011 although there will also be an increase in other themes such as shared services, manufacturing, China, pay and conditions along with a focus on the competitive advantage which is given to end-users.”

“It seems that the main underdeveloped issues in outsourcing are proof of value and research on the economic impact of outsourcing in the UK where arguments tend to be undeveloped and one-sided.”

John Willmott, Managing Director, Nelson Hall, followed on the discussion with comments on the big outsourcing themes of 2010 and predictions for 2011.

John said “I think that the main outsourcing drivers for 2010 have been cost reductions, the public sector and the improvements which have been made in the customer experience. Along with the increase in multi-channel strategies, businesses are being more selective about their outsourcing partnerships, which has led to an increase in multi-shoring. I have also seen an increase in shorter deals due to business uncertainty along with an increase in contract flexibility and transparency.

“Cloud will remain the hot topic for 2011 due to the promise of cost savings and the ability to ‘pay for what you use’. Offshore destinations will continue to make near-shore and onshore acquisitions which is good news for the UK jobs market. Job creation will also be a very important factor for many local government contracts.”

A panel of experts led the discussion for the remainder of the seminar. The panel of seven was comprised of:

• Will Arnold, Research Director, Apollo Research

• Kerry Hallard, Communications Director, NOA

• Chris Halward, Programmes Director, NOA Pathway

• Rex Parry, Partner, Eversheds

• Andy Rogers, Board Member, NOA and Senior Project Manager, National Grid

• Peter Skyte, National Officer, Unite the Union

• John Willmott, Managing Director, Nelson Hall

The discussion touched on various topics and predictions for 2011 including the continual dominance of offshoring, public sector contracts and shared services. Contracts will continue to flexible and more transparent along with multi-sourcing becoming more commonplace.

A lot of emphasis was placed on the human implications of outsourcing. The economic times, spending cuts and people heavy processes have all contributed to job losses being the number one cause for negative coverage.

Peter said “Relationships are the critical key component in any organisation. Outsourcing could and should not be just about cost-savings. People issues need to be addressed and discussed in plenty of time when there is a real risk of possible causalities.”

Finding new ways to improve cost efficiencies in this day and age can seem a little like looking for a needle in a haystack for cash-strapped local authorities.

Indeed, at the NOA’s 8th Sourcing Summit conference recently a number of Public Sector speakers explained how the recent squeeze on public sector spending has only served to put more pressure on councils to justify their spending and find new ways of making significant cut backs.

Councils across the country have been asked to make £780 million in savings to support and strengthen local services and help them to become more responsive and cost effective, following the government’s spending review.

As a result, local authorities have been taking a number of different approaches to try to meet these targets, with services such as IT seen as soft targets for councils looking for departments where they can make cuts.

For all councils, the spending review will be a test of their ability to meet the needs of their communities, whilst juggling a reduced budget and efficiency savings. To achieve these revised financial targets, it has been increasingly necessary for each council to identify its key competencies across their services using this as a framework to identify where services can be dropped, outsourced or even invested in.

The cuts will lead to a major drive by councils as they look to strip back to essentials. They will look to extend privatisation and outsourcing into every area with the creation of new contracts and jobs.

Many of our speakers asked if perhaps shared services is the solution? Often referred to as “Outsourcing without a contract” shared services could offer the first steps towards hitting Public Sector targets.

A good example of where this has been put into practice has been the emergence of a new ‘super council’ formed between Hammersmith and Fulham, Kensington and Chelsea and Westminster councils.

By merging a number of services together, and by working in collaboration and sharing information, the councils are predicting savings of between £50 million and £100 million per year. Of course, the other benefit of this is that it will result in operations streamlining whilst still protecting their most important front line services.

It’s important, however, to understand that just as an effective and carefully planned strategy will be the difference between outsourcing success and failure so such strategic planning needs to be carried out with shared services as well. (Perhaps without the contractual rigor, but more likely for Councils, with a political rigor).

They do need to recognise they are providers and understand what their citizens need when working out how to outsource or use shared services.

Communication between residents and councils is vital, along with working together collaboratively in order to pinpoint where cut backs and efficiencies can be made, whilst not compromising the services they are responsible for providing.

Shared service platforms can promote common BPO and technology platforms, enabling councils to secure greater cost efficiencies. These common platforms, which will ultimately become part of wider Public Sector Network and ICT facilities, will also help drive simpler ICT procurement and service innovation processes too.

There is huge potential for the recent cuts to help councils to become more unified, resourceful and efficient, and shared service platforms will enable councils to progress wider partnerships with the public sector, by pooling resources or advancing initiatives where multiple funding streams are directed towards larger scale and less bureaucratic projects.

Hopefully this will make the needle in the haystack that little bit easier to find!

Managing operations: FusionExperience’s 4th webinar on operations management will take place on Tuesday 14th December.

It was good to see so many attended the first three webinars - Strategic Operating Model Design, Managing Outsource Suppliers and Managing Major Change - in our Autumn-Winter series on operations.

The remaining webinar in this series, accessible from our website, will offer key insights into: successfully managing operations, ensuring your operations are much more predictable as well as reducing errors and complaints

We have seen from experience that driving out unnecessary cost has always been central to streamlining operations. Yet this cost cutting can sometimes be slow to enact and difficult to pinpoint. These cost cutting initiatives need to be done by carefully managing incremental improvement.

This improvement will increase business agility – drastically reducing project timescales (and thus cost) for small and large scale projects. In order to illustrate this, we will be looking at a series of case studies as well as examining the ‘Capability Maturity Model Integration for Services’ (CMMIs) framework, and the relevance this has for asset managers.

Discussing these issues often raises many more interesting questions. By establishing a healthy interaction between professionals on this fascinating subject in the webinar we hope to gather together the thoughts and ideas of professionals from across the industry in order to analyse and write about our and their opinions. We very much hope you can join us.

Gordon Easden, financial practice lead, FusionExperience

Home Secretary Theresa May says the only way the UK Police Force can save staff is through IT cost savings. The remarks were part of a Parliamentary written answer.

Source: http://www.publictechnology.net/sector/defence-fire-police/it-savings-only-way-save-frontline-police-delivery-says-minister

Fujitsu is hoping to turn customer innovation on its head with a new 'Open Innovation' service designed to break down the current method of R&D-led innovation to one that is a truly open and collaborative.

The company believes that the days of self-serving R&D departments are over and that organisations in both the private and public sector are now ready for an open approach that sees individuals, businesses, government and academia brought together so that true innovation can occur.

The increased willingness for collaboration between organisations to find and develop the best solutions for some of the most challenging of shared business problems is still in its early days. However, Fujitsu’s strategy of extending the concept of real collaboration right back through the development cycle to the start of the creative function, is set to turn the innovation process on its head.

The three key factors driving this change are the economic recession; IT evolution and new concepts such as Cloud, as well as technology enablers that can aid open innovation such as collaboration / online communications tools and trust derived from social networking.

Fujitsu UK & Ireland's chief information officer and chief technology officer, David Smith, said: "Many companies are still taking a linear approach to innovation, ie create something in their closed environment and then hope that they can sell it to meet the perceived market need. It is possible now to take a much more collaborative approach to innovation with Web 2.0 capabilities and social networking tools. These tools allow you to create distributed communities to collaborate on a given business challenge which operated outside of traditional corporate boundaries and potentially be far more engaged with your target marketplace and be directly driven by their input; I believe that companies that innovate alone will increasingly tend to be laggards not leaders."

The new open innovation service will allow community members to:

- Collaborate on innovative solutions, developing new business opportunities

- Explore existing business problems, exploit expertise and identify innovative solutions

- Gain an expert perspective on areas of interest relating to innovation

- Understand Fujitsu's future technology direction and technologies under development

- Harness dedicated R&D activity to support their business

- Shape Fujitsu R&D to ensure the outcomes fully fit their business needs

- Reduce the costs of innovation by collaborating with Fujitsu and its partners to develop shared solutions.

Microsoft secured a big cloud contract win with the US Department of Agriculture (USDA) yesterday in its latest cat-and-mouse play with rival Google to score lucrative deals with government bodies Stateside.

Just last week, Google scooped up 17,000 government drones from the US General Services Administration (GSA) as part of a five-year, $6.7m contract that was handed to Unisys Corp.

But Microsoft's win on Wednesday eclipses Google's latest effort. The software giant inked a deal that covers 120,000 USDA workers whose systems will be migrated to Microsoft's online versions of Exchange, SharePoint and Office Communications over the next month.

"USDA's IT modernisation will allow us to streamline our operations and help us use taxpayer dollars more efficiently. With a focused cloud roadmap, we saw a clear opportunity to achieve our cost savings and consolidation goals, and tap into the promise of the cloud," said USDA CIO Chris Smith.

Financial terms of the agreement were not disclosed.

To date, USDA staff have been using 21 different email systems across the department's office locations.

Microsoft said that it has 500 state and local governments on its cloud computing books, but the USDA deal is significant because it is the first federal agency to have signed up to the company's online offerings.

Source: http://www.channelregister.co.uk/2010/12/09/usda_signs_microsoft_cloud_contract/

Analysts TechMarketReview has revealed that Cloud computing will be worth £2.4bn this year, and is projected to be worth £10.4bn in 2014. This is what analysts refer to as the first wave of Cloud adoption, with the second wave, the move into private clouds. The third wave will see a migration into the public cloud, expected to transpire in the next five years.

Chris Papa, Managing Director for communications specialist and Cloud computing company Qubic, said “I predict that the coming year will see a movement towards Cloud technology as businesses become more aware of its advantages, namely the balance between cost and savings. Despite the trend companies still need to assess the benefits in accordance with their individual requirements and businesses will need to decide when Cloud is cost-effective, and when it is not. This should be assessed in partnership with a trusted supplier and although some will take the plunge into Cloud computing others will wait. Either way by 2013 I expect to see a greater movement towards Cloud technologies.”

Yesterday's update from outsourcing and construction group Carillion was upbeat. The company is confident of meeting full-year targets.

Earlier this year, Carillion started to scale back its UK construction business – with plans to reduce it by one third over the next three years. This was a prudent move.

The group is now looking to double revenue from its international business and grow its support services operation in Britain as public sector clients outsource more work.

Canada is one interesting source of opportunity next year. For example, Ontario is developing a new 10-year plan for infrastructure – with expenditure expected to be more than C$50bn (£31bn). There are also lots of bidding opportunities in Middle Eastern countries such as Qatar.

No new contracts were announced, but the order book in the second half so far has grown by more than £1bn – and the pipeline continues to grow. Much of this has come from scope increases on existing contracts.

Carillion also said it expected an improvement in the company's overall operating margin in 2010, which was 3.8pc in 2009, with margins in support services on track to achieve 5pc.

The group is also expected to be in a net cash position by the end of 2010, with analysts pencilling about £70m.

Source: http://www.telegraph.co.uk/finance/markets/questor/8189872/Questor-share-tip-Carillion-to-meet-expectations.html

The Accenture contract for FBI IT Supplies and Support Services is worth up to £30bn.

Under the contract, Accenture is eligible to provide the FBI and other DOJ agencies with advanced analytics to support intelligence-led policing and investigation; process innovation via Accenture's Law Enforcement Center of Excellence; multi-modal biometrics and large-scale identification offerings; and financial, supply chain and human resources offerings.

The indefinite delivery/indefinite quantity contract has a one-year base contracting period plus seven additional one-year options.

Standard Life is set to acquire IT supplier Focus Solutions Group for approximately £42 million.

The savings and investment firm said the transaction will help to improve its systems and capitalise on opportunities arising within its key corporate and retail markets.

Standard Life will combine Focus Solutions' technology with its own Wrap platform and the Focus Solutions brand will be retained.

David Nish, chief executive at the company, said: "Standard Life continues to focus on the delivery of solutions and services for intermediaries and other distribution channels. Consistent with our previous acquisitions of [benefits technology firm] Vebnet and [independent financial adviser services firm] threesixty, the acquisition of Focus provides further capability in providing support, technology and innovation to our core markets and customers."