Industry news

When it comes to launching new products like bonds, mortgages and private pensions, businesses in the financial services sector have two choices: they can either apply their own brand to an existing 'white label' product that's been produced by a third-party, or else they can create a product of their own, from the ground up.

The first of these options is attractive for many reasons. First of all, there are very few overheads involved with pushing out another company's product, since the team behind the product's inception will typically handle all of the regulatory requirements, product administration and IT systems behind the scenes. As such, all that's left for the vendor to do is add its logo, organise some marketing, sell the product and collect its commission.

However, these are of course pitfalls to this approach as well. For a start, the vendor in this scenario is wholly restricted in terms of the actual details of the product being sold. In other words: 'it is what it is'. The terms of the actual investment, the pricing, the potential returns, the commission and many other factors are normally set in stone at the beginning. As such, the vendor normally doesn't have the ability to modify any of these details, and so is therefore powerless to react to changes in the market or in response to customer feedback.

Despite these drawbacks, many companies – especially new players in this market like the large supermarkets and heavily branded firms like Virgin – may feel that it is easier to take this approach than to work with an outsourcer to develop a product for themselves. And for some of these new entrants to the market, that may be true – for the moment, at least.

However, simply selling the products of another company may be short-sighted for more experienced players, such as major banks and other established financial institutions. By adopting this approach, companies like these will be missing a chance to differentiate themselves with a unique product that would truly stand out in this crowded market. Not only that, but if these organisations are currently selling high volumes of white label financial products, they are also missing out on a significant amount of revenue, since their margins would be much larger if they were selling an exclusive product that they have created and launched themselves.

Most financial institutions are actually well set up to create these sort of products for themselves: they often just need a little support. A common fear among organisations in this sector is that they will need to build whole new systems and address large-scale administration and regulatory requirements in order to launch a new financial product of their own, but that is not always the case. By working with a specialist outsourcer, financial institutions can delegate the majority of this responsibility, and focus instead on creating an exclusive product that is in tune with its culture and brand, that is truly unique, and which will appeal to its own individual customers.

Tony Collins, CEO, OPAL

Businesses can cut their energy consumption by 91% by moving their on-premises applications to the cloud, research by US analyst firm Nucleus Research reveals.

The firm reached its conclusion after comparing the energy consumed by customers of Salesforce.com with the energy consumption of equivalent applications run in-house.

Salesforce.com customers saved the energy equivalent of 11 barrels of oil every hour, the study concludes. Businesses that move other applications into the cloud, could make similar savings.

"We looked at Salesforce because they have a diverse user base in terms of size, geographic location and how they use the application," said Rebecca Wetteman, Nucleus Research vice-president.

"Our view was that this was a good first proxy for customers looking at carbon consumption to estimate what the benefits of moving to the cloud would be," she said.

Cloud computing suppliers can get better deals on hardware, optimise their applications for the cloud, and load-balance so customers can gain access to computing power only when they need it, said Nucleus.

For organisations with a green IT mission, simply moving to cloud computing provides both a financial return and a tangible environmental benefit, the study concludes

Businesses need to identify what applications are best suited to the cloud, if they want to cut energy costs. Its best to avoid putting applications that have had a lot of customisation into the cloud.

"Those applications that are frequently used by a lot of users, those where you need remote or distributed access, those where you need a lot of flexibility to make changes, are likely to be candidates that generate green and economic benefits," said Wetteman.

Source: http://www.computerweekly.com/Articles/2010/12/01/244275/Save-90-on-energy-by-putting-applications-in-the-cloud.htm

Change is sweeping through the outsourcing sector. Often seen as the preserve of larger companies, outsourcing is being embraced by an increasing number of even the smallest SMEs as their recognition grows of its business benefits. Indeed, with the downturn and its lingering after-effects still weighing down on business performance, 2011 could be the year when outsourcing really comes of age among the UK’s four million SMEs. To reap fully the benefits though, SMEs need to have a keen appreciation of the pitfalls as well as the positives of outsourcing.

Business surveys, polls and research all point at an increasing take-up of outsourcing by SMEs. The IT sector, in particular appears to be benefiting. For example, a poll by online firm PeoplePerHour.com on IT outsourcing, revealed that close to 40% of small business owners plan to increase their use of contract/freelance IT professionals.

This marked change in attitude by SMEs partly reflects changes in the outsourcing sector. Traditionally, companies handed complete control of specific business functions to carefully vetted third parties on contracts that included detailed service level agreements and were of a long-term nature. This typically appealed to large companies as it required greater certainty, planning and commitment – and could also be expensive.

However, with the economic and business activity still depressed and corporate budgets tightening, outsourcing has become a more affordable, less structured, more flexible solution, which has increased its popularity among SMEs.

A small business owner’s time is often best spent on doing the tasks and implementing the actions that he is best suited to do rather than try and become a master of very single aspect of his/her business. And for growth businesses, constantly evolving and changing, outsourcing makes sense, as it allows them maximum flexibility to deliver on their expansion goals.

SMEs are in an excellent position to capitalise on the changes in the outsourcing market at a time when the focus on finance and service levels has never been higher or more intense. Outsourced services for SMEs can certainly deliver a range of business benefits, such as:

- specialised professionals committed to delivering a high-quality service;

- greater levels of efficiency as non-core services are outsourced;

- lowering of direct staff costs;

- transparent pricing structure on particular services for greater budget certainty.

For many SMEs, having the dedicated professionals and support teams that outsourcing firms can provide on particular functions and services is a luxury that they cannot afford internally. The greater level of expertise typically leads to greater efficiency, which also allows direct costs savings from reduced full-time staff and more flexible working arrangements.

Clear, standard pricing, which a outsourcing functions or services can deliver, is also of great benefit to SMEs, which are typically less equipped to manage volatile price moves from suppliers and core goods providers. A good outsourced offering can also minimise such things as errors on contracts, which can often incur penalty charges.

The more sophisticated way in which outsourcing firms offer their services is also more appealing to SMEs. Best-practice outsource companies now have more varied offerings, that allow companies to be at a modest level and then build up the level of service that they require as their business grows and becomes more complex and sophisticated.

As much as the positives are appealing, SMEs need to be aware of potential pitfalls too. For instance, SME CEOs need to be very clear about what they want the outsource company to do otherwise the process could complicate tasks and increase costs rather than the reverse. And even though a service may be outsourced, SME managers should not totally abdicate any role as there is still a need to monitor and ensure standards are being met and work is being done to the agreed level.

Overall, in such a challenging economic and business environment, outsourcing could help many SMEs simply just to survive as well as help underpin their future expansion plans. Like all business processes though, it needs to be carefully thought through, risk and rewards assessed and objectives and outcomes carefully considered. Just opting for the cheapest quote from a beauty parade of outsourcing companies, for instance, is not necessarily the best way forward even if superficially it may seem the easiest and most attractive. Cheap can often be expensive, in business as well as in life.

Source: http://www.outsourcemagazine.co.uk/articles/item/3647-smes-should-not-be-shy-of-embracing-the-business-benefits-of-outsourcing

Finnair has threatened to outsource some operations to lower cost countries after cabin crew launched a strike that left thousands of passengers stranded and ended the company’s hopes of returning to profit this year.

The Finnish airline, known for its strong long-haul network between Europe and Asia, grounded more than 100 flights on Tuesday, with a further 200 cancellations expected on Wednesday, after cabin crew walked out in a dispute over pay and conditions.

Mika Vehvilainen, chief executive, warned union leaders that Finnair’s current cost structure was unsustainable.

“It is tragic that parties are striving to hold on to old terms and conditions in an industry that is changing dramatically and irrevocably,” he said.

The airline had launched a strategic review to determine if some operations could be carried out “in locations with a lower cost level,” he added.

Analysts said the comments were intended to increase pressure on unions to compromise as Finnair tries to strike a favourable deal with cabin crew that would set a precedent for crucial negotiations with pilots planned for next year.

Finnair is one of several European airlines facing labour problems as the industry struggles to reduce its bloated cost base. Cabin crew leaders at British Airways this week announced plans for a fresh strike ballot after a series of costly stoppages this year.

Finnair said it would lose up to €2.5m ($3.2m) a day during its strike and warned investors to expect a full-year operating loss, having previously forecast a small profit.

Analysts said this indicated the airline was expecting protracted disruption.

The Finnish cabin crew union said one of the main sticking points was time off after long-haul flights and accused Finnair of making “unreasonable” demands.

The airline, 56 per cent owned by the Finnish government, has invested heavily in its long-haul network to promote its Helsinki hub as a gateway to Asia. By next summer, Finnair plans to fly 74 flights a week to 10 Asian cities.

There have been signs that the strategy could be working, with revenues up 26 per cent from last year in the third quarter to produce the company’s first quarterly profit for almost two years.

Pasi Vaisanen, analyst at Nordea, said the challenge was to maintain a competitive European network to feed its long-haul routes.

Source: http://www.ft.com/cms/s/0/26e65f4c-fcaf-11df-bfdd-00144feab49a.html#axzz16qyWZ7yU

Birmingham City Council has extended and expanded its existing contract with outsourcing company Capita in a deal worth about £300m. The original contract, delivered through the organisations’ joint venture of Service Birmingham, has been extended to provide ICT and contact centre services by five years to March 2021.

In addition, Service Birmingham will deliver the council's revenues service for ten years from 1 April 2011.

More than 150 council revenues staff will transfer to Service Birmingham under TUPE regulations.

The extension of the partnership is estimated to generate savings of £55m for the council over the lifetime of the contract.

Councillor Randal Brew, cabinet member for finance at Birmingham City Council, said: “At a time when we are facing an unprecedented financial challenge, we need to focus on driving efficiencies and getting value for money. This deal represents an excellent opportunity to achieve both.

"We have a successful relationship with Capita through Service Birmingham and we are confident that extending and expanding this partnership will mean we are able to continue to modernise services and meet the challenges we are facing.”

Equaterra’s 2010 UK IT Service Provider Study Ranks Wipro number 1 in Client Satisfaction, Applications Management, Infrastructure Management, Price and Governance.

Wipro Technologies, the Global Consulting, System Integration and Outsourcing business of Wipro Limited, today announced that Equaterra, independent sourcing advisors in more than 60 countries, shows Wipro as a leader for client satisfaction in its detailed UK IT service provider performance study. This annual report, recognised today as the most extensive and representative 'perception study' on the issues of Information and Communication Technology (ICT) sourcing, evaluated more than 650 outsourcing contracts held by over 220 of the UK’s top IT spending organisations. The study evaluated 25 service providers on the basis of responses from the CIO, CFO of the client organisations.

Wipro achieved 80% client satisfaction level amongst those surveyed, an 8% increase y-o-y, moving from 8th position last year to 1st place in 12 months. In addition, Wipro also ranked 1st on Pricing and Governance and also achieved Top 3 status for Quality, Flexibility, Relationship Management and Client Referrals.

“We are delighted by the results of this important UK market study” says Jeff Heenan Jalil, Head of Europe, Wipro Technologies. “We appreciate the recognition our clients have awarded us. We will continue to increase our investment in our people, building our industry capabilities and in expanding our footprint into new geographies. These results clearly demonstrate how an empowered team, with strong end-user engagement, can make a difference within what remain tough economic conditions.”

The study also confirmed Wipro’s strategic position in the UK market, with a 72% score on the strategic relationship KPI highlighting Wipro’s long-term commitment to the client relationship and end-user business objectives. Wipro’s No.1 ranking for pricing and governance sets the foundation for Wipro to deliver more quickly the benefits of an adaptable enterprise sourcing platform. The IT major’s continued investment in consulting and technology services has also been awarded with the number 1 satisfaction ranking in Infrastructure Management.

With 35 offices and 20 delivery centres spanning both Western and Eastern Europe, Wipro provides consulting, System Integration and outsourcing services to a broad client-base across multiple industries.

India’s economy grew more than economists estimated last quarter, adding to evidence of a strengthening in domestic demand that’s stoked inflation by placing strains on the nation’s transport and power systems.

Gross domestic product rose 8.9 percent in the three months through September from a year earlier, matching the revised pace of growth in the previous quarter, the Central Statistical Organisation said in a statement in New Delhi today. That was above the 8.2 percent median estimate of 30 economists in a Bloomberg News survey.

Improved infrastructure will prove critical to sustaining India’s expansion rate, Prime Minister Manmohan Singh said this month as inflation runs almost double what the government regards as “ideal.” The Reserve Bank of India may need to resume raising interest rates in the coming months after lifting borrowing costs six times this year.

“Inflationary pressures remain high as strong growth fuels consumer demand amid rising capacity constraints,” said Vishnu Varathan, a Singapore-based economist at Capital Economics Ltd. “The Reserve Bank will have to come back and probably raise rates further early next quarter to ensure inflation remains under control.”

Central bank Governor Duvvuri Subbarao on Nov. 2 raised the benchmark repurchase rate and the reverse repurchase rate by a quarter-point each to 6.25 percent and 5.25 percent, saying inflation continues to hold above the “comfort zone.”

Not ‘Ideal’

The wholesale-price inflation rate was 8.58 percent in October, compared with the “ideal” level of 4 percent to 5 percent, according to Finance Minister Pranab Mukherjee. Consumer prices are rising at a pace near 10 percent, the fastest in the Group of 20 nations after Argentina.

India’s GDP gain last quarter compares with an expansion of 1.9 percent in the 16-nation Euro area, 2.5 percent in the U.S. and 9.6 percent in China. The Organization for Economic Cooperation and Development on Nov. 18 said high levels of unemployment in the U.S., Europe’s sovereign-debt crisis and growing trade imbalances around the world pose risks to the global recovery.

Faster growth is boosting revenue for Prime Minister Singh’s government, giving him room to cut the budget deficit to a targeted 5.5 percent of GDP from a 16-year high of 6.9 percent last year, even as spending on oil and fertilizer subsidies rises. Officials sought parliament’s approval on Nov. 15 to spend an extra 50 billion rupees ($1 billion) on fertilizer subsidies after seeking 140 billion rupees more to cap oil prices in August.

Bond Boost

India’s bonds have climbed this month as faster growth eases concern over the budget deficit. Yields on 10-year government bonds fell 7 basis points this month through today, to 8.04 percent, the only debt among BRIC nations to rally during the period. BRIC refers to Brazil, Russia, India and China. The Bombay Stock Exchange’s Sensitive Index, or Sensex, was little changed at 19,400.46 as of 12:28 p.m. in Mumbai trading, erasing earlier declines of as much as 1 percent.

In the meantime, concern that political turmoil will impede legislative work has countered the effect of the RBI’s 1.5 percentage points of rate increases on the rupee, reducing its gains for the year against the dollar to about 1 percent.

The currency pared earlier losses and traded at 45.95 against the dollar after weakening as much as 0.4 percent to 46.1250 earlier, according to data compiled by Bloomberg.

Federal investigators arrested eight Indian bankers and brokers on Nov. 24 amid allegations of improper loan disbursals.

Luring Capital

Economists including Anubhuti Sahay of Standard Chartered Bank said faster growth and a higher interest-rate differential may attract capital inflows that contribute to inflation.

The Reserve Bank of India’s benchmark repurchase rate is 6.25 percent. By comparison, the U.S. Federal Reserve’s target for overnight interbank loans is zero to 0.25 percent, where it has been since December 2008.

The rate differential between India and advanced countries spurred an unprecedented $10 billion inflow into rupee debt this year. Overseas funds also invested a record $28.5 billion in Indian stocks on prospects of faster economic expansion in the South Asian nation.

The $1.3 trillion economy is likely to expand 8.5 percent in the fiscal year through March, the most in three years, Prime Minister Singh said Nov. 20. Finance Minister Mukherjee said economic growth may exceed that target after today’s release, while Kaushik Basu, chief economic adviser in the ministry of finance, said India could achieve 9 percent growth sooner than expected.

Challenges to sustaining the growth pace include dealing “effectively with the threats of corruption,” Singh said earlier this month.

Corruption Risk

Opposition parties led by the main Bharatiya Janata Party have stalled parliament proceedings since Nov. 9, demanding a deeper probe against a minister who’s charged with awarding phone licenses at below-market prices.

Rising car sales and expanding bank credit provide evidence of growing consumer demand in Asia’s third-biggest economy.

Maruti Suzuki India Ltd., India’s biggest carmaker, Tata Motors Ltd. and others sold a record monthly 182,992 cars in October, according to the Society of Indian Automobile Manufacturers. Loans given by lenders such as State Bank of India Ltd. and rivals rose 22.03 percent in the fortnight to Nov. 5, the fastest pace since January 2009.

Given the strong demand, high and sticky inflation levels, “we think the RBI will raise rates by another 25 basis points in its policy meeting in January,” said Indranil Pan, chief economist at Kotak Mahindra Bank Ltd. in Mumbai.

Farm output grew 4.4 percent in the three months through September, compared with a 2.5 percent gain in the previous quarter, today’s report showed. Mining grew 8 percent, manufacturing gained 9.8 percent, while construction rose 8.8 percent.

Companies should be wary of potentially harmful clauses hidden in contracts with cloud providers, a report from the Centre for Commercial Law Studies has warned.

The research from at the University of London's law department examined contracts from 27 cloud providers and found clauses that could have a negative effect on customers' interests.

Some contracts reserve the right to terminate accounts for apparent lack of use, while others may hand over customer data if it is deemed to serve their business interests, and many cloud providers often exclude liability for loss of data, it found.

"Perhaps the most disconcerting discovery of the survey is that many cloud providers claimed to be able to amend their contracts unilaterally, simply by posting an updated version on the web," warned the report.

Christopher Millard, professor at Centre for Commercial Law Studies, said the ease and convenience with which cloud computing contracts can be set up may lull customers into overlooking important issues of data protection.

Customers should review the terms and conditions before signing up to anything, he said.

Hampshire County Council and Dorset County Council are the latest local authorities to team up and share IT in a bid to save costs and increase capacity.

The authorities will work together on a joint ICT strategy to use shared services internally and to offer wider shared services to other authorities. Over the next three years the collaboration is expected to save a total of between £2million and £5million in combined IT costs alone.

The two councils have already begun to share computer centres, business continuity, technical expertise and technical services, and a joint Management Board has been put in place at director level to oversee business case development for a variety of other areas. These include joint development on major IT systems, shared contracts and procurement, and the potential for joint support and service desks. Opportunities to use IT to share other services and to widen the partnership to other organisations will also be considered.

“This is a very exciting move for our two counties to find ways to collaborate on shared IT,” said Leader of Hampshire County Council, Councillor Ken Thornber. “As local government faces some of its most challenging times, it is essential that authorities look closely at developing more efficient and effective working methods, and the role of technology in helping to deliver more for less.

“As the public purse tightens, this collaboration is just one strand of a wider programme of work that will see the way Hampshire County Council operates and the services it delivers, transformed to ensure that expenditure can be reduced in a way that is sustainable and avoids indiscriminate cuts,” he added.

“By taking a long term view, Hampshire aims to reduce the impact on frontline services as far as possible and minimise the uncertainty for staff and partners. In planning ahead, the Council aims to be in a position to reduce its expenditure for the next financial year and beyond, in a way that avoids knee-jerk reactions and protects its ability to deliver and develop quality services.”

Leader of Dorset County Council, Angus Campbell said: “Our two local authorities deliver similar services supported by IT and we share some key systems. Maintaining and developing the use of technology in support of front line services is essential and, as we face unprecedented financial pressures, what could be more sensible than pooling our IT resources and expertise for greater efficiency and the benefit of the public that we serve?”

Source: http://www.publictechnology.net/sector/local-gov/hampshire-and-dorset-drive-shared-services-agenda

The government's decision to cut the cost of contracts with IT suppliers may not adversely affect the bottom line of those suppliers, according to a government supplier and a top analyst.

Fujitsu, one of the government's IT providers, has signed a memorandum of understanding with the government to help cut costs in the public sector. However, UK and Ireland CEO Roger Gilbert revealed that reducing those costs does not represent a significant challenge for Fujitsu, as the government was paying inflated costs anyway.

"We can deliver the cost savings to the government in a number of ways," Gilbert told Computing.

"First, technology is inherently getting cheaper. So contracts that were awarded three or four years ago on the basis of competing prices then are worth less now, just by the nature of the way costs are being driven down in the industry."

He added that, beyond that, there is now a greater recognition in government of the value of shared services and collaborative procurement; which can also deliver cost savings.

Sarah Burnett, a senior analyst at Ovum's government technology practice, advised that government needs to forecast and manage costs better to get value for money.

"Government departments need better visibility of their expenditure so that they, along with the different parts and levels of the organisation, can see what they are working on and where they might be making mistakes, such as not realising that they're allocating money twice for the same projects," she said.

Burnett added that government departments should price contracts based on the value that the contract generates.

"Rather than pay on a quarterly basis, government should look to put the burden of proving value generation on the suppliers, especially in the case of longer-term projects," she said.

She added that while long-term contracts should not be avoided, due to the inherently decreasing value of technology over time stipulations should be made to ensure contracts continue to generate value for money.

Fujitsu's Gilbert added that suppliers must work on having a stronger dialogue with government in order to ensure that each party's priorities are being met as cost effectively as possible.

"The industry could reorganise itself differently too," said Gilbert. "For example, where two suppliers are supplying two departments with the same technology, if they can communicate with one another and say to government: ‘If you're willing to restructure your contracts, then so are we,' we would be able to deliver a better service for less money."

Source: http://www.computing.co.uk/ctg/news/1928812/fujitsu-urges-government-improve-processes