Industry news

Outsourcing business operations is no longer contained to big businesses. A new research reveals that more than 80 per cent of new and small businesses are warming to outsourcing in a bid to cut costs and gain skills.

The research carried out by OutsourceMyProject.com, an intermediary website between businesses and service providers, has identified this trend among new and small businesses. The companies surveyed believe that outsourcing will save money and give access to experienced people they need to survive.

Among the organisations that have outsourced, 65 per cent went abroad and the minority stayed in the UK. A quarter of these were most likely to outsource websites and e-commerce.

Loren Holland of OutsourceMy Project.com said, “Outsourcing has mainly been the preserve of larger companies, with few opportunities for start-ups or SMEs to outsource their work or projects. This latest research shows that these businesses need help if they are to succeed in and benefit from outsourcing.”

He adds, “Outsourcing and offshoring allows businesses to access specialist skills, as and when they need them. It also allows businesses to work with suppliers from lower cost economies such as India and Eastern Europe. It is essential that new and small businesses explore these opportunities in order for them to prosper, especially in the current climate.”

Source: http://www.sourcingmag.com/offsite.asp?A=Fr&Url=http://www.b2bm.biz/News/RESEARCH-NEWS-Outsourcing-hot-among-small-businesses/

Capgemini will continue to serve as the automaker’s application integration management (AIM) supplier for each of these respective process areas. The combined value of the five-year agreements is more than $100 million (approximately €75 million) and is an extension of Capgemini’s ongoing work in support of GM’s Next-Generation Systems Factory Operating Model, which provides standardized processes for application management as well as developing common, integrated standardsbased solutions that scale with business needs. These contracts are in addition to the renewal of two other General Motors contracts in support of their application outsourcing efforts announced earlier this year.

Under the terms of these three contracts, Capgemini will collaborate with GM’s Information Technology organization in providing services in the areas of: strategic planning, data management, systems engineering and architecture (SE&A), software engineering, program management, and verification and validation (V&V). Solid execution, innovation, and continued evolution of these services will assist GM IT’s on-going efforts to be more flexible, efficient, and effective in delivering new business capabilities.

“The AIM teams involved are a key support element in GM IT’s drive to provide the innovation and delivery excellence required by our business,” said Terry Kline, vice president, Information Technology, and chief information officer, General Motors. “Capgemini’s services are integral in helping us support GM as it designs, builds and sells the world’s best vehicles.”

“This win is testament to our collaborative relationship with GM, our success over the past four years in support of their IT initiatives, and the trust they’ve placed in Capgemini as a strategic partner,” said Marc Martinez, General Motors global account executive, Capgemini.

HP has announced that it will be adding 105 highly skilled jobs to its Enterprise Business unit in Galway, to boost the company’s software engineering base.

With the support of investment promotion agency IDA Ireland, HP is looking for IT workers with a range of skills, including enterprise data architecture, application development, and software engineering and testing.

The positions range from entry level to architect IT, and engineering positions from graduate to PhD level.

The workers will be located in HP’s Ballybrit campus, and will work on two multi-year projects that are currently underway at the site. New recruits will work on HP’s latest technologies including its cloud infrastructure, as well as for its services business.

Martin Murphy, managing director of HP Ireland, said: “HP’s strategic intent is to continue the shift towards research and development, including working with institutions such as LERO, the Irish Software Engineering Research Centre at Limerick University.”

Separately, last week IDA Ireland supported Citi’s recruitment drive announced for the creation of 250 new jobs in Dublin and Waterford, some of which will be in operations and technology roles. Other positions will be available in its funds, client services and product development divisions.

These are in addition to the 440 new IT jobs that the US financial services company announced it would be creating in Belfast last month.

Meanwhile, Yahoo is planning to reduce its workforce by up to 700 people, according to Reuters.

The losses would be equal to between four and five percent of the Internet company’s total workforce, and are expected to be mainly in Yahoo’s US products group.

Its Q3 2010 results showed that the Yahoo had 14,100 employees at the end of September, and this latest round would be the company’s fourth large-scale cuts in the past three years. Reports claim that employees could be notified of the cuts as early as today.

Source: http://www.cio.co.uk/news/3253588/hp-creates-105-jobs-yahoo-to-slash-hundreds/?olo=rss

Business functions such as IT and finance at European and US companies will continue to be offshored to low-cost locations as the practice matures.

According to business advisory the Hackett Group, 1.1 million jobs, including those in IT and finance departments, have been offshored since 2008 and another 1.3 million will go the same way by 2014.

The company said IT has dominated offshoring since 2000 but it is now levelling off, while finance job offshoring is accelerating.

"With the modest resumption of economic growth this year, policy makers throughout the industrialised world have been struggling to create jobs. But our research shows that across key business functions, their efforts are simply being overwhelmed by offshoring and other factors," said Michel Janssen, chief research officer at The Hackett Group.

"This is what's driving the jobless recovery we're seeing in key white-collar job categories, and it's likely to continue for the foreseeable future."

The Hackett Group said that in 2009 nearly 700,000 jobs in finance, IT, and other areas were lost to a combination of offshoring, productivity improvements, and lack of economic growth.

"We see the number levelling out at around 250,000 jobs lost each year through 2014, and possibly beyond," said Janssen.

The group said that businesses are becoming more mature consumers of offshore services.

Honorio Padron, global business services practice leader for The Hackett Group said many companies have become much more mature in their use of offshore resources.

"They began with shared service centres nearly a decade ago, taking basic transactional areas offshore on a one-off basis. But today we're seeing the rapid ascendance of comprehensive cross-functional global business services operations that are moving far beyond transactional work, to handle the lion's share of the support function for many companies. The result is a globalisation trend from which there's simply no turning back."

Source: http://www.computerweekly.com/Articles/2010/12/15/244517/Offshoring-growth-will-create-a-jobless-recovery.htm

As part of its activities in helping business organisations create solid and profitable relationships, the NOA has been working with other industry associations in collaboration with the British Standards Institute (BSI) to publish the first-ever standard on Collaborative Business Relationships – BS 11000 Part 1.

The formal launch of this new Standard at the House of Lords on Tuesday, 7th December, began with a welcome from the leader of the House of Lords and Chancellor of the Duchy of Lancaster Lord Thomas Strathclyde.

Senior industry executives, from a wide range of commercial and public sector organisations were present at the Launch to gain a deeper understanding on how this break-through standard can help them stay ahead of the curve by generating and implementing practical, innovative solutions through effective business relationships.

“We are delighted to host this event,” says BSI’s CEO Howard Kerr. “Building strong relationships both within and outside a company is fundamental to organizational growth and innovation”.

As part of the NOA’s commitment to establishing best practices in outsourcing, and in collaboration between organisations, the NOA has taken a leading role in working alongside a range of other industry associations to create this new industry standard aimed at ensuring successful collaborative business relationships.

NOA Board Member, Adrian Quayle, took on the responsibility of representing the outsourcing industry on the BSI Committee responsible for preparing the Standard. Adrian co-ordinated and contributed the NOA’s input throughout the development of the Draft Standard to its final version for publication.

Adrian commented: “In order to ensure we had the widest representation from the best thinkers in the outsourcing industry, I have been working with, and have received great contributions for BS11000, from a sixty plus strong Special Interest Group (SIG) drawn from NOA members and other thought leaders. The SIG members are drawn from a cross-section of service recipient customers, service providers, and third party advisers.

“It is expected that the British Standard 11000 will become a requirement for companies across a wide range of public sector contracts which will obviously include many outsourcing deals. Work continues on Part 2 of BS11000 - The Guidance and it is expected this will be published early 2011.”

The NOA SIG was represented at the House of Lords Launch by Paul Hart – IBM, Steve Barker – Siemens, Jess Long and Sue Tompkins – EQPartnering, Jim Brannan and Louise Brannan – Bcerta, Lauren Tennant – The National Trust, Belinda Doshi – FFW LLP, Andrew Humphries and Linda McComie from SCCI as well as Adrian Quayle, from the NOA Board.

Simon Tennant, finance transformation specialist at PA Consulting Group

In this second article Simon Tennant, finance transformation specialist at PA Consulting Group, outlines how immediate benefits can be gained from small adjustments and reviews of current sourcing strategies.

In addition to reducing false demand, revisiting and reassessing the strategic changes that have gone before and understanding where the current sourcing arrangements can be expanded in scope, there are four further areas where a sourcing health-check can immediately deliver valuable, ongoing benefits.

• Extend reach – organisations need to ensure that services are taken up across all their operations. Standardising operating models across all territories and divisions provides a much greater return on a shared service investment.

• Simplify and standardise – organisations need to simplify sourcing arrangements. For example, many financial services organisations have historically allowed sourcing to be managed at an individual business level, resulting in multiple arrangements with multiple providers. By rationalising the provider base, organisations can remove service overlaps between different providers and deliver further economies of scale. Equally, reducing the number of providers that have to be managed may provide a further cost saving as interactions with those providers are simplified and standardised.

• Review your governance processes – organisations need to check their governance arrangements are delivering the expected value and benefits. They need to explore whether controls can be tightened to prevent value leaking from the arrangements and whether further savings can be made, especially if the service is stable and mature. A recent PA sourcing survey found that only 16% of companies assessed themselves as having a mature governance model.

• Ask for a discount – organisations need to explore the option of reducing the costs with their suppliers. Many of PA’s larger clients are actively reviewing their contracts, applying focused programmes to improve their return on existing sourcing relationships. This is often accompanied by a request to the provider for a discount or a change in the phasing of payments. Such a request is rarely welcomed but, if approached in the right way (by understanding the balance of risk on both sides), it can be successful. Organisations do need to remember that their service provider is operating in the same climate of austerity, so there will be limits to what they can feasibly offer. That makes it important to consider whether there is anything that can be offered in exchange, such as references, assets or additional scope. There may also be opportunities to get the provider to pay for changes which help both them and their client. There is a clearly a mutual benefit from helping both parties cut costs while maintaining service delivery. So it is vital to challenge providers to act as partners and for all sides to support each other through the difficult times.

Underpinning all this work is the need to keep sight of the long term intention of any sourcing arrangement and, at each stage, check that the organisation’s approach is not undermining this. That means understanding that there is a prime opportunity to put in place changes which will better support the organisation as it moves into a period of higher growth and that change presents an opportunity.

These articles are extracts from PA Consulting Group’s book, ‘Surviving and thriving in the economic crisis: The sourcing opportunity’, and is available free of charge. To request a copy of the book, please visit http://www.paconsulting.com/sourcingopportunity

Last month I hopped on a plane to the HRO Summit in Amsterdam, one of the largest annual gatherings of senior HR professionals in Europe and a handy opportunity to find out what they are expecting from the coming year. What I had confirmed for me was that the executive of leading organisations have put talent at the centre of their business strategies, which has meant HR functions have been thrust, somewhat unexpectedly, into the spotlight.

The problem is, however, that they have arrived at this position in the wake of a major economic downturn and in many cases find themselves under-resourced to accomplish their given objective – the alignment of talent management with general business strategy.

In the light of this, the presentation given by Dr Anthony Hesketh of Lancaster University Management School at the Summit attracted more than a little attention. Why? Because he is a passionate believer that HR now has the tools at its disposal to demonstrate a direct and quantifiable link between the effective management of talent and business performance.

For those organisations contemplating outsourcing elements of the talent management spectrum as a way of tackling a shortage of internal resources this may be vital. After all, providing corporate boards with figures that show a compelling business case for a major ‘people initiative’ like this may be the quickest and most effective way to gain their attention. And, as Hesketh points out, “There have been no major HR cuts since 2007 in those organisations that have already outsourced.”

The measurement tool that Hesketh has developed is called ‘Return on Invested Talent’ or ROIT for short and one of its most attractive features in an age of increasing complexity is its relatively simple and straightforward methodology. ROIT establishes how much money an organisation makes, how much it has to spend on people to achieve that and the ratio between the two. But Hesketh believes that expenditure on talent needs to go much further than the salary bill and direct recruitment costs. “What you pay your employees only forms part of the equation,” he says.

“You also have to provide people with the tools and equipment that enable them to carry out their work and that needs to be factored in.” Elements such as depreciation and amortization are therefore also added to the employee side of the scales. He argues that it’s important to use the tool on a continuous basis to show how talent management influences financial performance and to employ it to gain buy-in for major HR projects such as partnering with an outsourcer.

Used properly it can , he says “Reveal an accountable, evidence-based metric to initiate the conversation about how organisations can leverage their greatest intangible asset – talent.” However he also points out that numbers are not the end point of HR’s case, but its beginning. “ROIT shouldn’t dominate every conversation,” he says, “so don’t just blindly follow the numbers, use them to strategically enable what they tell you.”

Damien Stork is a director at recruitment outsourcing and talent management specialist, Ochre House – www.ochrehouse.com

Luxoft has announced its top tips for businesses looking to make cloud computing work in 2011.

Luxoft has predicted that cloud computing, whether used in a storage capacity or to greatly decrease carbon footprints, will experience significant growth, in both the public and private sectors over the next 12 months, specifically in the area of internet services. The following tips have been developed by Vice President of Technology Strategy at Luxoft, Vasily Suvorov, to help businesses looking to use cloud computing effectively over the next 12 months.

Know where you stand right from the beginning

Cloud computing is emerging as one of the hottest technologies for IT, with an increasing number of organisations looking to the cloud to simplify and streamline their technology infrastructures while holding the line on costs. However, diving in with both feet isn’t always the best approach. Having a plan right from the start is crucial to getting the most out of the transition--and minimising the risk. Consider the following tips before making your first move.

Define what it means to you

There is no single all-encompassing definition of cloud computing. Before doing anything, decide which one of the various categories of cloud computing – Including SaaS (software as a service), cloud-based storage, infrastructure in the cloud, or platform as a service – most closely matches your specific needs.

“When you say cloud, it’s an umbrella term,” says Vasiliy Suvorov. “You need to decide which cloud offering you want before you go any further.”

Compare features & prices

Researching the alternatives is largely dependent on how complex the implementation will be. Simple cloud storage-based offerings, for example, are priced on a per-megabyte/gigabyte, per-month basis, along with additional charges for submitting or migrating your data onto the vendor’s platform. More involved application- and platform-based solutions will necessitate more complex pricing and feature comparisons.

Decide where you are on the cloud computing continuum before you begin applying selection criteria to features and prices.

Plan for the future

You may just be getting started, but vendor lock-in is a very real risk if you’re not careful. A key lesson for IT in this fast-moving market is to build a longer-term roadmap than you think you might otherwise need.

“As vendors and the market in general become more mature and their offerings become more commoditized, there will be more opportunities,” says Suvorov, who adds that the price/feature curve will continue to sweeten. “You may want to move elsewhere as prices come down. The scenario needs to be analysed for exit, as well, as you want to be able to move data out just as easily as you move it in.”

Check your tools

Tools that support conventional infrastructure don’t always translate into the cloud. Make sure you have the right tools in place to take advantage of cloud-based solutions.

“All cloud offerings except storage require extensive toolsets provided by third parties to integrate the data, integrate the physical to the virtual, support scalability, and provide monitoring capabilities,” Suvorov says. “Make sure you have administrative toolsets that cover the entire cloud-based ecosystem.”

Change your security roadmap

Cloud-based solutions force new approaches to managing IT security. While this is crucial for any organisation, it is especially so for those in sectors such as financial services, health care, and government, which are subject to greater regulatory oversight.

“Right now, no standardisation for security exists between different cloud providers,” Suvorov explains. “It depends on what cloud you use and who you work with.”

Suvorov adds that some providers, especially SaaS vendors, are more advanced than others.

“Whoever you go with, the important thing is to make sure you’re in control of who has access to your applications and all the data that’s going in and out of them,” he says. “Remember, that’s your accountability, not theirs.”

Prepare your people

This is perhaps the most important tip of them all. Although most IT shops can easily handle simpler cloud deployments such as storage with minimal retraining, more complex scenarios such as application migration may require different skills.

“If you’re deploying your apps into the cloud, in an environment where you need scalability, where you need to involve those IT resources who are responsible for maintaining and even developing your apps, then it gets a little more complicated,” says Suvorov, adding that IT staff may need to learn new APIs as they begin tuning apps for the cloud and integrating data on both sides of the firewall.

Hewlett-Packard GmbH and E.ON IT GmbH, the IT and telecommunications provider for Europe’s utilities company E.ON AG, today announced they have signed a five-year, $1.4 billion infrastructure technology outsourcing services contract.

One of the first major European utilities to outsource its technology infrastructure, E.ON has chosen HP to provide data center operations and workplace services in support of its global growth. The agreement is expected to strengthen E.ON’s competitiveness and create a more flexible technology environment.

“E.ON demands consistent, innovative and agile IT services to operate in a competitive global industry,” said Edgar Aschenbrenner, chief information officer, E.ON. “HP has proven experience in large-scale IT outsourcing and a global presence. We have asked them to apply their broad experience and innovation capabilities and to act as operational integrator toward our other key partners.”

HP is helping E.ON become an Instant-On Enterprise by embedding technology in every layer of its business to better serve customers, employees and partners with whatever they need, instantly. HP is working with E.ON IT to create a consistent, optimized and cost-effective technology infrastructure that will help lower the company’s technology investment.

“Utility companies need to remain stable to deliver excellent client satisfaction while adapting quickly to changing regulations and energy sources in the coming years,” said Jan Zadak, senior vice president, Enterprise Business – EMEA, HP. “HP’s experience in managing complex outsourcing engagements and leading the management of multisupplier environments will enable E.ON to focus on delivering better business results and drive growth.”

Under the terms of the agreement, HP will directly manage the data center services and workplace services for more than 80,000 employees. To reduce management complexity for E.ON, HP also will act as operational integrator, collaborating closely with E.ON’s other key IT suppliers. As a result, more than 1,100 employees will transfer to HP in April 2011.

HP currently supplies technology equipment, support services and managed print services for E.ON.

Siemens is set to take an initial 15 per cent stake and a board seat in Atos Origin.

The deal, announced on Tuesday, will create one of Europe’s largest IT outsourcing companies in a rare Franco-German deal.

The move comes at a sensitive time for Franco-German Industrial relations, after the French Government tried to ban a Siemens contract awarded by Eurostar. The subject has caused strong protests in Berlin and is still very much a contentious issue.

The decision to allow Siemens to take a stake and a board seat in a group that provides strategic IT services to France’s 58 nuclear reactors may help to assuage these tensions.

The Atos Origin deal is valued at €850m ($1.1bn) It will see Siemens hand over its ailing SIS unit in exchange for a 15 per cent stake, plus a €250m convertible bond that can be transferred into another 5 per cent of Atos’s shares, and a €186m cash payment. Siemens has made a binding commitment not to sell its shares in the next five years.