Industry news

IT systems are at the heart of modern business and the development of new software applications and the maintenance of existing systems, are both critical to ensure productivity, performance and profitability. Advances in software technology over the last 20 years have allowed increasingly more complex business solutions to be created, enabling companies to offer customers exciting new services and products. However, software development processes still suffer from the same problems that they have encountered for the last decade, regardless of the technologies being used.

But why is offshoring software development still considered so risky? All software projects have associated risks. One of the major sources of risk results from changes that occur during the project’s lifecycle. In its simplest form, this is normally assumed as changing the software user’s requirements. However this is not confined just to this area. For example, changes to the makeup of a project team, changes in the technology being used and changes to any external systems where new software might be needed, all present real risks to projects.

It is worth remembering that building any kind of software by using talented expertise abroad can provide a lot of know-how and at the same time reduce expenditure compared to using a company from North America or Europe. At the same time let’s not forget that North America and Europe are two of the world’s biggest consumers of offshore software development. However, here at FusionExperience, we have found that the biggest risk of all to a business is poor communication. Although English is the most common language to conduct business in, written and verbal communication can lead to ambiguity and misunderstandings. There is a need to find a blended approach between offshoring and onshoring that reduces the huge communication risk.

In order to reduce communication problems, businesses looking to outsource their software development need to introduce a communications programme internally. Traditionally it was believed that this would only effectively work if any internal communications were documented as narrative. However this is seldom the case, as written words can also lead to ambiguity and confusion when translated. Indeed, the value of such narrative rapidly erodes as complexity increases with conditional logic such as, ‘If-Then-Else’.

This problem has been inadequately addressed by a number of techniques such as using use cases and diagrammatic representations to go alongside standard narrative formats.

The newer generation of simulation and visualisation tools, with an embedded transparent and collaborative space for shared feedback, provide powerful alternatives to traditional ways of specifying requirements and transferring this knowledge to the offshore partner.

The introduction and implementation of a simulation, visualisation and collaborative communications platform can materially reduce the cost of coordination between onshore and offshoring working. At FusionExperience we use the leading product on the market called iRise. A company’s communications process works at its best when rework cost is reduced to a minimum. In fact, case study evidence has shown that the use of a simulation, visualisation and collaboration platform can reduce overall software development costs by around 34%.

Adopting a simulation, visualisation and collaboration platform for communications, whilst developing systems that deliver what the users actually want, will undoubtedly produce software of a higher quality and fit to purpose. This typically results in software that is easier to maintain, adapt and revise, thereby reducing the long term operational costs and associated risks.

Freddie McMahon, head of customer experience at FusionExperience .

We held the first of our series of interactive webinars and the insights garnered into ‘Operating Model Strategy’ were fascinating. Although the webinar targeted the asset management sector, the issues raised were sector agnostic. Two key topics were covered and discussed. The first is understanding the need for an operations strategy and the second topic was considering the conditions for when companies should review their operating strategies.

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 it should be reviewed. Answering these two questions 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.

Without a holistic approach, decisions are made without considering the overall implications.

Examples include:

- If considered in isolation, the decision to launch a new product may add unwarranted complexity to the operating model, adding cost that erodes competitiveness.

- There can be a failure to leverage existing capabilities across different product sets or jurisdictions.

Crucially, over time the product and service set can become disjointed and have no meaning for the customer.

This has important implications for the contents of an operations strategy. It must deliver an efficient product launch process that considers the impact on the operations as a whole. Moreover it must have clear links to the service proposition, and to the brand strategy.

A second effect of not having a strategy is that urgency tends to win over importance.

One frequent manifestation of this is in managing outsource suppliers. For very good short term reasons, additional services are taken from existing suppliers, complicating the service model.

Retained oversight staff are reduced, cutting costs with no immediate effect on service levels.

Over time, however, knowledge of the operations is reduced, and this degrades the ability to execute change projects. This increase in complexity and the lack of knowledge severely constrains the ability to move to another supplier, with a consequent loss of power when contracts are renegotiated. As a result the competitiveness of the firm is reduced. A good operations strategy can actually speed the product launch process, by providing a clear context within which decisions can be rapidly made.

A third effect of not having a strategy is that it results in the inefficient allocation of resources.

It is important to have the ability to make rapid decisions in response to market demands. However, the true value of any investment is seldom in the initial product launch that is required. It frequently comes from the re-use of the resultant capability across many products.

It is therefore important that the operations strategy articulates a shared and coherent view of the development roadmap, to provide a context for individual product decisions. Individual product launches and other change project decisions can be prioritised in line with the operations strategy.

Whilst this shows the pitfalls of not having a strategy, the work required to develop a good quality operations strategy can be daunting. In world where time is the scarcest resource, then spending time reviewing your strategy can be an expensive diversion.

This illustrates the importance of our second question: “When should you review your strategy?”

The simple and short answer is ‘When the world changes’. What do we mean by this? When the assumptions that a strategy is based on change, it should be reviewed.

A good operations strategy document must therefore make explicit the assumptions on which it is based. These assumptions should be systematically validated at least annually. A full review of the strategy is neccessary if (and only if) these assumptions are no longer valid.

Key assumptions underlying an operations strategy will include the business strategy. This should be examining if there is any change in target clients, distribution channels, or product set. In turn these decisions will be driven by changes in customer and competitor behaviour.

A second key assumption is the capability of the service providers. In recent years, the capability of the outsource providers has been transformed. The successful service providers have been extending their geographic reach, both by acquisition and by investing in global platforms. This investment has greatly increased automation, either by achieving ‘straight through processing’ without human intervention, or by the adoption of image and workflow or other automation tools. This greatly increases productivity. In addition, the consequent reduction in error rates greatly reduces the cost of rework. Finally, this automation allows the remaining work to be performed in global centres of excellence that can take advantage of economies of scale and low labour costs. Follow-the-sun processing allows many tasks to be performed overnight, with delivery to the customer prior to local start of day. For those service providers that have achieved this level of global integration, the next step is to add more services to their core offering.

All of this has very important consequences. Firstly, the consequent reduction in operating costs for the services provider means they are able to compete more aggressively on price. Secondly, these providers are desperate to add volume to their platforms to repay the large investments made. The increase of geographic scope and service scope provides opportunities for simplification of the operating model, improvements in the level of services, improvements in the ability to support new products, together with further reductions in cost.

A third assumption that can change is the regulatory environment. The level of regulatory change bearing down on the industry could fill a whole series of webinars all by itself. We have the Retail Distribution Review affecting distribution in the UK, UCITS IV enabling master-feeder structures and giving us the Key Investor Information Document. This is without considering the AIFMD, or the effect of the abolition of the FSA. To help asset managers understand the impacts, we will shortly be publishing an overview of these changes on our website.

The results of the discussion in this webinar were fascinating. And we hope you can join us for the next two: ‘Successfully managing major change’ and ‘Getting the best out of your existing operations’.

Author: Gordon Easden, practice head, FusionExperience.

The publication of the British Standard (BS) 11000 last month is a landmark for the world of business. It is the world's first standard for collaborative business relationships and rather than representing a one-size solution for all it provides a consistent framework that can be scaled and adapted to meet particular business needs.

As part of the NOA’s commitment to collaboration between organisations, it has been working alongside a range of other industry associations with the British Standards Institution (BSI) to create an industry standard aimed at supporting collaborative business partnering.

The framework comprises methodologies supported by a wide range of tools and guides which have been established over some 20 years experience in relationship management.

In February 2010, Adrian Quayle, NOA Board Member, took on the responsibility, on behalf on the NOA Board, of representing the outsourcing industry on the BSI panel and contributed throughout the development of the Draft Standard to its final version for publication. To ensure the widest representation from the outsourcing industry, Adrian set up a Special Interest Group (SIG) involving all sectors including service recipient customers, service providers, and third party advisers.

Working with the SIG members Adrian provided and co-ordinated the delivery of the wide range of industry best practice contributions to enhance the Draft Standard.

Adrian said: “The broad aim of the standard is to support organisations across all industry sectors to participate in successful collaborative relationships by establishing a framework which allows those organisations to incorporate industry good practice in their approach to working with other parties. The standard has been designed to establish a consistent framework that can be applied by organisations of all sizes, and to highlight the key areas which all companies should address, allowing them to benchmark standards in specific areas.

“The benefits of collaboration are clear: it allows organisations to share best practice and skills, enabling them to really get under the skin of their relationships in order to provide greater value. Only by working together can real benefits be drawn from business relationships.”

The BS 11000 aims to complete this objective through the promotion of five key activities.

• Ongoing management, monitor and measure the relationship

• Continual innovation

• Maintenance of behaviours and trust

• Management of delivery and performance

• Management of issue resolution and monitoring of joint exit strategy

The standard is the brainchild of Partnership Sourcing Limited (PSL) - a self-financing not-for-profit organisation which helps organisations of all sizes, in both the public and private sectors, to build and develop effective competitive business relationships based upon a collaborative approach. PSL's operations director, David Hawkins commented: "Venturing into the world of collaboration can be one of the most exhilarating and ultimately rewarding aspects of business.

"Collaboration offers the opportunity to share the flow of knowledge and experience between individuals and organisations. Moreover, it gives organisations an excellent opportunity to establish an open dialogue to generate positive changes to the dynamics of how the organisations work together to deliver benefit and add value.”

The NOA believe that the recent public spending cuts could fuel a surge in public sector outsourcing with many government departments outsourcing services which are not core to their business. Large integrated companies will be able to offer public savings by offering just one point of contact instead of many and companies with a broad range of services should be able to adapt easily to meet specific demands.

It is vital that there is some guidance for the way in which public organisations can develop their relationships with the private sector. Outsourcing may be a new way of working for many in this sector and unless great care is taken in maintaining and working on the collaborative relationship, neglect can build the foundations for failure.

The BS 11000 offers significant opportunities to support the implementation of more effective collaborative working between these sectors and enhance the operation of existing business activities to provide an improved relationship that adds value to the parties involved.

In addition, the NOA’s life cycle also outlines four steps to ensure collaborative success: strategic leadership, relationship engagement, transition and change and relationship management. Each step of the lifecycle is concerned with making sure that all the necessary activities are carried out to build and maintain a successful outsourcing deal.

Experience from those outsourcing deals that fail demonstrates that where short cuts are taken and key activities are omitted, problems start to arise. Examples include the failure on the service recipient client side to establish an effective internal management team, or the service provider failing to deliver the service that was promised in the sales process and the contract.

Although the standard was published in October, BS 11000 will receive a formal launch at the House of Lords on 7th December. Part 2 of the guidance is currently a work in progress and will be published early 2011.

Atos Origin, the first company to sign a Memorandum of Understanding with Francis Maude’s Cabinet Office, has announced its healthcare division has been awarded a three year contract extension by the Department for Work and Pensions (DWP) worth in excess of £300 million.

Under the terms of the extension, Atos Healthcare is to continue delivering medical advice and assessment services in a bid to “support the UK Government’s welfare reform agenda”. Atos Heathcare is the number one occupational health provider in the UK.

It’s claimed the extension will “help people to move into and progress in work, while supporting the most vulnerable”.

Keith Wilman, CEO for Atos Origin said, “We have a successful and longstanding relationship with the Department for Work and Pensions and are committed to supporting the Government’s welfare reform agenda to help those who are able get back to work and regain their independence.”

Source: http://www.publictechnology.net/sector/central-gov/dwp-awards-300m-contract-extension

John Suffolk, the Government CIO, has confirmed his resignation from the post effective before the end of the year. Suffolk has held the post for the past four years, and replaced the first Government CIO Ian Watmore.

It’s reported his resignation was first announced internally at the Cabinet Office, but Suffolk later confirmed his intentions to investigative journalist, Tony Collins. On his blog, Collins quotes the outgoing CIO as saying, “Just under 5 years is a good stint ...time to pass the baton on and give the new Government a clear run on new policies, new strategies and new people. It’s been truly great working with Francis Maude. His agenda is my agenda and reverse. He will drive it [major reform] forward.”

Whitehall sources were today talking up Andrew Stott, director of digital engagement and Suffolk's former deputy, as a likely replacement. Stott retires next month from his current role and worked with Watmore during his time as CIO. "[Suffolk's] replacement is likely to be an ally of Ian Watmore, who was brought in to head up the Cabinet Office’s influential Efficiency and Reform Group in July," commented Tola Sergeant of TechMarketView. "The Government CIO now reports to Watmore, and the two will need to work increasingly closely together to push forward the new government’s agenda."

Suffolk was the key proponent of the Government Cloud, which featured in the Labour Government’s ICT Strategy at the start of the year. It’s well known the Cabinet Office is working on a new strategy backed by the coalition government, though it’s understood to remain largely similar to its predecessor aside from extra provisions for open source software.

In recent weeks Andy Tait, deputy director on the G-Cloud programme, described the initiative as the “biggest transformation for public sector ICT in the past 20 years,” and reaffirmed that the G-Cloud was definitely coming. He later confirmed to delegates at Socitm’s conference in Brighton the programme had yet to receive the green light from the Cabinet Office.

Source: http://www.publictechnology.net/sector/central-gov/suffolk-resigns-government-cio-post

Services company Serco has this week joined the list of major ICT suppliers who have agreed to Cabinet Office Minister Francis Maude's new approach to delivering ICT to central government.

"I am very pleased that we have signed our MoU with the UK government and we look forward to continuing to support our customer in the delivery of essential public services,” said Serco’s chief executive Christopher Hyman.

Maude's rolling “memorandum of understanding” (MoU) process is getting vendors to agree on ways to provide efficiencies for central government procurement and project management.

The firm says savings in the way it works with Whitehall will be made through scope changes and cost efficiencies and are not material to the group's financial expectations.

The firm recently caused controversy with a demand that to meet Maude's targets it expected a 2.5% cut in all costs from its own supply chain.

The demand was later withdrawn and the services giant apologised to its suppliers.

Source: http://www.publictechnology.net/sector/central-gov/serco-latest-sign-maudes-mou

With 10 per cent of its IT and business processes outsourced, the UK is the most mature country in Europe in terms of outsourcing. However, the country remains ripe for countries looking to pick up trade in this area, with a report released today estimating that outsourcing from the UK could increase 600 per cent by 2020.

The report, called Europe's Global Sourcing Market: Trends Growth and Prospects, was produced by research firm Everest in collaboration with Egypt's IT development agency ITIDA. It argues that the drivers for this growth, as well as predicted growth of 1,000 per cent for most other European countries, are increasing cost and competitive pressures, an aging population leading to a shortage of skills, the global expansion of firms and an increasing ‘proof of concept' of global sourcing combined with a growing acceptance within the public sector and government.

Outsourcing activity is divided into IT work at 61 per cent, with the remaining 39 per cent being made up of business process outsourcing (BPO).

However, lingering economic uncertainty means this growth may be slow to start, according to Eric Simonson, managing partner, Everest Group.

"Volumes of work are currently static and companies remain reluctant to launch transformation programmes when they are nervous," he said.

Simonson added that the sovereign debt crisis and confusion over data protection laws were also holding back growth.

European countries such as France, Germany and Spain have a steeper potential growth trajectory of about 1,000 per cent because their markets are less mature than that of the UK.

The areas most likely to pick up trade from the UK and Europe currently are Central and Eastern Europe, Africa, India and South East Asia and Spanish-speaking countries in Latin and Central America.

Central and Eastern European countries such as Poland and Hungary offer multi-lingual European language skills but are relatively expensive.

West and South Africa also offer French and Dutch language speaking skills, while Egypt offers a sizable pool of French speakers as well as other languages. It's cost base is low and it is able to scale competitively, according to the report.

India also has a low cost base and is one of the three largest countries in terms of language and skills talent pool (with Egypt and Poland).

There are other concerns with outsourcing to countries outside the EU however, in that they may not be as politically stable as countries inside Europe.

Another consideration for companies considering outsourcing might be a host company's country infrastructure - this is a problem for low cost locations such as India and Egypt, the report said.

Sournce:

http://www.computing.co.uk/ctg/news/1898352/bpo-outsourcing-grow-600-cent-2020-report

A survey has indicated that 65% of customers didn’t care where their calls were handled, as long as they were handled well.

Jo Causon from the Institute of Customer Service argues that if you export bad practices overseas, you will still get bad customer service.

Mention customer service and before long the issue of contact centres and overseas call centres will inevitably enter the conversation.

This in itself is hardly surprising. We live and work in a 24/7 society and we expect access to services to be available all hours. Contact centres are currently the most widely available option in meeting these expectations and in many sectors, consumers’ view of an organisation is shaped by their experience with this channel of contact.

We investigated this subject in our UK Customer Satisfaction Index, published at the turn of the year. We polled our 26,000 consumer base asking them to identify the organisation that gave them their worst customer service experience and then pinpoint which element of that incident they most disliked. The biggest single issue was dealing with contact centre staff outside the UK, with close to one in five respondents citing this problem. This figure escalated rapidly as you moved through the age groups, from just over 12% among 18-24 year olds to almost 27% in the 65 and over age group.

So there is clearly a great deal at stake here. In the drive for organisations to remain price competitive, the need for ‘follow the sun’ operations must be balanced against maintaining customer service levels and the dangers of damage to brand reputation should these moves fail.

Since offshoring became a mainstream business option in the 1990s we have seen a steady stream of companies returning their operations to the UK, often accompanied by great media fanfare. BT is reputed to have cut 4,000 positions from its Indian call centres in the past year while the Mumbai-based company FirstSource, whose clients include some of the UK’s best-known brands, now plans to hire 500 people in Britain in the next two years.

Such announcements have been met with knowing looks and an ‘I told you so’ attitude. A number of companies have also made a point in their marketing that they only operate UK-based call centres. But does it follow that offshoring has failed?

All abroad?

From this Institute’s point of view, this rather misses the point. You can just as easily deliver and experience poor customer service from a UK call centre as you can from an overseas one. It doesn’t matter where the contact centre is based. It is about the ability of the employee in that centre to be able to help.

This is the crux of the problem. If the main driver for offshoring was cutting operational costs, many organisations have found that these savings didn’t materialise over time. In part this has been because they underestimated the amount of resources which would be needed in supporting geographically distant operations.

For instance, one survey in the financial services market found that overseas call centre workers didn’t have a strong enough understanding of the UK financial system and this meant that they struggled to deal with ‘non-standard’ requests.

A central tenet of good customer service delivery is the requirement to provide employees with the knowledge and freedom to deal with customer queries and not to be too tightly bound by scripts and process. This means treating customers as individuals and understanding that customers are different, not only in the nature of their enquiry but in how they want it dealt with.

Much of this comes down to training, not only in the details of the product or service in question but also in providing a real understanding of the values and ethos of the client’s brand the contact centre is delivering. For here lies the major risk for companies outsourcing their contact centre operations, whether in the UK or overseas. As indicated earlier, given that for many consumers the main contact they will have with an organisation will come via a contact centre, the experience they receive will profoundly shape their perception of that organisation’s brand reputation.

A potential disadvantage of an offshore call centre is that the company must rely on a third party to handle its customers. Arguably, employees at an offshore call centre have less of a stake in customer satisfaction than the company for which they are working.

Consistently poor service will have an even more pronounced effect on reputation, with consequent detrimental effects on customer loyalty in a difficult economic environment where organisations are attempting to retain their customers and competitors are eager to recruit disaffected consumers. Brand loyalty is built through marketing and product satisfaction, and ineffective customer service, whether outsourced or in-house, can easily destroy that investment.

Shifting sands

One thing we need to remember is that things have changed dramatically since offshoring was first introduced. As customers we have become much more demanding. In 2001 50% of people were willing to complain. In 2010 our research shows that figure has gone up to 75%. But without doubt the most striking change has been in how we complain.

The rise of social media means that we don’t just swap stories of bad customer service with friends and neighbours, we can post our concerns and experiences on social media networks for millions to read. We found that close to half the people we polled related their experience to 5 or more people, while 20% told over 10 people.

A customer now has the same impact as a newspaper reviewer. Our research confirms that negative word of mouth is now what organisations need to tackle rather than merely complaints that are made to them.

So there is much at stake and companies need to be clear about what they are hoping to achieve by moving part or all of their customer service function offshore. It is no good exporting bad practices overseas, you will still get bad customer service. If you are aiming for excellent customer service, average handling time metrics are not appropriate, whether your call centre is in the UK or overseas.

Opening this article I stated that call centres are perhaps the most regular contact a consumer has with an organisation. They are not the only contact and it is important to remember that fact. While it is true that many people express frustration at call centre service, including being held in a queue, constantly passed from agent to agent, repeating their customer details, etc., it is equally true that at other times customers welcome the convenience of such contact. This can include making changes to personal details, out-of-office-hours contact – or switching from web contact to speaking directly to an agent at the click of a button.

Technology is providing an ever-increasing number of options for communications between organisations and their customers. With opportunity comes challenge as consumers expect to be able to develop a relationship with these organisations over the channels of their choice, when and where they want.

Jo Causon

Contact centres will continue to play a key role in that activity. It is true that in 10 years’ time, maybe even in five years’ time, they may look very different from today. We live in a global marketplace so it is reasonable to expect that overseas centres will continue to be part of the customer experience.

The important lesson to heed is that wherever they are, contact centres cannot be viewed in isolation from the rest of an organisation’s customer service focus. This may have been an issue in the past when the move offshore was driven by a focus on cost cutting.

In a world where product differentiation is short lived, value for money a given and customer feedback and communication immediate and highly visible, we need to view the role of the contact centre as part of our overall processes and culture which focus on the customer. This is because customer service is the only sustainable competitive advantage in the world we live in today.

Source:

http://www.callcentrehelper.com/should-contact-centres-be-placed-offshore-13833.htm

The full impact of cost cutting on thousands of UK businesses can be revealed this weekend after internal documents showed that Carillion, the £1.4bn construction and support services group, is reducing its supplier base from 25,000 companies to just 5,000 as part of a drive to save £140m a year by 2013.

The plan, called Step Up, has already saved £42m and next month Carillion is moving to an electronic supplier invoicing system that will help it save a further £86m in 2011.

The company, which spends £3.5bn with suppliers each year, is also using electronic auctions for some products and services to select which of its existing suppliers remain preferred suppliers.

It is initially ranking suppliers on the percentage discounts they offer on volume contracts.

One supplier told The Sunday Telegraph that to take part in the auctions, those in his service category were being asked about retrospective rebates on work already completed this year. The rebates are understood to range from 3pc to 8pc depending on the type and volume of work.

Carillion, which employs 50,000 people around the world, is one of 34 "second tier" central government suppliers that have begun talks with the Cabinet Office about efficiency savings that could affect its profit margins this year.

Serco became the latest supplier on Friday to sign a deal with the Cabinet Office that will see it make savings.

However, Carillion, which maintains military bases, hospitals, schools and thousands of miles of roads in the UK, told investors last week that it expected its £5.4bn revenues to grow further in the UK next year despite the Government's cut in capital expenditure as central and local government outsource more services.

Carillion said it was bidding for £1.7bn of local authority contracts and tracking a further £2.5bn of deals. On Friday, its shares closed at 346.9p, 5pc below the year high and valuing the company at £1.4bn.

Serco, which faced criticism after it demanded a 2.5pc rebate from suppliers, is expected to issue a trading update tomorrow and has already said the "scope changes and cost efficiencies" agreed on government contracts were "not material" to its existing earnings expectations.

The supplier to Carillion told The Sunday Telegraph: "The e-auction is all about the discount and not pricing. They just get the cheapest price.

"We had a meeting with them last week and they were really aggressive – either we offer a rebate and money retrospectively for this year or you get out."

Carillion, which was de-merged from Tarmac in 1999 and acquired rivals Mowlem in 2006 and McAlpine in 2008, said it had no "general policy to seek retrospective rebates" but acknowledged that it did accept rebates when offered from suppliers.

A spokesman said: "In an increasingly competitive market, suppliers put forward proposals to customers aimed at improving performance, increasing efficiency and reducing costs, and in some instances this includes pricing in respect of both future and completed orders. This obviously affects the approach to pricing in the market in question and therefore other suppliers with whom they are competing."

Carillion also said its supplier rationalisation programme would help it select the "best" suppliers to deliver "best in class services". It said it used e-auctions because they were "transparent".

Source:

http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/8131271/Carillion-suppliers-facing-axe.html

Serco, the outsourcing group that apologised for demanding rebates from its suppliers in the wake of public spending cuts, moved to regain the confidence of investors by unveiling £2.3bn ($3.7bn) worth of contracts that it had signed since July.

An upbeat trading statement on Monday from Serco, which provides a wide range of public services from running prisons to maintaining military bases, nudged shares in the FTSE 100 company up 8½p to 571½p.

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But the shares – among the most heavily shorted in the support services sector – remain about 7 per cent below the level at which they traded before the supplier controversy.

Serco asked for a “cash rebate” from 193 of its largest suppliers but backtracked after Francis Maude, the Cabinet Office minister who asked 53 of the government’s biggest contractors to deliver multi-million pound savings, expressed his anger.

The U-turn by Serco, which derives more than 40 per cent of sales from UK central government and also runs nuclear facilities, schools and ports, raised questions over how it would deliver savings without denting its profit margins.

However, the company reiterated that it was on track to report revenue of about £5bn in the year to the end of 2012 and an improvement in adjusted operating profit margin to about 6.3 per cent.

Mike Murphy, analyst at Numis, said the trading statement was “re-assuring” but added that doubts remained “over margin progression and cash flow performance”.

Serco said on Friday that savings would be made “through scope changes and cost efficiencies” but has declined to elaborate.

Asked about the possibility of redundancies, Serco said: “It’s too early to say if there are any going to be any job losses and we’d minimise those by redeploying people and removing vacancies.”

According to Data Explorers, 6.6 per cent of shares in Serco are out on loan, an indication of short-seller interest, up from about 2 per cent in May.

Contracts won in the second half of the year included a £650m environmental services deal with Sandwell borough council and two arrangements with the US Navy worth $130m (£81m) to provide logistics support and hazardous materials management.

Source:

http://www.ft.com/cms/s/0/b13aeeac-f0e2-11df-bf4b-00144feab49a,s01=1.html#axzz15REWhj2Q