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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

The Defence Science and Technology Laboratory (DSTL), part of the Ministry of Defence, has awarded a £60m contract to IT services supplier Steria for the provision of ICT services over an eight-year period, which will begin on 1 April 2011.

Steria will be responsible for delivering core IT services for DSTL's corporate networks, including maintaining its IT infrastructure, providing IT helpdesk support, and technical support for ad-hoc departmental projects.

DSTL said Steria met its requirements of flexibility, service delivery, information security requirements and value for money.

John Torrie, Steria UK and India CEO, said, "[We are] committed to delivering significant cost savings over the contract lifetime and supporting DSTL in its drive to improve workplace efficiency and IT asset utilisation."

Source:

http://www.computerweekly.com/Articles/2010/11/15/243938/MoD-lab-awards-16360m-outsourcing-contract-to-Steria.htm

Bulgaria has the potential to become a sort of a "Silicon Valley" of the Black Sea, according to participants in a conference on outsourcing and off-shoring, organized by AmCham, the InvestBulgaria Agency, and Colliers International.

More than 300 international and local delegates attended the first "Realizing the Potential - Bulgaria on the Outsourcing and Off-shoring Map" conference in Sofia, an initiative of the American Chamber of Commerce in Bulgaria (AmCham) and the governmental InvestBulgaria Agency, in cooperation with Colliers International.

"The Conference turned into a truly engaging and successful industry exchange. The one-day event gathered more than 300 international and local delegates - high ranking governmental officials, prominent experts and senior executives, who shared valuable experience and engaged in a forward-looking discussion about Bulgaria's potential as an outsourcing and off-shoring location," AmCham said in a follow-up statement Monday.

Source:

http://www.novinite.com/view_news.php?id=122195

"One of the key objectives of AmCham is to support the government in positioning Bulgaria as an attractive investment destination. The event was an excellent opportunity for international companies to meet and network with Bulgarian companies and to explore the potential of Bulgaria as an outsourcing and off-shoring location", commented Valentin Georgiev, Executive Director, American Chamber of Commerce in Bulgaria.

Keynote speakers and attendants of the event included Traycho Traykov, Minister of Economy, Energy and Tourism; Rossen Plevneliev, Minister of the Regional Development and Public Works; Krassimir Popov, deputy-minister of Labor and Social Policy. Amongst the prominent speakers were senior representatives from McKinsey & Company, AES, Hewlett-Packard, TMF, Johnson Controls, OPI, Adecco, SAP Labs and Colliers International.

According to Borislav Stefanov, head of the InvestBulgaria Agency, Bulgaria has three major advantages as an outsourcing destination: the location and cultural proximity to key markets, its political and macroeconomic stability and the qualified human resources and talent. He believes it is the government's job to make sure that the perception of Bulgaria by investors reflects the benefits that it offers.

"Bulgaria has a great opportunity to become a niche player in Eastern Europe and to be known for specialized skills adding value to business operations and development", said Atanas S. Garov, Managing Director of Colliers International, Bulgaria, as quoted in the AmCham statement.

According to him, services with highest development potential include IT, engineering, research and development (R&D). He noted that employees in the outsourcing and off-shoring industry in Bulgaria which at present are some 10 000-15 000, could potentially reach 100 000 within five years if there are concentrated efforts to attract investors and major service users.

"The incremental growth for outsourcing companies from Eastern Europe within the next 10 years could increase 4 times up to USD 440 B... Bulgaria can become the Silicon Valley of the Black Sea with the united efforts of the business, the government and the academia. In order to become a leading outsourcing/off shoring (O&O) destination by 2020, the country needs targeted demand and talent development/attraction initiatives, such as raising funding from public and private sponsors; improving suitable talent availability; identification of focus areas for the local O&O players; structural changes to the educational system, setting up a Bulgarian expats regain program and assuring a highly reliable, cost-effective enabling infrastructure," believes Detlev Hoch, Senior Partner at McKinsey and Company.

"When choosing an outsouring/off-shoring provider, the financial offer is not always the most important decision factor but also the quality of the services, the infrastructure and communications, and the business environment. Local government's support is also crucial: developing university programs focused on outsourcing, providing incentives to business, sponsoring educational programs and helping local companies define the opportunities to leverage language skills and cost optimization," said in turn Elizabeth Hackenson, Senior Vice President and Chief Information Officer, AES Corporation, USA.

"In order to be a country of preference for the outsourcing and off-shoring industry, Bulgaria needs to invest not only in infrastructure, quality of service and education but also to encourage innovative business projects and entrepreneurial skills, as well as ensure that there is a strong government commitment to this cause," believes Sasha Bezuhanova, Director, Public Sector CEE, Hewlett Packard.

For the last ten to twenty years, outsourcing to India has long dominated the outsourcing landscape. But that appears to be changing with recent emerging players raising their heads to take advantage of the outsourcing game.

Although there are some good options for outsourcing to Latin America, Eastern Europe and Russia, Mexico and other Asian counterparts like Vietnam and the Philippines, China is touted take the lead in the next few years as the leading outsourcing country. Despite worries that the Philippines might become the biggest business process outsourcer in a decade or so, China is closing in on the gap within the industry.

The clear advantage that China brings to the table is the six billion people or more that populate the mainland. With more and more engineers graduating from Chinese universities, there is scope for more work to come their way.

One criticism that points to China is that despite the fact that the country boasts its Internet skills among its population, the English speaking capacity is significantly lower than those of workers found in countries where Internet skills are far less. This discrepancy will cost China but only to a certain extent because everything is so cheap in China.

Talking about cheap, companies will want to consult several vendors before deciding to hire one in China. Cheaper does not necessarily mean better. Just as the euphemism, ‘You get what you paid for,’ is an apt description of quality all around the world, the same is true in China. There will be several points where point of contacts of outsourcing firms will have to define and spell out clearly what kind of product or service is desirable for the company.

China has traditionally been good at process development when it comes to manufacturing and that tradition continues to grow. We buy everything from TV sets to cell phones from China. They have a way of bringing the basics to life and for a price that is fraction of its rivals – patent infringement aside, of course.

Just a few years ago, there were controversies over Chinese products coming into the U.S. that was tainted, for example seafood that salmonella in it. Another big scare was lead found in paint in children’s toys manufactured in China by Mattel. And there was a domestic scare about the ubiquitous ‘Chinese pork bun’ being made out of inedible materials.

All this goes to show that if you’re going to outsource to China, you will have to engage in frequent monitoring of products and also engage in constant communication with vendors so that standards are misinterpreted. If that can be achieved, China outsourcing offers value for the money.

Source:

http://www.sys-con.com/node/1611776

The Government has already "exceeded" its £800m savings target for this year by squeezing its main suppliers for cash rebates, Francis Maude, the Cabinet Minister has said.

With public sector contractors Serco and Capita due to update investors this week on trading and negotiations with 34 "second-tier" government suppliers taking place this month, the eventual savings could be much higher.

Mr Maude said the £800m figure had been a best guess when he began the cost-cutting process in July. "We did not actually know exactly how much we would get out of renegotiating contracts. We had an ambition and we've slightly exceeded it," he told The Sunday Telegraph in an interview.

He was speaking before Serco announced on Friday that it had agreed central government contract "scope changes and cost efficiencies". The company will update investors today when it posts a trading statement but has already said the changes were "not material" to its earnings.

Nineteen suppliers were hauled in to the Cabinet Office in July and since then G4S, Cable & Wireless Worldwide, Logica, Cap Gemini, HP, Oracle, BT, Accenture, Siemens IT Solutions and Services, Steria and Atos Origin have publicly said they have agreed deals.

Source: http://www.telegraph.co.uk/finance/newsbysector/supportservices/8132753/Francis-Maude-Government-has-exceeded-800m-savings-target-for-suppliers.html

US President Barack Obama, who has been openly critical of offshoring to India, seems to have changed his tune during his state visit to the country.

What seems to have changed his mind is the signing of some major trade deals, worth about $15 billion, as an “important step in elevating India to one of the US’ top trade partners. The US president said that the deals with India will create 50,000 jobs back home. The purchase of US Cargo planes by India alone will create 22,000 jobs in America, he added.

Obama said both the US and India were “operating on stereotypes that have outlived their usefulness”, adding “Whenever I’m asked about Indians taking away our jobs, I want to say, you know what? They’ve just created 50,000 jobs.

"US companies are creating jobs with tech in US and Indian businesses will take those technologies to expand growth and jobs in India and US," said Obama. “We agreed to keep working to reduce trade barriers and protectionism.”

“As far as India is concerned, India is not in the business of stealing jobs from the US,” said Indian Prime Minister Manmohan Singh. “The outsourcing industry, I believe, has helped to improve the productive capacity and productivity of American industries.”

Source: http://www.publictechnology.net/sector/central-gov/us-offshoring-deal-unveils-obama-u-turn

A £150 million outsourcing deal has been passed by Bournemouth City Council, which will see private company Mouchel take the reins of several services in the city for the next ten years.

Mouchel, which in recent months has had its contracted with Middlesbrough City Council extended by an additional five years, will run Bournemouth’s revenues, benefits, ICT, and facilities management.

In December 2009, the company was also awarded a place on Buying Solutions’ Software Applications Solutions framework agreement, enabling it to vie for contracts across the public sector, including customer management, enterprise resource planning solutions, and information management applications.

The agreement with Mouchel was passed by Bournemouth City Council by 34-12, with Conservative councillors arguing the deal was necessary as the city tries to manage a 40% budget cut over the next ten years.

Mouchel executive director Tony Williams moved to reassure citizens, and claimed service users, "won’t see any changes on December 1. It will be the same staff, doing the same jobs, for the same residents, from the same place.

Source: http://www.publictechnology.net/sector/local-gov/bournemouth-begin-150m-outsourcing-deal-december