Industry news

Serco, one of government's biggest contractor firms, has admitted that two of its largest suppliers gave in to aggressive pressure for rebates within days of receiving its demand for the return of past payments.

Media coverage shamed the outsourcing firm into apologising over the rebate demands. Serco said it had already abandoned the aggressive strategy but not before two unnamed suppliers had wired through some of the requested 2.5% of Serco's annual spend with their businesses, it emerged today.

Serco, which is trying to draw a line under the affair, said the payments, which it described as "relatively small", had been returned to the two firms, which it refused to name. It has also issued a public statement, saying: "We deeply regret this action and apologise unreservedly to [our suppliers] for the concern that this has caused."

The episode underlines the difficulty facing government contractors, which are under pressure to cut the amount they charge without passing on cutbacks to the smaller suppliers that ministers hope will drive the economic recovery.

This weekend Royal Mail became the latest business to have its tough negotiations with suppliers aired in public after details of a presentation outlining its "radical cost-cutting programme" were leaked. Delivering a presentation to an audience of 150 suppliers two days before the Serco news broke, Kath Harmeston, Royal Mail's procurement director, set out plans for "a 20% minimum target reduction per key supplier".

Careful not to be seen leaning too heavily on small businesses, Royal Mail said: "We are striving to get the best value for money throughout the business ... But we are absolutely not imposing a blanket cut on suppliers' bills."

The Serco demand, sent by the finance director, Andrew Jenner, to its 193 suppliers, said: "Like the government, we are looking to determine who our real partners are that we can rely upon. Your response will no doubt indicate your commitment to our partnership but will also be something I will seriously consider in our working relationship as Serco continues to grow."

The episode was embarrassing for the group because the language used by Jenner appeared to clash with assurances given to Cabinet Office minister, Francis Maude, that agreed profit margin cuts would not be passed on to suppliers. In the ensuing public spat, Serco's finance director and chief executive Chris Hyman were called in by Maude to explain themselves.

The affair wiped almost 8% from Serco's share price in two days as investors grew concerned about damage to its relationship with government and its ability to protect margins in supplier negotiations.

Source: http://www.guardian.co.uk/business/2010/nov/07/serco-admits-suppliers-gave-in-rebate-demand

Cameron's shake-up of the civil service comes as unions are angry about the coalition's deep public spending cuts that could throw half a million government employees out of work.

Cameron, Deputy Prime Minister Nick Clegg and the head of the civil service, Gus O'Donnell, will launch the new business plans at an event in London later on today.

The coalition says the business plans are different from the targets set by the previous Labour government which Cameron says created inefficiency and bred bureaucracy.

"The target culture pressured people to go for short-term wins at the expense of long-term improvements. Today we are turning that on its head," Cameron will say, according to excerpts of his speech released in advance by his office.

"Instead of bureaucratic accountability to the government machine, these business plans bring in a new system of democratic accountability ... Reform will be driven not by the short-term political calculations of the government, but by the consistent, long-term pressure of what people want and choose in their public services," he will say.

The business plans will set out in detail the actions the government plans to take over the next four years. They will also say what information the government will publish so the public can hold it to account, Cameron will say.

The plans will be published in parliament and be available to the public on a government website.

Source: http://uk.reuters.com/article/idUKTRE6A705G20101108

Although almost all SMEs consider IT to be crucial to business success, over a quarter admit they do not know enough about IT and how to make it work for their business, according to HP research.

HP commissioned a survey among 1,000 UK companies employing between one and fifty employees to find out how small firms are using technology to grow their business.

The research found that only just over a third (36 percent) of SMEs are deploying ecommerce strategies.

Despite this, over the past 12 months, 37 percent said they had grown their business. And over 90 percent of respondents are optimistic about the future of their business over the next three to five years. But only 43 percent were optimistic about the state of the UK economy over the same period.

Gavin Parrish, UK & Ireland commercial category manager at HP, said, “As the research clearly shows, many in this sector are still getting their heads around how to make IT work hard for their business.

"By providing information and support for this sector through our Business Answers blog SMEs can understand how IT can help grow their business."

On the low ecommerce take-up found in the HP research, Emma Jones, founder of SME support organisation Enterprise Nation, said, “The web allows you to launch a business on a Monday and be trading with the world by Wednesday.

"Small business owners should grasp this opportunity and sell through their own site or via on-line sales platforms. When you make the most of technology, you make the most of a global market.”

Although the HP research found that a quarter of SMEs were not confident about using IT for business, and ecommerce take up was relatively low, another recent survey found that nearly half of SMEs in the UK are using smartphones for business purposes, including email and other business internet functions.

Source: http://www.cio.co.uk/news/3247504/smes-failing-to-make-the-best-of-it-says-survey/

Barack Obama has signalled he is open to extending the Bush-era tax cuts for the richest 2 per cent of Americans, although not to making them permanent as Republicans are demanding.

Facing the reality of dealing with a newly energised Republican party following its resounding wins in midterm elections this week, the president on Thursday invited congressional leaders from both parties to the White House this month to try to reach compromises on pressing issues such as the tax cuts.

But underlining the challenges to bipartisanship, Mitch McConnell, the Republican leader in the Senate, said the party’s top priority now was to deny Mr Obama a second term.

“The immediate focus is going to be what we need to get done during the lame-duck session,” Mr Obama said before a cabinet meeting on Thursday, referring to the legislative period between this week’s elections and the start of the new Congress in January.

The lame duck session begins on November 15, a day after Mr Obama returns from a 10-day trip to Asia.

Democrats will want to push through votes on the Bush tax cuts while they still have control of both houses of Congress, while Republicans will want to exert their new power after winning control of the House this week.

“We have to act in order to ensure that middle-class families don’t see a big tax spike because of how the Bush tax cuts had been structured. It is very important that we extend those middle-class tax provisions to hold middle-class families harmless,” Mr Obama said.

The tax cuts enacted by former president George W. Bush – which cost $3,000bn over a decade – are due to expire at the end of the year.

The White House wants to extend the cuts for families making less than $250,000 a year but not those for the top 2 per cent of earners.

Republicans want all the tax cuts extended permanently.

A compromise could see the ceiling for the middle- class tax cuts increased to those earning up to $500,000 or $1m a year. Or there could be agreement to make permanent all the cuts except for the richest, extending those just for an extra year or two while the economic recovery takes hold.

In a further signal that the president is amenable to a deal, Robert Gibbs, the White House spokesman, said the president did not believe making the top tax cuts permanent was a good idea but “he’s certainly willing to listen to both sides”.

If the parties cannot agree, all the tax cuts will automatically expire on December 31.

The issue will be top of the agenda at a meeting in the White House on November 18, to which Mr Obama invited Mr McConnell and John Boehner, the incoming Republican speaker of the House, as well as Democratic leaders Harry Reid and Nancy Pelosi.

“I want us to talk substantively about how we can move the American people’s agenda forward,” Mr Obama said. “What’s going to be critically important over the coming months is going to be creating a better working relationship between this White House and the congressional leadership that’s coming in.”

Republicans are riding high after their electoral success this week, when they won a thumping 60-plus seat majority in the House and sharply reduced the Democratic majority in the Senate.

Mr McConnell told a forum at the conservative Heritage Foundation in Washington that the election results amounted to a repudiation of the administration’s agenda.

“We can hope the president will start listening to the electorate after Tuesday’s election,” McConnell said. “But we can’t plan on it.”

He reiterated that the Republican focus now was making sure that Mr Obama was a one-term president.

“Our primary legislative goals are to repeal and replace the health spending bill, to end the bail-outs, cut spending and shrink the size and scope of government, [and] the only way to do all these things is to put someone in the White House who won’t veto any of these things,” he said.

Mr Obama on Thursday also underscored the urgency of Senate ratification of the Start treaty with Russia, which would see both countries cut their nuclear arsenals by a quarter.

Some conservative Republicans are opposed to the deal but the president said the issue was a matter of national security, rather than a partisan one.

Source: http://www.ft.com/cms/s/0/b1a84a1a-e840-11df-8995-00144feab49a.html

India will seek to impress upon US President Barack Obama during his Nov 6-9 visit that outsourcing has actually created thousands of jobs in the US, and not taken them away.

"The issue of outsourcing will obviously figure in the discussions," Foreign Secretary Nirupama Rao told reporters here, briefing on the contours of the US president's visit, while touching upon what has been a sensitive issue for the two sides.

"Recent studies by FICCI (Federation of Indian Chambers of Commerce and Industry) have shown that thousands of jobs have been created by our greenfield partnerships," said Rao, referring to the growing operations of Indian companies in the US.

She said while the US was the third largest investor in India with a cumulative inward investment of nearly $9 bn since 2000, India was also was contributing much toward the American economy.

"According to the US officials, India is the fastest growing source of foreign direct investment in the US. They are creating, saving or supporting tens of thousands of jobs in the US," the foreign secretary said.

"India's defence acquisitions and major purchases in energy and aviation sectors, for example, are contributing to the US economy."

As per the study by the leading industry lobby, quoted by the foreign secretary, Indians are not taking away jobs in the US but had created and saved 65,000 jobs in recent years through increased investments.

"Recent Indian acquisitions have created and saved 65,000 jobs in the US. A total of 374 acquisitions have been made and 127 greenfield projects have been set up in the US by Indian investors," FICCI secretary general Amit Mitra said Wednesday.

India's Ambassador to US Meera Shankar, who was also at the event Wednesday, said Indian companies invested $5.5 bn in US greenfield projects from 2004-09. "In mergers and acquisitions of US companies, Indian companies invested $20 bn."

Mitra said one area of outsourcing shouldn't be seen as a fulcrum of Indo-US engagement. "The relation need to be judged in its totality just as some European nations have begun to look at their engagement with India."

Obama, accompanied by a large delegation of over 200 corporate honchos, arrives in Mumbai this weekend on an official visit to India. Both sides acknowledged that business will be on top of the president's agenda during the visit.

Source: http://www.deccanherald.com/content/110366/outsourcing-has-created-us-jobs.html

* Sees NHS tenders, contracts towards end of Q4

* Says on track to meet own FY view

* Ups interim dividend by 22.4 pct to 6p

* Grows forward order book by 5 pct (Adds details)

Britain's Synergy Health posted a 22 percent rise in first-half adjusted pretax profit, helped by higher margins, and said it expected further outsourcing by the National Health Service to boost its business.

The provider of sterilisation services to hospitals raised its interim dividend to 6 pence from 4.90 pence and said forward order book grew by 5 percent to 890 million pounds ($1.44 billion).

"Our focus now is to convert the bid pipeline into further contract wins in the fourth quarter and into the next financial year," Chief Executive Richard Steeves said.

For the six months ended Sept. 26, adjusted pretax profit was 18.1 million pounds, compared with 14.9 million pounds a year ago.

Revenue fell 3 percent to 138.7 million pounds, but gross margins improved 2.1 percent, helped by winding down of non-core business.

The company's shares were flat since Synergy on Oct. 6 forecast first-half profit in line with its own view, compared with a 4 percent drop in the FTSE 350 Health Care Equipment & Services Index .FTNMX4530.

Synergy Health shares closed at 747.50 pence on Wednesday on the London Stock Exchange. ($1=.6201 Pound) (Reporting by Aditi Samajpati in Bangalore; Editing by Vinu Pilakkott)

Source: http://uk.finance.yahoo.com/news/update-1-synergy-health-sees-boost-from-further-nhs-outsourcing-targetukfocus-e4509c5b5921.html

Large-scale offshoring of IT and business processes is seen by many as the way government departments can cut costs, but the ineffective procurement of the past could mean there is an alternative way to reduce budgets.

In the government spending review last month, chancellor George Osborne outlined spending cuts of £81bn over four years.

Although the government will use IT to help cut costs across the public sector, Whitehall departments and their suppliers will be forced to offshore to reduce the amount of money spent on technology, some experts believe.

Sarah Burnett, analyst at Ovum, says demand for offshoring will increase as a result of the government's negotiations with IT suppliers to deliver the same for less. Business process outsourcing (BPO) is the area most likely to move overseas. "Offshoring is one way for suppliers to deliver the requisite cuts in prices," she says.

Indian outsourcing companies are already positioning themselves to take a slice of the UK public sector market. Suppliers such as Mahindra Satyam, Wipro, TCS and HCL Technologies have declared their intent. "We can deliver twice the service quality and at half the price [of current providers]," says Vineet Nayar, CEO at HCL.

Doubts over offshoring

Public sector IT chiefs recognise the need to outsource but are less certain about offshoring work.

David Wilde, CIO at the City of Westminster, says outsourcing is likely to increase to maximise the benefits of large virtualised environments as well as helping to establish more shared services.

But he says government bodies should not treat outsourcing as a blanket approach to reducing costs. "It really depends on the specific service, and offshoring should not be looked at as an end in itself, just one of a number of business options," he says.

"I think there is a fundamental question about the extent to which offshoring actually does cut costs."

Many public sector outsourcing contracts have come under fire for proving too costly, with the government having lost billions in project overspends, delays and cancellations in the past. But the complexity of those projects could end up being a reason not to offshore, and to cut costs instead by improving what has come before.

Jos Creese, president of public sector IT user group Socitm, says offshoring is not always the best option. "Offshoring can work well for a clearly defined service or product, but the greater the complexity, the less likely remote delivery will result in a satisfactory outcome," he says.

Robert Morgan, director of consultancy Burnt Oak Partners, says, "Outsourcing is absolutely not the only way to meet spending targets. The waste is within the old system."

David Cameron's visit to India, where he declared that the UK was "open for business" suggested that the government has already positioned itself to outsource more of its contracts, says Mark Lewis, head of outsourcing at law firm Berwin Leighton Paisner.

But the issue of UK jobs vanishing overseas remains politically sensitive, he says. "The government will be looking at offshoring providers that have an onshore presence. Tata Consultancy Services, for example, has well over 5,000 staff in the UK and HCL also has several thousand. To talk about offshoring as an option is not just about seeing jobs disappear from the UK. And, of course, that is something the government can mandate on," he says.

Big businesses have been offshoring IT in increasing volumes for at least a decade. Although the government is the biggest business of them all, it is a different beast. Sending work offshore makes business sense, but it might not make political sense.

Source: http://www.computerweekly.com/Articles/2010/11/04/243756/Is-IT-offshoring-inevitable-to-meet-government-cuts.htm

As US President Barack Obama primes himself for his imminent visit to India next month, the question on everyone’s lips is whether or not he will be able to rebuild the bridges he burnt with the strong anti-outsourcing stance he has demonstrated in recent times.

By visiting India earlier in his presidency than any US leader before, Obama’s visit is intended to be symbolic of the new US-India relationship. There are, however, plenty of bumps in the road ahead which the President will have to negotiate before the trip can be classed as a success.

Indeed, ahead of the Obama visit, anxiety is cutting through India's outsourcing industry over the President's policies, which include a determination to block tax breaks to companies who choose to globalise their IT operations, along with the HB-1 visa which will restrict the hiring of foreign workers.

How fair are these measures, though?

It’s clear that organisations all over the world benefit from the value that India is adding - including those in the US. For example, Tata Consultancy Services, India's largest IT services firm, runs a project in Ohio that employs over 300 people, which, as it stands, could be in danger.

It’s true that the largest worry across America today is the nature of the economic recovery, which has seen unemployment levels reach close to 10%.

Ohio's struggling governor is up for re-election in November and with a Republican accusation that outsourcing has cost the state thousands of jobs during the Ohio governor's occupancy, he, issued an executive order banning outsourcing from his state.

The Ohio ban and the announcement of an end to tax breaks could impact across the entire Indian IT industry; a situation which will only become worse if other US states follow suit.

The industry has grown at a rapid pace for the best part of a decade, much of this stemming from US companies offshoring their back-office procedures.

Indeed, as much as 60% of India's IT operations revenue comes from outsourcing and a large chunk of it from the US. India is quickly becoming the world’s back office and as a result, the US has shifted jobs to India for lower costs and greater efficiency.

It’s important to remember, however, that before any decision is made to offshore services, all businesses - not just those in the US - will identify where their core competencies lie, and will only outsource processes where they are not efficient.

This means that by offshoring services, US companies are becoming more efficient at delivering the things they are good at, which can, in turn, mean more jobs are created as a result.

Perhaps it’s time that Obama was told that a ban on outsourcing is not necessarily the answer to his domestic troubles? Everyone understands that the economic downturn has seen the President come under increased pressure to protect US industry - but perhaps his visit will help him to see the bigger picture, as well as the wider ramifications of his actions.

Collaborative sourcing is a true transformational approach to an enterprise's applications development and maintenance strategy. In addition to providing the mechanism to realise the benefits of global delivery and continue significant cost reductions, collaborative sourcing creates the engine to accelerate time-to-value.

Since the early 1990s, companies have moved applications development and maintenance work to lower labor-cost countries, to varying degrees. Often referred to as "offshoring" or "outsourcing," this labor arbitrage has had an important effect on businesses' ability to reduce costs of ADM.

Although cost take-out continues to be a primary CIO focus -- and oftentimes is the principal yardstick by which ADM service providers are measured -- the market has matured to the point that such cost-savings initiatives, while important, are no longer strategic and offer little, if any, competitive advantage.

So, where are CIOs turning for the next wave of value creation from IT? A time-based competition strategy, supported by a quantitative outcomes-measurement process, has quickly become the foundation for an enterprise's "next generation" sourcing strategy.

What Is Collaborative Sourcing?

Application collaborative sourcing is a delivery framework that provides ongoing development and maintenance of an enterprise's full application portfolio. The framework model provides a platform to drive innovation and focuses on time-to-value while introducing working collaborative practices to get critical business functionality into production at a fast rate.

A core theme of collaborative sourcing is improving the business's capability to compete on time. The collaborative sourcing argument is that if we wish to accelerate time-to-value, we need to measure -- quantitatively, systematically and persistently -- factors of time at the lowest levels of granularity possible.

Collaborative sourcing accelerates time-to-value. Through a set of Web 2.0 technologies and an integrated set of processes, collaborative sourcing focuses on cycle time (elapsed time) and speed (hours versus estimate) as the principal metrics for measuring performance.

Staff behaviors are directed toward competitive, time-based outcomes when not only development methods, but also the talent model and recognition systems, are calibrated on time-based measures.

Collaborative Development

A core principle of collaborative sourcing is the notion that true collaboration among knowledge workers accelerates delivery while fostering innovation and reducing risk. Collaboration between IT (employees, contractors, partners, etc.) and the business (employees, contractors, partners, etc.) yields acceleration of time, improvements in quality and reductions in risk. While most executives -- IT or business -- will agree in principle with that assertion, such collaboration in a real and consistent manner has been largely an elusive goal.

Real collaboration requires both a mechanism to enable seamless, transparent communications and, perhaps more importantly, trust between the parties. These two ideas are inexorably linked. True collaboration will occur when parties share information and have a trust relationship that engenders that sharing. Trust will survive only when information is shared willingly and consistently in a truly transparent fashion.

Collaborative sourcing addresses this issue through delivery communities and an environment of pervasive transparency. Delivery communities are the basic governance construct of collaborative sourcing. The delivery community is organized around a business process and incorporates all the professionals -- business and IT -- who deliver value to the business in that business process area.

Business and IT professionals collaborate using the Web 2.0 technologies of the integrated platform in an environment of pervasive transparency -- where all work and all project artifacts, business and IT, are visible to all members.

The delivery community becomes the point of execution for work in the collaborative sourcing model, as well as for work in the IT governance model within the enterprise. Delivery communities are virtual organizations with membership spanning any number of operational and organizational boundaries to bring together professionals with work to do (creation of components), which creates value to the enterprise through application development and maintenance. While the constituency of the community is a virtual construct, the physical instantiation of the community is very much actual.

Software collaboration tools provide the infrastructure to enable real-time global collaboration, as well as component level transparency, to work. Members are assigned to the community, work items are managed and visible to all members across the community, and such performance metrics as component scores, reuse statistics and other time-based calibrations are aggregated to the community level.

Within these business-process-focused delivery communities, practices are optimized for the acceleration of time-to-value: These practices include component-based development project methods, digital reputation scoring systems, and systematic asset reuse and component catalogs.

Outcomes-Based Performance Evaluation

The collaborative sourcing model supplements the traditional methods of performance evaluation that rely heavily on consumption-based measures with a quantitative outcomes-measurement process. Outcomes have typically been thought of as high-level outcomes of a project or major project phase. Often, these outcomes are translated to service level agreements and serve as a mechanism for defining a project outcome or set of outcomes.

A professional's percentage of utilization -- the percentage of a theoretical maximum available number of hours -- acts as a surrogate measure of performance. This measure, combined with annual or semi-annual performance reviews that attempt to take into account other less-quantitative measures of performance, form the basis of most talent-management models.

These measurement systems and performance review processes do little to support a time-based competition strategy. The reward mechanism favors high utilization -- not necessarily being the most productive and certainly not being the fastest.

Collaborative sourcing defines outcomes at the component level. A fundamental principle of collaborative sourcing is the discipline of component-based development: Any project artifact that can be time-boxed and defined as a discrete deliverable is a component.

Components become the building blocks of ADM, and by emphasizing the quantitative evaluation of these components -- based primarily on time -- the enterprise creates not only an effective scoring and incentive system for talent management, but also a core asset in the component catalog for ongoing development and maintenance.

The Big Picture

Collaborative sourcing is a true transformational approach to an enterprise's applications development and maintenance strategy. In addition to providing the mechanism to realize the benefits of global delivery and continue significant cost reductions, collaborative sourcing creates the engine to accelerate time-to-value.

Rather than focusing almost exclusively on cost takeout, collaborative sourcing refocuses a CIO's capabilities and resources toward adding value to the business through accelerated time-to-value and outcomes-based measurement processes.

While continuous improvement in cost management will always be important in IT, significant returns on IT investment can be realized when tied more directly to business benefits. First-mover advantage in a market, premium price leverage, rapid response capability -- all enabled by accelerated IT delivery in collaboration with the business -- have significant revenue- and profit-enhancement potential.

The next-generation sourcing strategy is here, and enterprises are already beginning to realize its transformational potential.

Source: http://www.ecommercetimes.com/rsstory/71165.html?wlc=1291801536

Unlike US President Barack Obama, European lawmakers find outsourcing jobs, products or services to India mutually beneficial, creating a win-win situation.

'Outsourcing is now seen more as a partnership than losing jobs. Success of Volkswagen cars in India provides more opportunities for our firms back home in a big way,' European parliament member Barbera Weiler said here Wednesday.

Weiler, who represents the German Socialist Party, is in India as part a nine-member European parliamentary delegation to understand how this country deals with regulatory issues such as services, standardisation, customs and consumer protection.

Admitting that outsourcing of IT jobs from the European Union (EU) to India did evoke protests in Germany initially, Weiler said they were, however, becoming shriller as there was greater realisation on the benefits of such engagements.

'Protests against outsourcing to India were natural earlier as job losses were feared in Europe. It is not a price argument anymore. It has now come to mean selling our products in India and helping trade grow between the European Union (EU) and India,' she told reporters at an interaction with the delegation.

Noting that the Indian IT industry had expertise in automation and was using information and communication technology (ICT) in the administration productively, Weiler said such domain knowledge would be of immense help to some of the European countries lagging behind in e-governance.

Echoing Weiler, British lawmaker Malcom Harbour said that outsourcing helped the EU countries in product engineering and design.

'The whole process has matured and aerospace majors such as Airbus and EADS (European Aeronautic and Defence Space) are doing product engineering and design work using local skills in India,' Harbour pointed out.

Allaying fears over outsourcing, the British member said in a globalised world, skills had to be used successfully as they were scarce in Europe.

'Outsourcing to India helps us to sustain jobs as there is a resource scarce across Europe,' Harbour, who is the chairman of the committee on internal market and consumer protection in EU, asserted.

The delegation is on a two-day visit to Bangalore to find new solutions in transport, health and green technologies for the 27-member EU states.

'Sharing and joint development of technologies should be encouraged. Cross border trade is given a push as we are bullish on global trade revival and economic cooperation with India,' Harbour added.

Source: http://economictimes.indiatimes.com/infotech/ites/European-lawmakers-bat-for-outsourcing-to-India/articleshow/6867807.cms