Industry news

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

Outsourcing and the hidden costs of recruitment

We’ve written before on how many organisations are choosing to outsource their recruitment functions for more strategic reasons than short-term financial gains (read our previous contribution at http://www.sourcingfocus.com/index.php/site/opinionscomments/2519/) , but for the moment, there’s no getting away from the fact that a desire to save costs is still a significant factor.

However, at the risk of stating the staggeringly obvious, you can only save money if you know what you are spending already. And when it comes down to recruitment, our research suggests that very few organisations have an accurate understanding of their cost per hire.

The superficial reasons for this are legion – the daunting prospect of marshalling and analysing agency invoices and the hidden hire squirreled away under some other budget area are just two of the most common ones. But what about all the other factors that arguably ought to come into the calculation? Some organisations will include elements such as advertising, travel costs and even the employment cost of the recruitment team itself, but few will go beyond this which may be somewhat short-sighted.

Our research shows that more than 50% of recruitment costs are indirect and perhaps one of the most obvious aspects of this is the time cost of line managers. With managers conducting an average of 10 interviews for each hire, it’s easy to see how costs can stack up (we calculated that hiring managers’ time accounts for around £2500 per hire). And while business leaders may accept that interviewing is an integral element of a manager’s job, they quickly become conscious of lost earning opportunities where revenue generators are involved. But this particular indirect cost may be just the tip of the iceberg with the ‘nine tenths under the water’ coming from the employment of temporary and contract workers.

Many organisations rely on contractors and contingent workers to support their operations, but a growing number also use them as an alternative to permanent recruitment and this is where costs can really mount up. So why do so many line managers choose the contractor route over permanent?

Our research uncovered two key reasons:

- Headcount approval – hard to achieve for permanent hires, but surprisingly easy for contractors

- Talent availability – managers frequently state that it’s easier to secure a good quality contractor than a good quality permanent employee

Sound reasons perhaps but not particularly cost effective. Let’s assume most contractors charge a 30% premium on their equivalent permanent salary and an agency margin adds another 20%. On average therefore the extra cost of recruiting a contractor over a permanent employee can easily be 50%. And that cost continues throughout the life of the contract. To make matters worse many organisations don’t even have a clear idea of how many temporary workers they are using at any given time. In a recent client project we found the company was employing three times more contractors than it thought it was at a cost of over £60 million. And £20 million of that was accounted for by contractor premium and agency margin – money that could have been saved by better overall control of the hiring process.

Which of course begs the question – can an organisation really afford not to know what its true cost of recruitment is?

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

Craig Wilson, MD of Ciklum UK, states how organisations, battered by cutbacks, are under more pressure than ever to demonstrate value for money from their IT projects. Yet the tide has turned on traditional off-shore services as a means of deriving substantial cost savings from IT development, because the results simply are not standing up to scrutiny.

Over the last few years, analysts have signalled a growing trend towards ‘backsourcing’. Indeed, Gartner Group* reported that 56% of small-sized business, and 42% of mid-sized business contracts are backsourced following contract discontinuance. Here, disillusioned UK businesses and public sector organisations cut their losses and bring their IT development work back in house, because the economies have not proved worth it. The main stumbling block has been a lack of management control - the result of overly rigid development methodologies and the logistical difficulties of trying to work with a team thousands of miles away.

However few organisations in the current climate can afford domestic salaries, as budgets have been set around off-shore cost models.

It is here that nearshore services have stepped in and interrupted the flow of projects being brought back in-house, offering organisations a viable and attractive alternative to the domestic wage bill. The most compelling propositions combine similar - if not better - cost-efficiencies compared to traditional offshore offerings, with more familiar and flexible working practices and greater management control.

Offshoring - blind leading the blind

According to IAG Consulting*, 68% of ‘waterfall’ (a rigid, sequential software development process, favoured by traditional offshore providers) IT development projects fail. This is because such arrangements are extremely blinkered in their approach. In the ideal scenario, a detailed, functional, step-by-step specification is requested by the outsourcer and, after a cost is agreed, the results are delivered within the agreed timeframe.

However, if there are problems with the steps in the specification, they are typically not flagged to the customer, but instead the process is continued with blindly and an entire project is quickly derailed. By the time the errors are discovered when the final product does not work or the goal simply cannot be reached, it is too late: the work has been done, the time and budget spent.

Even if errors are discovered early, any attempts to redirect the project along the way are likely to translate into delays, the resetting of contractual terms and inflated costs, undermining any anticipated cost and speed benefits of the offshore model.

A closer fit

And so it is unsurprising that the ends of corporate tethers are reached and more and more projects are brought back to the native shores. But while the project stands a greater chance of successful, timely completion when brought home, as greater control and flexibility can be exerted, the costs remain high. Domestic wage bills were after all the reason why the offshoring model was used in the first place.

Eastern European nearshoring destinations are therefore, quite rightly, seeing this reluctant return to in-house activity as a huge opportunity. The low cost and sheer amount of IT-literate talent – since 2005, the volume of the country’s IT market has grown an average of 77 percent per year – and the Europhile culture, combined with all the advantages of outsourcing with none of the detriment, is making the proposition highly attractive.

Craig Wilson, MD of Ciklum UK - www.ciklum.net

* Gartner Group, "User Survey: SMB Business Process Outsourcing," 2004

*IAG Consulting, "Business Analysis Benchmark Study," 2009

Today’s retail IT Director is far more than a ‘techie’, on hand to deal with the black arts of till and website malfunction. Instead, they are arguably the company’s most diligent multi-tasker, forced to focus on their organisation’s core competencies, their consumers’ wants and needs and, most importantly, what will entice these customers to keep coming back for more.

Relieving the IT department of tasks which are not its areas of specialism through outsourcing to a trusted partner not only relieves retail IT Directors of non-essential duties but also provides time to focus on developments which might otherwise have been neglected, such as multi-channel and m-commerce, serving the all-important consumers of the future.

When retailers measure the tactical benefits of using an outsourced IT partner, they should not ignore the value that comes from being able to release their IT Director to focus on growing the business. For an IT Director, outsourcing IT can be life-changing. It releases him or her from the daily management of services to guiding just a few key individuals within an outsourcing partnership. IT Directors should look upon this as the chance to improve their credibility as a business enabler and adopt a new field of vision – that of refining and differentiating the business through systems, services and innovations that both reflect and drive the mechanics of 21st century retail.

IT outsourcing can help fashion a role for the IT director that is more dynamic, more vibrant, where operations are managed effectively by a third-party and allow senior individuals to think of the bigger picture, be creative and more strategic. Where this is already being done successfully, organisations are a marked increase in sales and margin as IT moves from being a support structure to a business driver.

The new retail world is characterised by consumer pull rather than supplier push, and retailers have come to view themselves as service providers, responding to needs rather than necessarily creating them. To get ahead, retailers need to concentrate on the essentials: what they want to sell, to whom and how, and be ruthless in their focus on what sets them apart.

In that context, the mechanics of retail - supply chain and fulfilment, merchandising and delivery - are more important than they have ever been. IT processes are the engine that powers these mechanics. Consumers are becoming more discerning in their purchasing, expecting faultless and consistent delivery and being unforgiving if they are let down. Retailers must respond by creating a service-based culture which resonates with the demands made upon them. And, as more is asked of retailers, so they should ask more of their IT function.

Many retailers already employ outsourced partners (OPs) to manage key functions such as a Help Desk for store-based and office-based staff, a Data Centre environment where hardware and systems are hosted by a third-party, the development of new and updated applications, and project management of new IT infrastructures and systems. However, as a means to control costs, streamline operations and improve their service delivery in a demanding trading climate, more and more retailers will turn to IT outsourcing.

If an OP is chosen carefully, true understanding and hands-on experience of retail can also be provided. So, why dedicate costly inhouse resources to these areas when an expert can offer a better service more consistently by having focussed and skilled resources, and more cost-effectively by sharing the service across a number of retailers?

There is much to be said for approaching use of an OP as a means of shortcutting the lengthy and complex process of gaining ISO20000 compliance and adhering to the ITIL framework for technical development. ISO and ITIL are the first internationally recognised standards for IT service management. Whilst critical for IT providers, these accreditations are equally valuable to in-house IT departments in retail businesses that support internal staff and external customers, as a route to building ‘best practice’ into the systems that drive the business.

The process of acquiring ISO/ITIL accreditation is demanding and wide-ranging. It will commonly take an organisation many years to construct and consistently adhere to the necessary processes business-wide. Rather than impose the task of achieving adherence upon an internal department, it may be better to use an OP that has already ‘climbed Everest’ and gained ISO 20000 accreditation.

By demonstrating that they operate to the ITIL framework both within their own business and in their client work, an accredited OP can introduce huge gains in project development timescales and quality. The ISO20000 approach of ‘plan, do, check, act’ also helps organisations to learn from their successes as well as from their failures. The result will be services that better meet the requirements of the business and its customers, and at a lower cost.

In the retail race, there is no finishing line. Continuous improvement will be demanded of all retailers as they strive to keep pace with the demands of canny consumers and the rigours of a testing economy. Retailers would be well served by putting the best skills to use in the best way within their businesses. Outsourcing of core services to an ISO/ITIL-accredited partner and releasing IT’s main champion to shape the company’s future are a couple of the hidden benefits of outsourcing IT.

Dan Smith is Managed Services Director at retail-only solutions and services provider, Retail Assist. Email Dan.smith@retail-assist.co.uk or www.retail-assist.co.uk

A recent report (Commentary on Aggregate Complaints Data 2010 H1) released by the FSA has ‘named and shamed’ for the first time those UK banks which have received the highest number of customer complaints during the first six months of 2010. Unsurprisingly, the media jumped on these statistics, and a plethora of lurid headlines has followed. Banker-bashing clearly remains a national sport – and will most likely continue to be for some time – so perhaps we should not be too surprised at this outcome. But if we look closely, there are some interesting facts behind the headline-grabbing numbers in the FSA's report.

Firstly, as an industry, the banking sector actually receives relatively few complaints overall: according to a report produced for Ofcom earlier this year, just 6% of the UK population make a complaint about their financial services provider each year, compared to 12% who complained about energy suppliers, and 23% who complained about suppliers of broadband and telephony services. In an industry as highly-regulated as financial services, that’s not actually a bad effort.

So what does this tell us? Well first of all, it tells us that complaints are a real commercial issue, and that regardless of how management sees complaint management today, there are sound business reasons for putting real time and resource into complaints going forward. There are two views of complaints in the banking sector: those who see complaint management as an unavoidable compliance issue, and those who see it as a chance to gain valuable feedback and learn from it. As such, the way in which lenders react to customers’ complaints and feedback is a key difference in terms of service levels within different organisations.

The secret to complaints handling is understanding what the issues are and what you need to do to improve your business. At its heart, complaints management is a management information (‘MI’) issue. If complaint volumes are going to be taken seriously as a business issue, a robust process for MI reporting is essential. Disparate legacy systems will make seamless complaints handling very difficult, as a unified view of complaints is impossible to achieve.

Strong MI reporting enables a lender to consolidate and analyse customer feedback in order to identify the root causes of customer dissatisfaction. By using MI reports to analyse this data, lenders can quickly and easily classify their customers' issues, feedback and complaints, and can then make informed decisions on identifying customer requirements, enhancing product design and improving service delivery.

At the same time, lenders can also adopt preventative measures that will reduce the chance of a complaint before it occurs. It won’t happen overnight – but if you can establish a single view of complaints, dealing with the root cause of these problems will become much easier.

Despite the best efforts of any lender, however, complaints will always occur, and there will always be more work to be done in this area. Lenders will therefore need to keep reviewing their processes to ensure that they are fair – and working as intended – and will also need to evaluate the consequences of any changes they make.

Software can help with this process, and in fact can also be used to establish and monitor key performance measures that reward staff for treating customers fairly, and also to identify when things go wrong. Showing how complaints affect the bottom line is key to success – showing how costs can be reduced or how the chance of getting a fine has been minimised will be the indicators that management looks for. A small investment upfront in proper complaints management can offset much larger costs further down the line.

Paul Clark, CEO, Charter UK, www.charter-uk.com

In the third part of his series of blogs on the first 100 days as a new CIO, Alex Blues, Head of IT Sourcing at PA Consulting Group, explains why CIOs must ensure all IT services are being resourced and delivered as efficiently as possible.

Once you have convinced the rest of the board to take responsibility for their own IT costs, you can’t just turn your back and think ‘job done’. It is your responsibility to ensure that you are delivering the services in the most efficient manner. The chances are you will have a mix of in-house capability, outsourced services, contractors and consultants. I am not going to talk about how you must have a sourcing strategy, that is a given, but I will talk about the more practical elements of what to do.

The current market and emphasis on value for money is a golden opportunity to get the most out of your external suppliers. The temptation, and indeed the trend, is to squeeze suppliers on rates so that you can wipe money straight off your bottom line. This might achieve short term savings and make your bottom line look good, but it is does not look at the long term opportunities.

Instead, you should use the current climate as an opportunity to talk to your suppliers and look at ways of providing a win for both parties. Be honest with them, they know their business and want to protect theirs as much as you do. Work out strategies together to cut costs and review the major cost elements of contracts and how you are getting Value for Money. You’ll be amazed at how cooperative suppliers can be when they feel part of a process.

Use consultants wisely, there is a temptation to just cut consultancy spend. What you should really be doing is identifying where consultancy can add value. To maximise value, you should look at your contracts with consultants, for example you could have a performance related and risk reward deal and share the benefits.

Next it is time to look internally at your organisation. It is tempting to come straight in and start redesigning your organisation in line with ‘best practice’. However, organisations are a living entity and they evolve to suit the circumstances. To suddenly change the organisation without looking at the circumstances will lead to failure. I am not advocating not changing, but you need to understand why things are the way they are and act accordingly.

Once the new organisation is designed, you should perform a review of capabilities in line with new roles. You must not be constrained by existing skills and people and should identify any gaps in capability. You should plan the means of filling these gaps, and consider mentoring - internally or externally – to fill these gaps. One of the best Service Delivery Managers I know learnt from an interim, supporting them as they delivered a Service Improvement Project and taking over upon completion.

In the fourth of this four part series, Alex Blues returns to discuss capital expenditure, project management and the need to be seen as more than just an IT functionary www.paconsulting.com

Listening to business or simply realising a mistake?

Sometimes there can be no greater show of strength for a man than admitting you simply got it wrong. If the Prime Minister’s recent hints that he will listen to the protests from major international firms and look to water down the planned immigration cap tell us anything, it’s that he’s not afraid to reconsider his policies. Or do they?

David Cameron’s announcement that intra-company transfers “should not be included in what we are looking at [for the immigration cap]” will almost certainly be heralded as good news for the outsourcing industry. But is it a coincidence that this news comes amidst new warnings that a forthcoming European trade treaty with India will circumnavigate the proposed cap in any case, by allowing multinational firms to transfer unlimited numbers of Indian employers to the UK?

Perhaps - perhaps not. What’s clear is that any immigration cap as initially proposed by the coalition government would have been very bad news indeed. In a worst-case scenario, it could have played a major part in ensuring that a number of industries were short of skilled workers. For instance, both the healthcare and IT sectors are hugely dependent on the influx of highly skilled workers from abroad. So perhaps the announcement of the government’s about-turn was inevitable?

Either way, it’s clear that if the government is to find a way a way to make the recently announced public sector cuts work, it will have to lean heavily on suppliers of outsourcing, many of whom are dependent on the specialist skills provided by those from other countries. In this context, it makes more sense that the government would make a U-turn on its all-inclusive attitude towards the cap - the last thing they want to be seen to be doing is throwing the baby out with the bathwater, and they will understand that they need to make full use of all resources at their disposal if the cuts are to be seen as a success.

Perhaps, then, it’s not impossible to speculate that the government has, not, in fact demonstrated the laissez-faire attitude towards its policies that many have credited them with? The proposed immigration cap as it stood was a big mistake for them - but let’s be honest, this about-turn perhaps has had very little to do with consulting the outsourcing industry for their views, and much more to do with the fact that they have realised that the government has backed itself into a corner.

Maybe this was signalled last week when the Government CIO John Suffolk, said that he had told Indian companies to “Bid, bid, bid” for government business!

Martyn Hart

The resilient Indian IT industry Wednesday lauded US President Barack Obama for terming those against outsourcing as holding onto old stereotypes and for committing to do away with protectionism.

‘Obama did a great job for our industry by terming them (anti-outsourcing lobbies) as stereotypes. I think his administration will also do a great job in terms of changing those stereotypes,’ IT industry lobby Nasscom president Som Mittal told reporters here.

For positioning India as the market for US businesses and declaring that India was no longer emerging but had emerged, the US administration’s efforts to change the stereotypes would get support of the industry, Mittal said.

‘I think we too have to do our job to change those stereotypes and ensure there is a much larger community that understands our business model that we are part of the solution rather than creating the problem itself,’ Mittal said on the margins of Nasscom’s annual Product Conclave & Expo 2010.

Expressing the industry’s satisfaction over the outsourcing issue figuring at the discussions between Obama and Prime Minister Manmohan Singh Monday, Mittal said that both the governments were committed to do away with protectionism.

Source:

http://calcuttatube.com/indian-it-industry-hails-obamas-outsourcing-stand/130296/

The Ministry of Defence has made an investment in ICT to help front line troops' medical treatment by moving to the electronic patient record (EPR) software Medway from supplier, System C.

The EPR is going to be used to support UK and NATO troops fighting in Afghanistan at its Medical Treatment Facility at Camp Bastion (the nation's main military base in Helmand Province).

Medway will also become part of the MoD’s Afghanistan pre-deployment training programme for operational medics and nurses for both the UK armed forces and our NATO partners.

The EPR deployment is being managed by systems integrator Logica, prime contractor for the project, with both it and the software house working to train up military clinicians, primarily at the Army Medical Services Training Centre near York.

Logica's going to be working to make sure Medway gets successfully integrated with existing MoD software applications so as to provide a “first class clinical platform for the management and treatment of patients”.

Bed management, clinical support tools, emergency department, intensive care, order communications, reporting, and patient administration will all be covered in the first phase of the project.

Logica already works closely in partnership with the MoD to deliver the MoD’s main Primary Healthcare application.

Source: http://www.publictechnology.net/sector/defence-fire-police/uk-armed-forces-use-system-c-epr

The outsourcing market in Bulgaria is currently estimated at EUR 100 M to EUR 150 M a year, but has the potential to go up over 10 times, according to Economy and Energy Minister, Traicho Traikov.

Traikov spoke Thursday during a conference titled "Bulgaria on the World Outsourcing and Offshore Map," at the Sheraton hotel in downtown Sofia. The event was organized by the American Chamber of Commerce in Bulgaria, the Bulgarian Investment Agency and Colliers International, gathering over 300 politicians, experts, local and international businessmen.

"Outsourcing is literally export of production; the concept of taking internal functions of a company and giving them for execution to an external company. Offshore is the moving of production and services to countries with lower labor cost and/or better investment and tax climate, Traikov explained.

The Minister announced Bulgaria ranks 1st in Europe and 13th in the world by outsourcing, citing a March research of the international research agency "ATKearney."

Traikov pointed out as main factors the country's location, qualified work force, quality education and low taxes, adding encouraging the outsourcing market is key for attracting foreign investors.

The Minister gave as example his own institution studying opportunities to give the activities related to the management of the "Competitiveness" operational program to an outside business.

"Every time I notice someone not doing their work, I tell them we will pay someone else to do it, and it is always effective," Traikov joked.

Source:

http://www.novinite.com/view_news.php?id=122067