Industry news

Gordon Easden, financial services practice leader at FusionExperience, explores some of the concerns in the minds of fund managers when it comes to outsourcing.

Traditionally there has been reluctance within the fund management industry to widen the scope of the business processes fund managers outsource. Although many are happy to outsource back office functions such as fund accounting many are still slow to recognise the value of broadening the scope of operations they are willing to entrust to a third party. However, the outsourcing landscape has changed, creating the opportunity for fund managers to transform service quality and cost by outsourcing much more and much more cost effectively.

The present day outsourcing by fund managers is part of a continuum that started 15 years ago. At its inception, fund managers were happy to outsource basic back office functions but would not have been comfortable allowing access to more complicated or ‘core processes’ such as customer service for example. The evolution in those 15 years is illustrated in the development of outsourced customer service solutions. This has almost become a matter of course for fund managers. Many are also considering outsourcing to a centre of excellence that provides a more holistic service as it would be supported by much wider range of technologies at a cheaper price.

This evolution has presented the fund manager with a wide array of options when deciding what to outsource, a question that can sometimes feel a little daunting. It is important for a fund manager to consider its options holistically and develop an in-depth understanding of what its operations are there to do. Fund managers must have a handle on core structure and costs and an understanding of what is going wrong. This will help isolate what functions are advisable to outsource and which may not be necessary.

A concern for many in the industry when looking to outsource are the perceived risks involved. It is fair to say that in some cases, when not managed adequately, outsourcing can create risk. Fund managers run the risk of losing the capability and knowledge to run processes and also the possibility that too many processes are embedded with the provider. This can make it difficult for fund managers to migrate away or renegotiate contracts favourably. There is also the risk of choosing a provider that is not a specialist in the areas that they have been earmarked to outsource.

The industry undeniably has specificities that present challenges in outsourcing, but also illustrate the importance of it. Fund managers’ operations are rapidly evolving, particularly in the technology and regulatory landscape, from customer care to the evolution of the STP market place with regards to targeting and positioning. This necessitates a high level of reporting and presentation technology to cater for regulations that are in constant evolution. The average size of a fund management firm remains small so there is a demand for centralised and cheaper service.

Finally, as the UK emerges from the recession, the specifics of the fund management industry and the evolution in regulation have led to a much greater emphasis on transparency of reporting and compliance. Outsourcing providers with evolving platforms and new technologies can help fund managers move from more traditional monthly reporting to a daily reporting cycle that many clients have come to expect.

Exam results keep rising but pupils taking relevant subjects continue dropping

Hot on the heels of the recently announced A-level results, this week’s release of GCSE results indicated a rise in the pass rate – for the 23rd year in a row.

But if students are getting smarter, why is it that options/subjects such as languages and ICT have seen a drop in the number of pupils taking them?

In today’s multicultural/multilingual world, technology filters into all aspects of life; so does it make sense to opt of the subjects which could very well determine (or at least significantly influence) future job prospects?

“The IT industry may well value qualifications in areas other than IT, such as. Science, Mathematics etc, above pure IT subjects in the future,” observed Roger Newman, senior vice president at IT solutions provider Mahindra Satyam. “The next generation of knowledge workers, which are now entering higher education, have grown up with, and already have a good understanding of, the fundamentals of IT and so can develop into the type of person who can drive more business benefits from IT regardless of having a formal IT qualification.”

As the economy slowly recovers, demand for skilled labour will also increase. In this instance, the markets and industry knows what they need and know what they want. It needs skilled labour and it is ready to import or export it depending on the situation.

“The recent A-level and GCSE results suggest that there has been a general decline in the number of students taking IT subjects,” noted Newman “I believe it may be symptomatic of a shift in the types of skills that will be required in tomorrow’s IT workers. IT is now highly embedded in most business processes and businesses are increasingly using off the shelf applications and Open Source Solutions. It therefore follows that businesses rely on a higher degree of skill in understanding business processes and the application of technology to operations than the past.”

Newman stressed: “Somebody has to build the off-the-shelf applications and Open Source Solutions and, to do this; formal training in IT is required. In summary the decline in the number of people studying IT subjects will probably not affect outsourcing trends in the short or even medium term but will have a profound effect on the IT industry in the long term, unless a sensible balance is maintained.

In its August 2010 Labour Market Outlook survey, the Chartered Institute of Personnel and Development found that the demand for migrant workers has increased in line with improvements in the UK labour market during the past year.

The study surveyed 600 organisations of which 45% indicated that they had vacancies that were proving difficult to fill from the domestic labour market and were now looking overseas in a bid to fill the positions.

According to their figures about one in six (17%) employers intend to recruit migrant workers in the third quarter of 2010, which is above the previous peak of 15% recorded three months ago. Employers in the education and healthcare sectors are most likely to hire migrant labour (27% in each sector).

In a technology-based world, the budget cuts will continue affect the quality of education – among other public and social programmes – the outlook for Britain just keeps getting rosier…

Oslo-based aluminium firm Norsk Hydro has awarded Accenture a three-year application outsourcing (AO), which covers support and maintenance of two of Hydro's SAP systems globally.

The agreement is designed to improve the efficiency and cost-effectiveness of Hydro’s SAP-based business processes through an industrialized approach that offers higher quality and innovation.

The services will be provided to Hydro users in multiple countries by Accenture’s Global Delivery Network, using centres in Germany and India. The delivery of the outsourced services is scheduled to begin in October 2010.

Norsk Hydro and Accenture have worked together in the areas of consulting and technology services since the late 1980s.

The Lloyds Banking Group (LBG) has awarded Factbook, a specialist provider of fund reporting, marketing and data management solutions to the investment community a extension of their managed factsheet service.

LBG has chosen to migrate their Bancassurance factsheet production for both Halifax and Bank of Scotland to Factbook’s fully managed production environment, building upon the success of the earlier Clerical Medical factsheet project.

This latest roll-out sees peak monthly document delivery from the LBG production platform almost double to in excess of 250 retail fund factsheets.

The relationship between LBG and Factbook is already a couple of years old and it is expected to further develop over the coming months.

The Financial Services Authority (FSA) has fined the UK branch of Zurich Insurance £2.27m for failing to have adequate systems and controls in place to prevent the loss of customers’ confidential information.

This is the highest fine levied to date on a single firm for data security failings.

Zurich lost the personal details of 46,000 customers, including identity details, and in some cases bank account and credit card information, details about insured assets and security arrangements.

The loss could have led to serious financial detriment for customers and even exposed them to the risk of burglary; however there is not evidence to date to indicate that the data has been misused.

Zurich UK outsourced the processing of some of its general insurance customer data to Zurich Insurance Company South Africa Limited (Zurich SA).

In August 2008, Zurich SA lost an unencrypted back-up tape during a routine transfer to a data storage centre. The absence of proper reporting lines meant Zurich UK did not learn of the incident until a year later.

As Zurich UK agreed to settle at an early stage of the investigation the firm qualified for a 30% ‘discount’, without which the fine would have been £3.25m.

Comms vendor Avaya and telco BT have extended their global partnership for a further three years.

The telco firms are looking to deepen their partnership which covered contact centre equipment and services and explore new areas including voice and unified communications (UC).

As part of the relationship, BT will provide integration and consultancy services to support the Avaya product suite. Avaya and BT will jointly market and sell the products and services to businesses around the world.

The new agreement between the two companies covers next-generation contact centres, unified communications and services, and complements BT's portfolio of networked IT services.

Both firms have been working together for the past 10 years.

Following Avaya’s acquisition of former rival Nortel, its relationship with BT has been under close scrutiny from the comms industry.

Nortel, which entered Chapter 11 in early 2009, had a longstanding relationship with BT, signing a four-year partnership as recently as May 2009 – Avaya agreed a deal two months prior to that.

Global consulting and IT services provider Mahindra Satyam, the brand identity of Satyam Computer Services has appointed Gaurav Gupta as associate vice president, Strategic Partnerships in Europe for the Aerospace and Defence sector.

In this role, Gupta will lead development of customised partnership arrangements in the sectors of Aerospace and Defence. He will focus on building new business opportunities and, using the synergies of the Mahindra Group, convert them into large global relationships.

His appointment comes as Mahindra Satyam looks to strengthen its focus on specialty offerings for this sector and to meet the specific challenges facing the industry, namely; cost, time to market, and a need to maintain research and development at reduced costs.

Gupta has more than a decade’s experience in the industry which began when the Aerospace and Defence sector first started looking at outsourcing and off-shoring in a major way.

Prior to joining the Mahindra Group, he worked as a director of Business Development with HCL, based in the UK.

Unisys Corporation has been awarded a five-year extension on its contract to provide end-user support services to oil & gas supply manufacturer Flowserve Corporation.

Under the new agreement, valued at close to $37m, Unisys will provide ongoing and expanded services to support approximately 10,000 of Flowserve's employees in more than 50 countries worldwide for five years beyond the originally contracted 2011 expiration date.

The ongoing services include service desk support in nine languages, desk-side support, equipment maintenance, and installs, moves, add and changes for desktop and laptop PCs, BlackBerry smartphones, servers and printers.

Expanded services to be provided –from 2011 –will see Unisys implement its Converged Remote Infrastructure Management Suite service offering for Flowserve.

The solution provides a single, unified view of an entire IT infrastructure. It will enable Unisys to provide integrated monitoring and management of some 500 servers deployed in Flowserve locations around the world.

In addition, Unisys will implement an IT Services Management framework, based on the ITIL v3 standard, for continuous improvement in service delivery.

Unisys will also enhance both the self-service portal for Flowserve employees and the knowledge management solution that stores information about prior service events so that end users and service personnel can anticipate and more quickly resolve potential equipment problems before they lead to potentially costly downtime.

Recent media reports have been insisting that a number of suppliers have been ‘going bust’ this year. But how accurate is this?

Yesterday’s online editions of The Guardian, The Telegraph and the FT – amongst others - reported a 47% increase in the number of public sector suppliers affected by the degraded economic environment.

The figures derive from research attributed to accountancy firm Wilkins Kennedy, which claims that H1 2010 saw an increase to 168 insolvent companies, up from 114 in the same period last year.

However, it would be interesting to put that 47% increase into context.

A few figures:

According to statistics reported in February’s HM Treasury speech on government procurement:

• There are 4.7 million small and medium sized enterprises (SMEs) in the UK, representing 99.9% of UK business

• At the time the government was spending 95% of £220bn of public sector procurement in UK-based firms.

Needless to say, that by its size the well-being of SME space is fundamental to economic recovery, which is perhaps why the news of a near 50% increase in the insolvency rate made such news.

I do not mean to down play the meaning this increase has for individuals whose livelihoods depend on the jobs created by insolvent companies. However, it’s clear that £209bn (95% of £220bn) has been spent in UK-based procurement suppliers, which begs the question - how much of this percentage actually goes to SMEs?

“There’s no doubt that public sector work is of major importance to small businesses” said Chris Gorman, Private Business Forum (PBF) spokesman.

“Countless small firms up and down the country rely on bodies like local authorities, health trusts, police forces, schools and colleges for business. If these important contracts suddenly start disappearing, I think it’s safe to say many smaller businesses are going to suffer and may even go to the wall.”

It is probably not much although according to the Government, in 2004/2005, SMEs won 59% of the total value of local-authority contracts and 22% of central-government contracts.

Similarly, around 10% of members consistently report concerns about public procurement-related issues, according to proprietary research conducted by the Forum of Private Business.

It is something the coalition government has promised to address and the ‘supply2gov’ website is supposed to be part of the answer. The website, designed to make it easier for micro-business to tap into public contracts, originally launched in 2006 it is expected to re-launch later this year.

The portal in theory, allows SMEs to gain free access to contracts worth £10,000. Higher value deals, with tender documents worth more than £25,000, would follow, in order to meet the target of allocating 25% of all state contracts to small businesses..

The current 'supply2gov' portal does not seem to delivery. Let’s hope the portal re-launch changes that.

The stats presented may have been a bit misleading, having omitted the size of the business community – however, they do depict the reality.

While many will say that any economic downturns serves to ‘cleanse the system’ and rid it of inefficient players, the fact remains that some competitors are too small to absorb the shock caused by unfavourable trading conditions which makes them more likely to go bust than larger players.

“Although small business owners traditionally favour low taxes and low spending, many are very wary of calling for ‘slash and burn’ public spending policies from the new government,” noted Gorman.

The question in everyone’s mind is: will the measures taken by the government succeed in rebooting the economy as well as boosting investor confidence?

It would seem that uncertainty remains close to the only certainty – aside from taxes and death!

A team from Sheffield Hallam University working on data search technology that has the power to change the World Wide Web has secured €370,000 funding from the European Commission with help from Enterprise Europe Yorkshire.

The funding is part of a €4m collaborative project lead by German technology leaders, SAP, that will focus on how improved data searching will impact on business.

Dubbed the ‘Semantic Web’ by father of the Internet, Sir Tim Berners-Lee, the next generation of the World Wide Web will allow users to search more data than ever before, return more relevant results and save users time surfing the web.

Currently only a proportion of data posted on the Internet can be ‘read’ intelligently by computers and users have to visit multiple websites to find the information that they want.

The project will develop methodologies and a platform that combines essential features of semantic technologies and business intelligence.