Industry news

Tata Consultancy Services (TCS) has become the second-largest insurance business process outsourcing (BPO) provider in the UK, after winning two deals worth £250 million (around Rs1,800 crore). UK-based Capita is the number one player in this space.

Diligenta, a subsidiary of TCS, had yesterday announced that it had acquired Unisys Insurance Services (UISL) from Unisys Corporation, in lieu of which the company received business worth £250 million for the next six years. With this, Diligenta won business from Phoenix Group (earlier known as Pearl Group) and Old Mutual International. Phoenix Group is an existing customer of Diligenta.

Diligenta is already in talks with a few more insurance players for similar deals. “The cycle time for deals to materialise in case of Diligenta is six months to a year, especially for similar deals. So, in the next 12-18 months, we will have something to share. But winning these deals validates our strategy,” said Phiroz Vandrevala, chairman of Diligenta and executive director at TCS.

TCS, the country’s largest information technology (IT) services provider, took almost four years to develop a platform for the insurance segment in the UK. “We did not want to do a lift and drop kind of work in this space, and we wanted to partner in transformational work. It has taken four years to develop the platform. There was skepticism around this platform, but in April this year, we went live with two million policies for Phoenix,” said Vandrevala. For TCS, the UK is an important market, contributing 15 per cent to its revenue. TCS headcount in the UK will touch 2,000.

TCS started its journey in the UK insurance space in 2005, when it acquired the life and pension operations of Pearl Group under a 12-year £486-million BPO deal.

Diligenta now has three clients — Phoenix Group (additional extension to its earlier contract), Old Mutal International, and National Employee Savings Trust (NEST). In March, TCS had bagged a 10-year £600-million contract from Personal Accounts Delivery Authority (PADA) to administer the NEST scheme, but the deal is under the UK government scanner. Vandrevala said, “So far there is no change. In October, the government will take a final call on the overall IT deals. We will come to know about this only then.”

With these new contracts and an existing £486-million deal with Phoenix Group, analysts feel that TCS’ strategy is paying off. “I think TCS took a risk when it signed the deal with the Pearl Group in 2005. But if Indian IT firms want to break into the big league, they will need to take such risks. Also, with this win, they get much more flexibility,” said Vikram Gulati, director, Quantum Step, a UK-based research and advisory firm.

With these deals, TCS is also hopeful that the UK subsidiary will break even by the end of this financial year. “The work on the new contracts starts immediately. We are hopeful that by the end of this fiscal, we will break-even,” said Vandrevala. Diligenta reported a net loss of Rs56 crore in 2009-10 on a turnover of Rs456.2 crore, against a net loss of Rs41 crore on revenues of Rs527 crore in 2008-09.

TCS shares today closed 1.59 per cent down at Rs843.55 on the Bombay Stock Exchange.

Source:http://www.bpo.biz/bpo-news-blog/2010/09/06/tcs-is-now-the-2nd-largest-insurance-bpo-provider-in-uk/

The government is to initially cut its IT and outsourcing costs by £800m following meetings with its main suppliers, according to reports.

The new government targeted IT suppliers in an attempt to squeeze costs out of existing and future contracts.

In July minister for the Cabinet Office Francis Maude met the chief executives of the government's top 19 suppliers to start "renegotiating with them across everything that they do for government to get the cost down".

Progress is being made but some supplier offerings are going down better than others.

A source close to the negotiations said the government is making progress. He said suppliers that are offering standardised services and asking the government to make it easier to deal with them are offering big savings. "These suggestions are going very well." But he said suppliers that are just cutting prices and asking for extensions are not.

One attendee at the original meeting told Computer Weekly the government asked for immediate savings this year and ongoing cost reductions. He added that no numbers were mentioned.

A Cabinet Office spokeswoman said the £800m figure has not come from the government. She said the government has not yet completed the process. "It will run into hundreds of millions of pounds, but it is too early to say," she said.

Source: http://www.computerweekly.com/Articles/2010/09/06/242615/Government-IT-suppliers-agree-to-intial-163800m-cost.htm

Wipro Technologies the global Consulting, System Integration and Outsourcing business of Wipro Limited (NYSE:WIT), today announced an initiative with Oracle to jointly deliver a Warranty Management and Analytics solution for the Industrial Manufacturing, Automotive and High Tech industries.

This combined solution will leverage Wipro’s deep industry expertise and Oracle’s Siebel CRM applications to help streamline the warranty management process across OEMs and their suppliers, dealer service providers, and contract manufacturers to help reduce warranty expenses and fraudulent claims.

“Around 4 percent of warranty claims are fraudulent, making it one of the biggest challenges that the industry is facing today,” said John Barcus, Vice President, Manufacturing Industry Business Unit, Oracle. “We believe there is an immense opportunity to reduce these losses and an effective product warranty management solution is pivotal in helping reduce fraud-related losses. Wipro’s strong domain expertise in the Manufacturing, High Tech and Automobile industries and experience in development and deployment of Siebel CRM applications makes it a powerful partner for this solution.”

“Wipro is excited to work with Oracle in developing the Warranty Management solution to help our customers manage their claims more efficiently and accurately,” said N. S. Bala, Senior Vice President, Manufacturing Industry SBU, Wipro Technologies. “We believe that a streamlined warranty process and analytics will allow customers to better predict their warranty exposure and better manage their warranty reserves. The solution will be hosted for demonstration at Wipro’s state-of-the-art Oracle Lab, OZONE allowing our clients to see the solution before their own infrastructure is up and running.”

Wipro is a leading Oracle services provider, rated by independent industry analysts as a leader in Oracle services, Wipro provides services from rack to stack across Oracle product suite.

Source:http://pr.watblog.com/2010/09/wipro-joins-with-oracle-to-deliver-domain-solution-for-industrial-manufacturing-automotive-and-high-tech-industries/

It seems analyst were right as to who would win the bidding war over global provider of utility storage 3PAR. But with $115bn annual revenue –compared with Dell's $53bn - this should come as no surprise.

Indeed, given HP’s size and global presence, it is also likely to obtain a return on investment than Dell would have been able to get.

The definitive agreement HP and 3PAR have entered into sees HP purchase 3PAR, for $2.35bn. The transaction has been approved by the boards of directors of both companies.

The decision comes after a couple of weeks of intense bidding where the price of 3Par shares escalated from $18 (when Dell made its original offer on 16 August) to $33 per share which HP will pay in cash.

HP’s cash tender offer commenced on 27 August 2010 and it is scheduled to expire at 12:00 midnight, New York City time on 24 September 2010, subject to customary tender offer conditions being satisfied.

The merger will speed up HP’s Converged Infrastructure strategy and drive growth in key storage markets and strengthen its storage, server and networking product offering.

The final closing of the acquisition is expected to occur by the end of the calendar year. As for the termination of the previous agreement with Dell, 3PAR paid Dell the required $72m fee.

Hitachi Europe and Green Data Systems (GDS) have announced the opening of a highly energy efficient data centre in Deventer, The Netherlands. It will be opened on 23 September this year.

Both firms entered a strategic partnership earlier this year to collaborate on and deploy highly energy efficient data centres.

GDS, one of the investors in the ECO2DC initiative, is planning to develop the most energy efficient data centre in Europe, based in The Netherlands. ECO2DC is a leading data centre services provider aiming to build and operate the most energy efficient data centre in Europe.

GDS pursues energy efficiency in data centres and provides customers with optimal data centre capacity, cooling, managed services, SAN, security, server, software and data storage technology as well as services for green data centres and resellers in European countries such as Belgium, Germany and The Netherlands.

Hitachi's modular type data centres are thought to be an effective solution for energy efficiency.

In 2007, the Hitachi Group launched its energy efficient data centre project, which was driven by the increasing demand for IT equipment and facilities in data centres and the need to lower the environmental impact of this technology.

Hitachi later developed a modular data centre solution, which has been available in Japan since January 2009. The solution optimises the configuration of the cooling units to obtain the highest level of power efficiency in a high-density arranged data centre.

A couple of days ago, the Metropolitan Police Service (MPS) renewed its pay and pensions outsourcing contract with Logica, a £10m deal.

The extension will give the MPS the opportunity to introduce organisation-wide electronic payslips, overtime and expenses for the first time, as well as providing staff with greater use of self-service IT systems.

Similarly, reports suggest that UK-based Diligenta, the insurance and pension outsourcing unit of Tata Consultancy Services (TCS), has been approached by two prospective clients for outsourcing contracts worth more than £100 million each.

But it doesn’t stop there. A couple of days back Alliance Boots announced its decision to outsource part of its pension plan, which according to reports, could see the pharmaceutical retailer and wholesaler, offload about £300m of retirement fund liabilities to Pension Corporation, a specialist buyout vehicle.

As part of the plan, Boots has closed its UK defined-benefit pension schemes to future accrual for active members. Whether this is a cost cutting measure or not, Boots is not the first – and it’s unlikely it will be the last – to decide to reassess and reorganise its liabilities.

Last year, Barclays Bank decided, despite initial opposition from its staff, to axe the final-salary pension schemes for existing members.

Pension consultancy Mercer suggests that deals like that closed by Boots are part of a trend that has been increasing over the last 12 months.

It seems that after three years of living in a difficult financial environment, the City folk are trying to come up with new ways to keep their jobs resulting in innovative products. Which is good, as long as we don’t see another mess like the one that ensued from the sub-prime and CLO market crisis…

Concerns from the outsourcing industry may stem from the Government’s decision to apply the consumer prices index (CPI) instead of the retail prices index (RPI) for the price indexing of public sector pensions. The result of this has been an uncertain environment for public-to-private outsourcing exercises although the implications for outsourcing projects will depend to an extent on whether bulk transfers have been agreed or not.

What is certain is the emphasis on pensions in relation to outsourcing will likely become more prominent as the Government’s cost cutting measures begin to be rolled out. It will be a bumpy ride ahead.

In the last of the three part series on adjusting the fundamental approach when establishing sourcing relationships, Tim Palmer, the Lead in HR Transformation at PA Consulting Group, details the two final steps in ensuring objectives are mutually agreed and achieved.

Step 3 – CRITICAL! Check approach and contract align with intent

When you have made your decision, agreed your pricing and are finalising the arrangement, take time to reflect on where you are in the process. We mark this as CRITICAL! because it is the hardest thing to do; your project team will be fatigued and the service provider will be pushing to start (if they haven’t already). However, it is important to sit back and take stock before signing and starting. Almost all of PA’s sourcing remediation projects, where we help fix broken relationships, have at their heart unmet expectations and misunderstandings. One multinational has had three key problems in their global outsourcing contract. These are the same three areas that felt wrong when they signed – but under pressure from the board to ‘get on with it’, they proceeded anyway.

Due diligence should be about preventing such surprises; a key element is to validate that the original sourcing intent is achieved in the arrangement. This can include going back to the scenarios used in the selection process and checking that the solution still holds. It can also involve finalising the end-to-end metrics that will measure (and potentially incentivise) success.

Of course, there is always the possibility that these tests show that your intent is not met by the final proposed arrangement. In this case, you have ‘sourcing programme manager’s dilemma’. You have worked hard at something for a protracted period, cost your organisation a lot of money, and now have delivered something that doesn’t (yet) meet their requirements.

What do you do? From our experience, it is wrong to persevere with something that is doomed to fail, so however painful it might seem, we would stress the importance of going back through a loop, checking the intent and proposed course of action before proceeding and then coming to an agreement that puts the intent at the front of the mind of the team preparing the implementation.

Step 4 – Implement the business change in line with the intent

Planning and agreeing a sourcing approach is one thing, but there is no value created until the solution is implemented and the benefits are flowing. The way in which the implementation is managed needs to be in line with your intent. You should find ways to bring it to life, such as the creation of a ‘working guide’ that can be shared across all staff, that starts with the joint intent statement and sets out how it will be realised through its implementation. Whatever the solution, the intent needs to be understood and adopted by both the service provider and the customer organisation.

The current global economy presents the chance for sourcing techniques to prove their worth, by creating and realising value through a reduction in costs, increased performance and the provision of flexibility. If companies follow the four key steps outlined in this article then they will benefit from the wealth of opportunities that sourcing presents in the current environment.

This article is an extract from PA Consulting Group’s book, ‘Surviving and thriving in the economic crisis: The sourcing opportunity’, and is available free of charge. To request a copy of the book, please visit http://www.paconsulting.com/sourcingopportunity

IT and outsourcing consultancy Capgemini has acquired a 55% stake in Brazilian IT services company CPM Braxis.

Capgemini has an option to buy the remainder of CPM Braxis’ capital (45%), and the existing shareholders have an option to sell their remaining shares. These options can only be exercised between the 3rd and the 5th anniversary of the closing date (on the basis of an estimated price based on fair market value at the time of the exercise of these options).

The deal will enable Capgemini to considerably boost its presence in Brazil an IT services market amongst those with the highest potential.

The agreement will see the group widen its client base and contributes to Capgemini’s ability to better support its international clients in their developments in Brazil.

CPM Braxis’ client portfolio includes major Brazilian and international companies, particularly in the financial sector. The company expects to record 2010 revenues of around BRL 1bn (€450m).

CPM Braxis will also benefit from Capgemini’s assets –its global reach, methodologies and network of alliances - to serve its own clients, both in Brazil and around the world.

The Metropolitan Police Authority (MPA) and Metropolitan Police Service (MPS) have granted Logica a £10m three-year extension on its pay and pensions outsourcing contract.

The extension covers the period 2013-2016 and renews the existing contract between the two organisations, signed in 2005.

Logica already provides a fully-integrated, managed payroll and pensions’ administration service for the 58,000 police officers and staff of MPS.

This extension will also see Logica offer the opportunity for MPS to benefit from introduction of organisation-wide electronic payslips, overtime and expenses which it has not had to date. The new contract maintains the focus on providing quality services at good value for money.

The pensions’ administration service will continue to be managed through Logica’s partner Xafinity Paymaster.

Logica will also provide an even more resilient and flexible solution providing additional benefits to MPS employees through greater use of self-service IT systems. Additionally, Logica's technology and payroll solutions, which were developed specifically for the public sector, have been tailored to meet the specific needs of Logica’s Police User Group.

Buying Solutions, the public sector procurement agency awarded Bull IT a framework agreement for IT Managed Services.

Under the agreement, Bull’s IT managed services will be made available to all UK public sector organisations which are seeking to contract a supplier who can design, implement and manage end-to-end, cost effective Information and Communication Technology (ICT) services.

The framework agreement provides a simplified procurement process that meets the European legislative requirements of public sector organisations with nationally negotiated pricing and pre-agreed terms and conditions.

This removes the need for lengthy tendering processes or complex procurement arrangements meaning efficiencies can be achieved in much shorter timescales.

This announcement follows Bull being awarded a framework agreement for IT Infrastructure Products and Services by Buying Solutions in April this year.

With framework agreements for IT Infrastructure Products and Services, and now, IT Managed Services, the UK public sector will be able to meet Government budgetary and environmental targets. These include saving £300m per year on ICT projects and reducing power and cooling requirements by 75%.