Industry news

It's always interesting to know what books are on a business leader's current reading list. When I recently visited Rwanda-based outsourcing company Gasabo 3D Design Limited, I spotted a copy of 'Start-Up Nation: The Story of Israel's Economic Miracle' lying on the desk of CEO John Rugamba.

It seemed an entirely appropriate choice: the book tells the story of how Israel has defied regional boycotts and a relative lack of natural resources to become a major international business force and, more specifically, a widely recognised centre of excellence for information technology.

It could be argued that Rwanda faces even greater challenges in its struggle to build a prosperous knowledge economy. To much of the world, the name of this country is still synonymous with the tragic events of 1994, when some 800,000 people were slaughtered over the course of just 100 days, in one of the most brutally efficient genocides of the twentieth century.

Sixteen years on, I found that tiny Rwanda is looking to the future - and its success so far in achieving security, political stability and economic growth has made it a role model for other African nations. But if it is to be successful in forging a foothold for itself in the world of international business, much will depend on the ambitions and hard work of local entrepreneurs like John Rugamba.

He started Gasabo 3D back in 2007, as a spin-off from the Rwandan Information Technology Authority. Today, he employs 12 skilled engineers at the company's offices in the Kigali ICT Park, recruited primarily from the Kigali Institute of Science and Technology and the Ecole Technique Officielle de Gitarama (ETO-Gitarama).

The company's engineers work to convert two-dimensional (2D) drawings into three-dimensional (3D) computer-aided design (CAD) models using software technology from SolidWorks, on behalf of clients in the USA, Western Europe and India. One of the most impressive names on this tiny company's customer rollcall is construction machinery giant, Caterpillar.

The Gasabo 3D team works in two shifts to meet international companies' demands for quick turnaround times: these shifts run 0730h-1630h and 1400h-2100h.

It's an interesting proposition. Other outsourcing companies offer this kind of service, mostly from India or China, but none can beat Gasabo 3D on price, Rugamba tells me. "At a charge of around $15 per hour to the client, and sometimes lower, we may even be half the price of competitors in other countries," he says.

Setting up the company was easy - all the paperwork was completed in a single day. The Rwandan government, under President Paul Kagame, is very active in nurturing and supporting new technology companies.

But building a strong, profitable outsourcing company in Rwanda, however, has been a harder path, Rugamba concedes. There's a lack of local managerial expertise on which he can draw and few international business leaders know much about Rwanda. Many would struggle to find it on a map. "One of our biggest challenges is helping overseas clients to have confidence in who we are, where we are and what we do," he says.

International marketing, however, requires money - another major challenge for Gasabo 3D. To build awareness, Rugamba gets a lot of support from the team at SolidWorks, he says. In fact, the copy of 'Start-Up Nation' was sent to him by SolidWorks' CEO Jeff Ray.

At the same time, Rugamba is also focussing on providing outsourcing services to local companies with architectural and engineering design needs, including telco MTN Rwanda.

Like many Rwandans I met on my trip, John Rugamba studied abroad (in his case, at the Tshwane University of Technology in South Africa), but returned to Rwanda determined to contribute to his country's resurgence. "That's important to me, so the challenges do not matter so much," he says. "Already, Gasabo 3D is showing people in other parts of the world what Rwandans can achieve."

Alex Blues

Head of IT Sourcing at PA Consulting Group

Very few of us would have thought that an accident involving the Transocean Deepwater Horizon drilling rig on the 20th April 2010 could have affected the outsourcing industry.

In fact, some commentators have gone as far as saying that there was no impact on the outsourcing industry at all. This argument is based on these commentators distinguishing between subcontracting and outsourcing – subcontracting being where an organisation requires an external body to meet a specification, and outsourcing as where a client asks an external body to provide a particular outcome.

I have to say however, that I completely disagree with this conclusion. I do not believe that the market will understand the subtleties, and I think the clients who are reliant on outsourcing for strategic services need to take a step back and consider in more detail what the consequences are if sourcing (subcontracting or not) goes wrong. The catastrophic events in the Gulf of Mexico should be seen as a wakeup call as not enough attention is being paid to the impact of an outsourcing contract failure. As has been all too clearly seen, the ultimate responsibility in terms of political consequences, financial damage and public reputation, still lies with the client, whether the causal fault lies with a contracted party or not.

If an outsourcing contract fails, especially in dramatic circumstances, it can have a major impact on the brand of the client – both in terms of market and customer perceptions – on the share price, and even on revenue and profit.

We should not be arguing over semantics. Instead, I believe we should take a look at all strategic outsourcing contracts, and ask the “What if” question. What if it goes wrong? What impact would it have? And what mitigations can now be put in place to avoid that?

In a similar fashion to how the EDS / BSkyB situation has caused calls for greater scrutiny over the way in which services are sold, the BP situation should compel organisations to run a ‘disaster scenario pen’ over their outsourcing contracts and ensure that any negative impacts on their share price, brand, revenue and employment are anticipated to as fine a level of detail as possible.

We are all aware of disaster recovery plans that protect a business in the case of infrastructure damage caused by any number of circumstances – the same levels of foresight, planning and preparation are equally applicable to outsourcing contracts. While much may be gained from a fruitful relationship, so much more can be lost from a poor one.

Global customer management outsourcer (CMO) has acquired Australian contract centre and IT provider PCI.

Following the acquisition, PCI will be rebranded as Vertex. The new business will build on PCI’s track record of delivering innovative inbound and outbound customer contact services linked to multilingual support in nine languages.

The acquisition will strengthens Vertex’s existing global portfolio in retail, utilities, financial services and the public sector across the UK, US, Canada and India.

The new business will invest in client relationships and harness the group’s experience to capitalize on the high-growth potential in the Asia Pacific market.

The company has operations in Melbourne Australia and in the Philippines and will open a new site in Ballarat, Victoria.

The new location will employ 600 people over the next two years. A further site in Australia and additional investment in the Philippines are also planned.

Despite an encouraging 82% of UK businesses relying on learning and development (L&D) third party experts to deliver their workforce’s training needs, two-thirds (68%) of businesses have opted for ‘low-level outsourcing’, only outsourcing the basic elements of their training delivery model.

Only 21% of businesses have adopted a ‘high-level outsourcing’ approach, outsourcing high-value functions such as learning management systems and training administration.

These figures published by industry player Thales Training & Consultancy, point to the emergence of a possible two-tier divide in businesses’ ambitions when it comes to outsourcing L&D.

The research also indicates that only a fifth of businesses are exploring more innovative ‘high-level outsourcing’ of L&D functions, including; training administration (20%), training strategy (20%) and learning management systems (20%).

Indeed, 73% of businesses consider cost to be the greatest barrier to L&D outsourcing.

The research aimed to explore the different aspects of outsourcing L&D and how it is being used to drive efficiency, talent management and business performance. It was carried out during March 2010; interviews were conducted with 200 L&D professionals in organisations of at least 1,000+ employees.

DoH to receive £1.06m in royalties from NHS SBS

The Department of Health is to receive £1.06m in royalties from NHS Shared Business Services (NHS SBS), a joint venture between the Department of Health and business outsourcing specialist Steria.

The sum will be re-distributed to the NHS trusts and organisations who subscribe to NHS SBS services. This is the first in a series of payments which are earmarked for distribution amongst NHS SBS clients over the next few years.

Launched in 2005, NHS SBS provides shared business services to a growing number of NHS trusts. It currently works with 125 NHS organisations (representing 30% of all NHS trusts), delivering shared business services such as payroll and finance and accounting.

NHS SBS was established to help NHS trusts streamline back-office functions and deliver greater operational efficiency, thus enabling key staff to focus on frontline care.

The shared services delivery model offers modernisation, high flexibility and cost savings. The results are encouraging, particularly at time when the as public sector resources are further tightened by the recently announced emergency budget.

Over the last three years, NHS SBS has seen a substantial rise in levels of client satisfaction; the most recent survey shows that 87% of NHS SBS clients state they would recommend the service.

The joint venture now also delivers the added benefit of sharing proceeds with participating trusts. More than 21 million people in the UK have NHS healthcare delivered by NHS SBS clients.

European procurement provider buyingTeam, has made two new senior appointments within its London office. Gareth Evans has been appointed operations director and joins buyingTeam’s board with immediate effect. Peter Roberts joins as engagement manager, working alongside buyingTeam’s 30-strong engagement team.

As Operations director, Evans is responsible for service delivery to all of buyingTeam’s clients. He brings 18 years of experience across procurement and professional services and was one of the earliest proponents of the procurement outsourcing market. He led the procurement BPO business at PwC, was a partner in Accenture’s BPO business and most recently director of business process consulting at Fujitsu Services.

Roberts joins from Accenture, where he was a solution architect within its Business Process Outsourcing team. There, his role included working with clients to construct outsourcing arrangements to meet their delivery and financial business needs, managing client relationships, defining the scope of services suitable to each client, constructing business cases and preparing transition activities. Prior to working in the Business Process Outsourcing team, he worked with clients such as NTL Telewest, Bank of Ireland and Lloyds TSB, as part of Accenture’s strategic procurement consultancy practice.

Hello - it's been a while since I last blogged, but I've been travelling a great deal and, in some cases, in regions where Internet access remains a big challenge. I recently got the opportunity to visit Rwanda, for example. While there, I visited a small but interesting new outsourcing business - but more about that in my next blog.

Last week, I was in London and had lunch with BG Srinivas, who heads up Infosys Technologies' European operations. It was a while since I'd visited London and even longer since I last saw Mr Srinivas. Our last meeting was way back in 2007, at a dinner he hosted in Greenwich. Attending this dinner were 25 UK university graduates from 12 different universities, who were off the next day to the company's Mysore campus for a six-month stint on the Infosys Global Talent Programme.

This time around, I was keen to get BG Srinivas's perspective on how Infosys would navigate the tricky path of global economic recovery. "The good news is that customers are starting to make decisions again," he told me. Across its global operations, Infosys has seen positive signs of recovery over the last three to five months, particularly in the US over the past two quarters.

But what about Europe? "We expected the European recovery to lag behind by around three to six months, and that has proved true, to some extent," he says. But he has been pleased, he says, to see a robust response to the European debt crisis within the region. "I'm glad it's being viewed as a collective problem, with all countries making sure that they are helping one another."

That said, Infosys has little if any direct exposure to the countries in the most serious trouble - Greece, for example, or Spain. Its major territories here are strictly northern European: the UK, Germany, France, Switzerland, Benelux and the Nordics. Nor need Infosys worry about the effects of the UK's Emergency Budget on its business - the company has "no real focus" on the public sector in this country.

But, says Srinivas, organisations in both the public and private sectors currently face the same challenge of "doing more with less", and for him, that's the guiding principle that is reshaping Infosys Technologies' approach to pricing.

"As clients and prospects start to experience the recovery for themselves, they're looking for ways to boost internal productivity while keep costs low - and not to get stuck with a whole lot of fixed cost, but to pay only for what they use," he explains. "To some extent, cloud computing is driving that change and customers are beginning to expect the same approach from a whole range of service providers. So in future you'll see Infosys moving more and more to pay-as-you-go and outcome-based pricing models."

As for the UK, Srinivas is seeing "definite positive signals, but we're still cautious. This certainly isn't a time for exuberance." Does he still host dinners for new graduate recruits and pack them off for a six-month Mysore training adventure, I wonder? UK students didn't get that opportunity in 2009, he confesses, but Infosys is considering reinstating the programme in 2010. And with our lunch over, he makes the dash from restaurant to office, across a blustery Canary Wharf.

There has been much speculation around the emergency budget announcement due today and it is already raising concerns among the general public. Further spending cuts are likely to affect social programmes and the unemployment rate.

The repeated call for more effective use of resources has led to increased talk about efficiencies and cost-savings being achieved through outsourcing.

To add to the fear already present among public sector employees, some media sources have taken to publish reports of millions of private sector jobs which would also be at risk. These would be outsourced jobs serving the public sector. Such speculations often lack substantiation and may suffer from inflated figures.

Indeed, exactly what impact the emergency budget will have on the country’s unemployment rate remains to be seen.

Outsourcing is not new to the government; it has been outsourcing various functions and services for some 20 years. Although as an experienced user, it could do with improving how it manages its outsourcing relationships.

“The bad press that surrounds the cost-effectiveness of some past public outsourcing projects not withstanding, I would expect a well thought through outsourcing contract to provide effective and cost-effective delivery of services,” observes Danny Jones, partner in charge of UK public sector at advisory firm TPI.

It may be that more outsourcing contracts are awarded in which can result in the creation of new (on-shore) jobs among the outsourcing community.

Equally, it may be that the outsourcing industry is negatively affected. Indeed, we have seen how proactive luxury contracts are put on hold or scrapped altogether (like the National ID). And while essential money saving projects will continue to go through, the impending budget cuts will impact existing relationships, as evidenced by recent budget cuts.

“Suppliers are already feeling the squeeze particularly when it comes to negotiating contract extensions; and they expect this to continue”, notes Jones.

This is confirmed by findings from a recent report published by KPMG. It discovered that outsourcing appears to have fallen off the CIO agenda. Indeed, more than two-thirds of CIOs surveyed indicated that they now expect to pay more attention to the price to quality ratio they currently experience.

Industry players still maintain there are more opportunities than drawbacks to expect from today’s announcement. The government needs solutions that will not just deliver savings but it also needs solutions that deliver results quickly; this is often a key benefit of outsourcing.

However, when it comes to how quickly outsourcing can deliver solutions a word of warning is necessary; fast deliverability could come down to a matter of semantics. Certainly, it usually takes 18 months to two years for an outsourcing project to begin delivering following the signing of the contract. This could be a problem unless the government changes its outsourcing model to resemble that of the private sector.

“Typically, the government has awarded large contracts to a single supplier, but we will see a shift to a model where government breaks large projects into manageable blocks which are then awarded to suppliers according to expertise/service required. This will increase the effectiveness of delivery if it is well managed” says Jones.

There are pros and cons to everything but despite the many opportunities that may arise from the necessary measures announced today, economic policy is often a bitter pill to swallow.

Worldwide cloud services revenue is forecast to reach $68.3bn in 2010, a 16.6% increase from 2009 revenue of $58.6bn, according to advisory firm Gartner.

The industry is poised for strong growth through 2014, when worldwide cloud services revenue is projected to reach $148.8bn.

Gartner estimates that, over the course of the next five years, enterprises will spend $112bn cumulatively on software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS), combined.

Gartner is seeing an acceleration of adoption of cloud computing and cloud services among enterprises and an explosion of supply-side activity as technology providers maneuver to exploit the growing commercial opportunity.

North American and European markets represent the largest markets from a geographic perspective, and while other geographies around the world will experience growth, this growth will not notably alter the overall weighting away from the larger, more-mature regions over the course of the next five years.

The U.S. share of the worldwide cloud services market was 60% in 2009 and will be 58% in 2010, but by 2014, this will be diluted to 50% as other countries and regions begin to adopt cloud services in more-significant volumes.

Western Europe is expected to account for 23.8% of the cloud services market in 2010, and Japan will represent 10%. In 2014, the U.K. is forecast to account for 29% of the market, while Japan will represent 12% of cloud services revenue.

The financial services and manufacturing industries are the largest early adopters of cloud services. Communications and high-tech industries are also leveraging the cloud in significant volume, while the public sector is also clearly interested in the potential of cloud services and its share of the overall market.

The Metropolitan Police Service (MPS), the largest of the police services that operate in greater London, has extended its contract until December 2015 with its prime information and communications technology (ICT) partner, Capgemini UK.

The contract is expected to provide an estimated £43m savings in supporting the day-to-day work of London’s 55,000 police officers, staff and community support officers.

The contract extension covers the three-year period 2012-2015 and renews the existing seven-year IT support contract between the two organisations, signed in 2005.

The early renewal will enable the MPS to lock agreed cost savings in place and set budgets with greater certainty.

The agreement will also help Capgemini to better plan the resources required to fulfil the requirements of the contract.

Capgemini will continue its partnership with its main subcontractors, BT and Unisys. BT’s services include upgrading and rationalising the MPS’ voice and data networks, and Unisys supports application management, data centre hosting, desktop and server break fix.

The cost savings will be achieved from increased automation, improved joint processes and rationalisation of services.

There will also be closer collaboration to streamline management control and simplify reporting structures.

The movement of some Capgemini support services to centres in the north of Scotland will also deliver higher cost-effectiveness. All of Capgemini’s work under the contract will continue to be carried out entirely within the UK.