Industry news

Electricians at St James’ Hospital Dublin are staging a one-day stoppage as a dispute over outsourcing work escalates.

Members of the Technical Engineering and Electrical Union (TEEU) will walk off the job the hospital after no agreement was reached at the Labour Relations Commission (LRC).

Union leaders confirmed emergency life and limb cover will be provided during the industrial action, but warned the technical services department will be affected.

This is the third stoppage by members at the hospital since the beginning of the month.

On 10 August, talks over outsourcing the work of electricians in the Technical Engineering and Electrical Union adjourned after three hours with no significant progress made.

The dispute is over management moves to reduce the role of electricians on site. Outside contractors have been brought in without prior agreement with the TEEU under agreed procedures. The union is concerned about health and safety, as well as job security issues resulting from the contracting out of services.

Other craft workers at the hospital, including members of Unite and UCATT, have refused to pass the pickets, leading to the effective closure of the Technical Services Department at St James’s hospital during the stoppages.

Transport for London (TfL) has published a tender for the provision of average speed cameras for a project it plans to trial, according to the notice published in the Official Journal of the European Union on 10 August 2010.

The government department said that the cameras will be used to "enforce average speed limits in urban areas", according to GC News.

The notice is a pre-qualification questionnaire (PQQ) and that there are no concrete plans in place yet, however it will form part of a wider project currently being undertaken with four London boroughs.

More announcements are expected to be made post-October.

The speed camera notice was published three days after TfL cancelled a tender for road traffic predictive modelling software due to tighter spending measures being introduced at the organisation.

Wessex Water cites commercial and technical reasons for dropping sewer-based fibre-to-the-home (FTTH) rollout, although a pilot project was completed.

The project will be completed using micro-trenching and digging up roads as a way to avoid the rollout "coming to a halt”. Borough Council has given planning permission for these techniques to be used.

Network supplier i3 Group was planning to deliver the FTTH service for Bournemouth residents through sewer systems owned by Wessex Water.

In a released statement i3 indicated that "citing technical issues as a reason is misleading in respect to the viability of the i3 Group's FS System, a patented method of laying fibre in ready made ducts including sewer pipes."

But the reasons for the change in plans remain vague at best.

Meanwhile, Scottish Water has recently signed a non-exclusive framework agreement with i3 to expand operations across Scotland. The utilities provider is working with i3 Group to allow a similar sewer-based FTTH project in Dundee.

Global IT services & solutions company ITC Infotech, fully owned subsidiary of ITC Ltd, is working with Oracle to provide Loyalty & Marketing based BPO services.

As per the BPO initiative agreement, ITC Infotech will have the non-exclusive license to use the Loyalty & Marketing programme solution offered by Oracle.

Oracle’s cutting edge offerings will support ITC Infotech in providing customers loyalty, marketing & customer relationship management (CRM) solutions in an outsourced business process model.

ITC Infotech is the first system integrator company globally to implement Siebel Loyalty for the airlines industry, for the hospitality industry, and for a coalition loyalty across hospitality & retail companies.

Along with its partner(s), ITC Infotech, can also provide services in the areas of loyalty strategy and program design, rewards and fulfillment, analytics, partner management, hosting, etc.

This new partnership with Oracle will allow ITC Infotech to expand its services to the BPO market globally.

Swansea City and County Council is seeking a four-year framework agreement to check the condition of technology. The agreement will be accessible to all public sector bodies across Wales and would be worth between £4-12m.

The framework agreement for the supply of an Information Technology Health Check (ITHC) and associated services, would enable compliance with security best practice guidelines and the requirements of GCSx Code Of Connection (CoCo) 4.1 and PCI-DSS accreditation.

The majority of public sector networks are currently accredited to handle protectively marked information up to level 3, ‘restrict’, but some members may have a requirement to test their network at higher levels.

Compliance with PCI-DSS, a payment card industry standard, will also be covered by the deal.

The contracts will be awarded principally on supplier and service quality (60% of the weighting), followed by price (40%).

Vendors have until 8 September to request participation; up to seven suppliers will be invited to bid.

The woes of debt-laden integrated services group Connaught continue.

More than £400m have been wiped off the value of Connaught after it warned on 25 June that public spending cuts would see its revenues fall by £80m this year.

Lloyds Banking Group a junior member of a lending syndicate led by Royal Bank of Scotland, confirmed on Wednesday night that it would not start selling off loans. A debt-for-equity swap with the banks remains a possibility.

Investor confidence in the firm suffered after Barclays sold its entire debt exposure of £19m ($29.7m) for about 37% of face value.

Breeden European Partners, Parvus Asset Management and Norges Bank, which manages the Norwegian Government Pension Fund Global, have sold down their stakes. Toscafund, which has built a stake over the past month, is also believed to have reduced its holding.

Deloitte is investigating Connaught's accounting policies while a new management team has been set up to lead an attempted turnaround. The firm’s CEO, Mark Tincknell, and its finance director, Stephen Hill, left the business in early July.

According to reports, the Department for Business Innovation and Skills (BIS) has predicted that the renegotiation of its Elgar contract will save £5m this year.

Elgar is an outsourcing contract to supply and manage IT equipment and core services put in place by the former Department for Trade and Industry. Fujitsu receives about £28m annually under the terms of the deal.

The renegotiations with supplier Fujitsu were completed last autumn, and "resulted in savings of £50m a year over the life of the contract," from 1 April 2009 to 2014.

The department's resource accounts for 2009-10 say that it renegotiated the contract to remove the majority of the 'technology refresh' element.

BIS will now pay for new hardware directly from its own capital budgets for the remainder of the contract period.

Alex Blues, Head of IT Sourcing at PA Consulting Group, comments on Africa's rising popularity as a offshoring destination.

According to the 2009 A.T. Kearney Global Services Location index, Africa has become one of the fastest growing offshoring destinations in the world.

• Egypt is the 6th most popular location moving up from 13th,

• Ghana has moved from 27th to 15th,

• Tunisia 26th to 17th,

• Senegal 39th to 26th,

• Morocco from 36th to 30th

• And interestingly South Africa has moved the other way from the 31st to 39th.

Looking at Africa it is important to realise that you can divide the country into three areas, firstly Northern and Saharan Africa, the up and coming West and East African countries and then Southern Africa, particularly South Africa.

Northern Africa

Egypt has become a much more popular destination as American giants such as IBM and EDS have both had operations here for some time and interestingly, Wipro and Infosys have been expanding into Cairo, thereby taking advantage of the availability of low cost well qualified people. Egypt, like Morocco, also has huge support from the government to expand this ability which is key to sustainable success.

Moving along the African coast, then Morocco has rapidly found its presence as a supplier of outsourcing services to the French market. Until recently, Morocco’s outsourcing market had focused on call centres, but its expansion into banking/ insurance, telecommunications and information technology is being supported by infrastructure investment and the development of four outsourcing hubs at Fes, Marrakech, Tangier and Casablanca. A good example of increased presence is Capgemini’s recent investment in Morocco, providing sourcing services to the French market. Tunisia meanwhile is looking to emulate Morocco’s success.

West and East Africa

Kenya is heavily promoting itself as an offshore destination. As part of Kenya’s strategic plan called ‘Vision 2030’, BPO (Business Process Offshoring) has been selected as one of the six main economic pillars. With this is mind, Kenya hopes to quickly become one of the top three destinations in Africa, and government goals by 2012 are to create 7500 jobs in the BPO industry of which 5000 will be located in BPO parks.

Countries in West Africa, particularly countries like Ghana and Senegal, are growing from a very small base and outsourcing in these countries is quite often done by providing outsourced services to other West African or Central African countries. However these countries are ones to watch for the future.

Southern Africa

Moving further south, to South Africa, 5-6 years ago this was a very popular destination particularly for call centres and for financial service applications, especially in and around Cape Town and to a lesser extent Johannesburg and Durban. Interestingly, the reason for the decline is an increasing concern about the increasing value of the rand, as the economic case becomes less compelling and concerns about infrastructure deterioration grow.

Like Egypt, South Africa has looked to partner with India. The reason for this is that India is geographically closer to Europe than South Africa by roughly four hours but the time zone difference in Africa is no more than two hours + or – GMT.

In all, we are seeing much more complex relationships, with countries such as South Africa for the UK market and Morocco for the French and Spanish markets, providing first line support with India providing second and third line support, making Africa one of the fastest growing offshoring destinations in the world.

Over the past decade we’ve seen an increasing number of large organisations applying the concept of outsourcing to their human resources functions. And perhaps one of the most effective applications of the approach in this area has been in the allocation of the process driven aspects of recruitment to outside specialists.

But are too many employers now entering into such relationships simply because it has become’ accepted practice’ in the HR arena and without a real grasp of what recruitment process outsourcing (RPO) can actually achieve?

Towards the end of 2009 Ochre House conducted a survey of over 100 companies and financial institutions across the EMEA region and found the main reason for outsourcing recruitment functions was to reduce financial costs. On average, organisations had expected to make a saving of 37% but in practice this turned out to be closer to 20%. So does this mean that recruitment process outsourcing cannot actually deliver what it promises?

More detailed examination of the research tends to suggest that the real problem lies, not in a failure to deliver, but in a lack of understanding of the real benefits of RPO. Not a single one of the organisations questioned, that regarded their outsourcing decision as ‘successful’ or very successful,’ had rated cost saving as a highly important criterion. Instead their motivations had included the improvement of employer brand, more efficient sourcing and hiring processes and access to specialist expertise.

According to one respondent, Simon Patton, the then HR director of supermarket chain Somerfield (now part of the Co-operative Group), “Of course price played a part in the final negotiation process but it wasn’t the factor that got us there in the first place. You can make cost savings through outsourcing but it shouldn’t be your major driver, because if you are focused purely on the bottom line you risk being disappointed.

“Efficiency, simplification and added value are the areas where you can make real wins. I don’t say this lightly and it wouldn’t be the right move for everyone, but outsourcing was the best decision I’ve made as an HR director.”

What the research also uncovered, however, was that the organisations which took a wider view of outsourcing were often those that ended up making the most significant financial savings. One of the major reasons for this is that improving processes through more efficient technology, the employment of more effective talent sourcing channels and a move to best market practice can all combine to deliver better value in the mid to long term.

However, perhaps even more importantly, the businesses that take the strategic approach tend to be those which recognise that outsourcing should cover a much wider agenda than has traditionally been the norm. Recruitment is never a ‘stand alone’ function. Instead it is part of a complete talent management process, which needs to be addressed holistically.

After all, what is the point of creating an efficient and effective talent sourcing machinery if you do not subsequently get the best out of your recruits by ensuring that they are fully engaged and their training and development is effective or if a significant proportion of them leave before you can derive the maximum benefit from them?

Significant reductions in labour costs can be made but only if an outsource provider is allowed to work with an organisation on a strategic rather than a purely tactical basis. This means being able to address the whole talent management spectrum from recruitment itself through engagement to training and development and retention.

This could represent the true future of outsourcing in the employment arena, but one that can only come into being if a buyer undertakes the sort of rigorous selection process that will give them enough faith in a supplier to enter into a genuine partnership relationship.

As Ian Ruddy, European People Services Director for telecoms giant, Telefonica O2, puts it, “The day you have to take the contract out of the drawer is the day you don’t have a partnership anymore.”

India already holds at least 50% of the global outsourcing market, and has become the world's back office where Western firms set up call centres, number-crunching and software development outlets to cut costs.

It is, therefore, not without good reason that the visa bill which, if passed, would double the cost of visa application fees and add $200m in visa costs to Indian companies, has had such an unsettling effect in India.

Compared to the US, David Cameron’s statements during his visit to the Indian sub-continent a few weeks back was quite the positive one – comments about Pakistan notwithstanding. Maybe if chicken tikka were also a national dish in the US things would be different…

Indeed, HM Revenue and Customs is considering outsourcing sensitive tax processing work to India, a move that would save tax payers as much as £205m a year. Meanwhile, the British Council could outsource 100 IT and finance jobs also to India; the Foreign and Commonwealth Office as well as the Treasury could all have similar plans.

Outsourcing may be what Cameron had in mind when he devised his ‘Big Society, Not Big Government’ election campaign.

Thus the UK remains open to outsourcers provided there is increased inward investment in the UK.

But while this provision may have been intended to appease the public in general, that jobs are not off-shored does not mean that they won’t disappear; after all, efficiency often comes at the price of redundancies.

Certainly the government probably expects that the private sector will absorb some of the jobs lost in the public sector. But what happens when budget cuts also mean that private sector companies (working with the government) have less money with which to work, grow and create jobs?

Quite a tough decision to make: on one side cost-saving measures supported by efficiencies resulting from outsourcing. On the other increased unemployment, the problem of redundancies and increased cost of benefits.

Ah, the bitter-sweet taste of the path to economic recovery!