Industry news

Capgemini and Henley Business School partner up

The Informatics Research Centre (IRC) within Henley Business School (HBS) at the University of Reading has partnered with Capgemini UK plc to introduce a unique MSc programme entitled Business Technology Consulting.

The course, set to start in October 2010, is designed to provide graduates with a practical knowledge and deeper understanding of business and its use of technology, rather than the more traditional MSc programmes, which tend to concentrate mainly on the technologies themselves.

Alongside IRC’s teaching portfolio, the full-time 12 month course will be based on a system currently employed by Capgemini to develop skilled business technology consultants.

The graduates, limited to just 20 individuals, will be given access to the latest knowledge in business technologies, consulting frameworks, case study examples as well as real life project based assignments managed and coordinated by a network of mentors. The course will also include a week long module at the Capgemini University in Paris.

As well as postgraduates, the broad and in-depth nature of the MSc programme also caters for commercially experienced professionals keen to develop a business context to the use and potential benefits of technologies.

The course follows on from Capgemini’s ongoing relationship with Warwick Business School (WBS), where it has helped provide a similar programme of learning. The course offers a full cycle of learning, with a mixture of lectures, discussion, workshops and presentations with WBS staff and Capgemini’s Outsourcing board members.

Norwegian energy company Statoil has awarded Accenture a five-year business process outsourcing (BPO) contract, to manage the company’s accounts payables processes.

The agreement is designed to improve the efficiency and effectiveness of Statoil’s accounts payable function by reengineering processes and increasing automation supported through Accenture’s Global Delivery Network using centres in Norway, the Czech Republic and India.

The delivery of the outsourced services is scheduled to begin in September 2010.

Accenture has worked with Statoil since the late 1970’s, in the areas of management consulting and technology services

Northern Trust has successfully migrated the investment operations for asset manager Hermes Fund Managers, to the Northern Trust platform.

With the migration complete, Northern Trust provides a range of back- and middle-office services for portfolios.

During the transition, begun in June 2008, Northern Trust has supported the launch of Hermes' range of Irish domiciled funds, providing trustee, custody, fund accounting and transfer agency services.

The appointment of Northern Trust also included the provision of custody services for the UK's largest pension scheme, the BT Pension Scheme.

Northern Trust provides post-trade operations, fund administration and custody to Hermes, as well as management of over-the-counter property derivatives activities including daily independent valuations for complex IPD (Investment Property Databank) swaps.

Norwegian energy company Norsk Hydro has awarded Fujitsu a six-year global delivery contract covering the full outsourcing and development of its IT infrastructure services systems in Norway and abroad.

Under the terms of the agreement, Fujitsu will be responsible for an integrated and end-to-end service delivery that covers both on-site and remote services across Hydro's business areas.

The agreement also covers server hosting and administration, PC, LAN, storage systems, 24/7 multilingual service desks, application hosting and collaboration systems.

The six-year global delivery agreement is based on a one-year transition period followed by a five-year outsourcing agreement. The agreement goes into effect in September 2010 and includes IT systems in 40 countries.

Global consulting and IT services provider Mahindra Satyam’s outsourcing arm Mahindra Satyam BPO and South Africa’s contact centre and BPO company Direct Channel Holding have entered into a partnership that will allow both companies to extend their business offerings.

In the case of Mahindra Satyam BPO the partnership will extend its service offering to its global client base, who already have operations in Africa (especially South Africa), or are considering South Africa as an alternative delivery centre for services such as inbound and outbound call centre services and a range of other transaction based back-office services.

In turn, Direct Channel, professional services including business process consulting, knowledge process outsourcing, finance and accounting outsourcing, human resource outsourcing, legal process outsourcing, business intelligence (BI), data analytics and other consulting expertise, now form part of the service offering.

Direct Channel is headquartered in Randburg, Johannesburg with delivery centres in Durban, Cape Town, Nairobi (Kenya) and Lagos (Nigeria). The company provides a diversified outsource service offering to blue-chip listed South African and Pan-African clients in industries such as insurance, banking, automotive, mobile telecoms and retail sectors.

The World Cup-winning England rugby union team of 2003 famously spent a great deal of time, effort and money on “critical intangibles” in their training, even down to how to make the players’ eyes work better so decisions in the game could be made that split-second faster.

But a similar level of attention to ‘the little things’ is not seen in the sourcing world. During the life of many outsourcing relationships, the focus has been primarily on the tangibles. The people involved in the arrangements are expert at finance or at law or assessing service levels, and most sourcing relationships are therefore buried in the data trying to prove whether something is working or not.

But so many of the critical intangibles are critically important – and often have a greater impact on the success of a sourcing relationship than the detailed achievement service levels. For example, do the two (or more) organisations’ cultures have synergy? In your approach to working with clients, are you co-operative or are you competitive? In your approach to working with suppliers do you naturally come from a trusting or suspicious basis, are you prescriptive or are you open to market influence and do you want to be commercially open or closed?

These factors are not ones that can be added up in a calculator or read, or even necessarily provided for, in a contract, but they will make a very real difference in whether an outsourcing relationship works. If you and your suppliers are at the different end of the spectrum on these measures, then while it does not necessarily mean that the relationship will fail, it is very likely to create a different set of achievements to those planned for or expected.

In the next series of blogs, I will be considering exactly what these intangibles are, how to ensure that they are paid close attention to, and whether it is actually these that make the difference between sourcing success and sourcing failure.

Ferenc Szelenyi, VP EMEA, Public Sector Services at Dell Services, explores what the future holds for offshore outsourcing, and its likely impact on governance and customers.

It seems that there has been a growing trend to outsource certain activities to more local service providers, but this doesn’t mean that that the days of offshoring are numbered.

According to a recent PeopleperHour.com survey of 50,000 business users, 61 percent of UK organisations are now opting to outsource IT work to domestic service providers rather than to faraway traditional destinations like India and China. These are countries that, in the past, have offered cheaper rates and a much greater skills base. It could be argued that this predicted decline in offshoring might be caused by the recent availability of skilled IT professionals offering their services within the UK is on the rise.

Indeed, not a day goes by at the moment without the reporting of yet another back-office or customer contact process being outsourced onshore rather than a traditional offshore location. For example, typical back office processes that have been staying onshore recently include payroll, billing and HR services. What was initially a trickle has now become a flood. So what does all this mean for the future of offshore outsourcing and where is the industry as a whole heading over the next five years?

Going against the grain

Contrary to current opinion, I believe specific types of activities that demand a greater knowledge and skillset will remain offshore. These activities range from basic data entry to more complex 'knowledge services', which will include risk modelling, data mining, actuarial services and auditing. Certain activities will include more technologically sophisticated tasks such as the provision of radiology interpretation services to hospitals, outsourcing of financial and equity research by investment banks, and R&D services being outsourced by multinational engineering firms. Despite the current reported trend of keeping work onshore, the workers who have the skills to complete these large-scale operations to the highest possible standard still remain offshore.

However, there will still be challenges to offshoring moving forward. For example, one of the main barriers in offshoring has always been risk diversification. This means that placing different processes with different vendors, in different countries, will continue but may result in disaggregating the end-to end process. Currently companies have offshored parts of processes for migration, rather than whole capabilities. This has resulted in process fragmentation and required greater management time and capability to re-integrate.

The future will, therefore, need to see the migration of entire processes to achieve best practice. This will become increasingly feasible as emerging offshore destinations such as the Philippines, South Africa, Mauritius, Russia, and Barbados become selected for specialist language skills. This will be as the service provider already has some connection or presence in that country.

Governance, compliance and regulation

As the offshore vendor becomes an integral part of the customer's 'extended organisation', governance will also emerge as a key issue in the future of offshoring. Companies will increasingly focus on governance as a way to increase productivity as well as maximise savings. This increased focus will ensure that demonstrable good practices are being followed. Compliance with regulatory requirements, such as the Sarbanes-Oxley Act and the Markets in Financial Instruments Directive (MiFID), will highlight the responsibility of all company directors for the effectiveness of their company's outsourced control environment. It will become even more important for management to demonstrate that the organisation has the necessary assurance mechanisms in place. This will be in order to monitor and mitigate potential risks in its network of relationships.

It is good to see that, as we come out of recession, outsourcing relationships are already being managed better by a combination of controls that include a raft of policies and guidelines, clearer defined service level agreements, monitoring and control of the vendor, right to audit, third party reporting and change and termination processes. The fear of another possible recession means that this trend for greater demonstrable control will continue.

Customers

In terms of customers, the future will see a plethora of pilots turning into full-scale operations. However, this will take more organisational effort, focus, and investment, than many currently expect, understand or have planned for. Short-term projected cost-savings for some of these operations may, therefore, not materialise, resulting in some questioning the move offshore.

However, for the majority, a significant structural impact on their cost/income ratios will have been created. This, coupled with greater comfort provided by a maturing vendor market, a reduction in implementation costs due to reduced learning costs and the completion of current expenditure/income and management strategies, will create the necessary offshoring momentum for new entrants to come in.

As a result, the near future will see cash-strong industries, such as financial services and those companies that failed to ramp up in the initial offshoring wave, consider the move offshore.

In the short term, Build Operate Transfer (BOT) models will continue to grow in popularity and a few large players will develop new, captive operations. Organisations, however, will remain unclear as to how the market will mature and will want to keep their options open. In addition they will recognise that processes need considerable re-engineering and re-architecting to deliver the aspiration of a consistent customer experience, though many will not have yet worked out this new design.

Longer term, large organisations with global business intent will continue to operate captive models. Some of them will also see this as an entry point into new markets such as India, and as a way to expand their commercial interests there. Others will either not exercise their options to transfer their Build Operate Transfer (BOT) contracts, or sell their captive operations to vendors. However, the desire to re-allocate investment funds away from the back-office will not be realised in the short-term and will only be fully achieved when organisations are able to outsource into a mature market.

Captive operations of international companies, particularly those of banks and insurers, will continue to grow at the expense of third party suppliers as issues of risk and management control come to the fore. Some of these captives, seeing an opportunity to leverage their own domain knowledge and offshoring expertise, will begin offering these services to third party customers, thereby turning their offshore processing operations from cost to profit centres. Some may succeed; others will be forced to re-evaluate their core competencies.

In summary, offshore vendors will become acutely aware of the need to globalise and will make acquisitions in both the BPO and IT space. Global providers, however, will expand into the offshore BPO space, both organically and where suitable targets are available through acquisition of other offshore providers. Rapid consolidation in the industry will be inevitable and the plethora of today's suppliers will rapidly diminish.

Accenture has signed a seven-year agreement with Aviva‘s property claims repair service, Asprea, to provide application and infrastructure outsourcing services for its buildings claims division in the UK.

Accenture will develop and manage all the applications that support Asprea’s buildings claims operations, covering the claim validation and fulfilment process.

Asprea will also outsource to Accenture its infrastructure services, including service desk, workplace, network and telephony, and data centre services. The deal is designed to improve customer service and increase cost efficiencies.

Asprea provides a dedicated insurance claims service for Aviva, dealing with around 25% of its building claims for both domestic and commercial customers.

On April 1, 2010 the Asprea business was transferred into the Aviva Group, having previously been part of the Carillion Group.

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.